8-K
Orchid Island Capital, Inc. (ORC)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 17, 2021, (
November 16, 2021
)
Orchid Island Capital, Inc.
(Exact Name of Registrant as Specified in Charter)
Maryland
001-35236
27-3269228
(State or Other Jurisdiction of
Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
3305 Flamingo Drive
,
Vero Beach
,
Florida
32963
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number,
including area code
(
772
)
231-1400
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
☐
Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a
-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol:
Name of each exchange
on which registered:
Common Stock, par value $0.01 per share
ORC
NYSE
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of
1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
☐
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act.
☐
ITEM 1.01.
ENTRY INTO A MATERIAL
DEFINITIVE AGREEMENT.
Effective as of November 16, 2021, Orchid Island Capital, Inc.
(the “Company”) and the Company’s external manager, Bimini
Advisors, LLC (the “Manager”), entered into
a Third Amendment (the “Amendment”)
to the Management Agreement between
the Company and the Manager dated February 20, 2013
(the “Agreement”).
The Agreement was previously amended on April
1, 2014 and June 30, 2014.
Pursuant to the Agreement, the Manager performs management
and other activities relating to the mortgage-backed
securities
portfolio,
business
activities
and
day-to-day
operations
of
the
Company
as
set
forth
in
the
Management
Agreement,
and
provides the Company
with its management
team. In consideration
for such services, the
Manager receives management
fees
as well
as reimbursement
of certain
costs and
expenses.
Certain repurchase
agreement trading,
clearing and
administrative
services have been provided to the Company by AVM,
L.P.
(“AVM”).
Pursuant to Section 7 of the Agreement, the Company
is required to pay the fees for such services directly to AVM.
Pursuant to
the Amendment,
the Company
and the
Manager have
agreed the
services that
are currently
performed by
AVM
will be performed
by the Manager.
Bimini Capital Management,
Inc., the sole
member of the
Manager (“Bimini”), has
hired
Patrick Doyle,
effective as
of December
1, 2021,
to perform
the services
currently handled
by AVM.
The transition
of such
services from AVM
to the Manager
shall occur on
the first business day
immediately after the
termination of the
Company’s
arrangements with AVM,
which the Company currently expects will occur on approximately March
31, 2022.
Pursuant
to
the
Amendment,
following
termination
of
the
AVM
arrangements
and
in
consideration
for
the
repurchase
agreement trading, clearing and administrative services being performed by the Manager,
the Company will pay the following
fees to the Manager:
●
A daily fee
for repurchase agreement
funding transaction services
that is based
on the outstanding
principal balance
of the Company’s repurchase agreement funding.
The fee for
each day shall be
equal to the product
of the outstanding
principal balance
of repurchase
agreement funding
in place as
of the
end of
such day
and the
applicable basis
point
factor set forth in Appendix A of the Amendment, divided by 360; and
●
A fee for the clearing and operational services provided by personnel of the
Manager equal to $10,000 per month.
Pursuant
to
the
Amendment,
the
Company
is
also
required
to
pay
its
allocable
share
of
fees
incurred
for
safekeeping,
transactions and cash
services provided to the
Company by the Bank
of New York
Mellon (the “BNYM Fee”)
directly to the
Bank of New York
Mellon.
The Company’s allocable share of the BNYM Fee
shall be equal to the Company’s percentage of
all assets under management by the Manager,
inclusive of Bimini’s assets (measured as of
the first day of each month).
The
foregoing
description
of
the
Amendment
is
not
complete
and
is
qualified
in
its
entirety
by
reference
to
the
entire
Amendment, a copy of which is attached hereto as Exhibit 10.1, and incorporated
herein by reference.
ITEM 7.01.
REGULATION FD DISCLOSURE.
The Company
also issued a
press release today
announcing that Mr.
Doyle has been
hired by Bimini
and that the
repurchase
agreement funding
services and
clearing and
operational functions
currently handled
by AVM
are being
internalized by
the
Manager and will be handled by employees of the
Manager following a transition period. This press release is attached
hereto
as Exhibit 99.1 and is incorporated herein by reference.
The information referenced in this
Item
7.01 (including Exhibit 99.1 referenced in
Item 9.01 below) is
being “furnished” under
this Item 7.01. Regulation
FD Disclosure and, as such, shall
not be deemed to be
“filed” for the purposes of
Section 18 of the
Securities Exchange Act of
1934, as amended,
or otherwise subject
to the liabilities
of that Section and
shall not be
incorporated
by reference into any registration statement or other document filed by the Company pursuant to the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in
such filing.
Caution About Forward-Looking Statements.
This Current Report on Form 8-K contains forward-looking statements within
the meaning of the Private Securities Litigation
Reform Act of 1995 and
other federal securities laws, including, but
not limited to, statements about
the timing of the transition
of services from AVM to the Manager.
These forward-looking statements are based upon the Company’s present expectations,
but the Company
cannot assure investors
that actual results
will not vary
from the expectations
contained in the
forward-looking
statements. Investors
should not
place undue
reliance upon
forward looking
statements. For
further discussion
of the
factors
that could affect
outcomes, please refer
to the “Risk
Factors” section of
the Company's Annua
l
Report on Form
10-K for the
fiscal year ended December 31, 2020.
All forward-looking statements speak only as of the date on which they are made. New
risks
and
uncertainties
arise
over
time, and
it is
not possible
to
predict
those events
or how
they
may
affect
the Company.
Except
as required
by law,
the
Company
is not
obligated
to, and
does not
intend
to,
update or
revise
any
forward-looking
statements, whether as a result of new information, future events or otherwise.
Item 9.01. Financial Statements and Exhibits.
(d)
Exhibits
Exhibit No.
Description
10.1
Third Amendment to Management Agreement, effective as of November 16, 2021
99.1
Press Release dated November 17, 2021
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on
its behalf by the undersigned hereunto duly authorized.
Date: November 17, 2021
ORCHID ISLAND CAPITAL,
INC.
By:
/s/ Robert E. Cauley
Robert E. Cauley
Chairman and Chief Executive Officer
orc8k20211117x101
THIRD AMENDMENT TO
MANAGEMENT AGREEMENT
THIS THIRD AMENDMENT TO MANAGEMENT AGREEMENT
(the “
Amendment
”) is
entered into effective as of November 16, 2021 (the “
Effective Date
”), by and between Orchid Island
Capital, Inc., a Maryland corporation (the “
Company
”), and Bimini Advisors, LLC, a Maryland limited
liability company (“
Manager
”). Capitalized terms used but not defined in this Amendment shall have
the meanings set forth in the Agreement (as defined below).
W I T N E S S E T H:
WHEREAS
, the Company and the Manager entered into a Management Agreement effective as
of February 20, 2013, the First Amendment to Management Agreement effective as of April 1, 2014 and
the Second Amendment to Management Agreement effective as of June 30, 2014 (collectively,
the
“
Agreement
”);
WHEREAS
, the execution of repurchase agreement funding transactions and certain clearing
and operational functions related to the Company’s trading activities are currently handled by AVM,
L.P.
(“
AVM
”), with the Company paying for such services directly to AVM;
WHEREAS
, Section 7 of the Agreement includes the following language relating to such
payment by the Company directly to AVM
(the “
AVM
Language
”):
“
For the avoidance of doubt, payment for all services provided to the Company by AVM, L.P.
(including repurchase agreement
trading, clearing and administrative services) shall be made by the
Company directly to AVM,
L.P.
”;
WHEREAS
, in connection with the Manager hiring an individual experienced in the execution
of repurchase agreement funding transactions and related clearing and operational functions, the
repurchase agreement funding services and clearing and operational functions currently handled by
AVM
are being internalized by the Manager and will be handled by employees of the Manager
following a transition period;
WHEREAS
, the Company will terminate its agreements with AVM
according to the terms
thereof; and
WHEREAS
, the Company and the Manager now desire to amend the Agreement on the terms
set forth herein.
NOW
,
THEREFORE
, in consideration of the premises and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are expressly
acknowledged, the parties hereby amend and modify the Agreement in the manner set forth below:
1.
Section 2 of the Agreement is hereby amended by renumbering Sections 2(b)(xxv) and
2(b)(xxvi) as Sections 2(b)(xxvi) and 2(b)(xxvii), respectively, and by adding the following new
Section 2(b)(xxv) of the Agreement as follows:
“(xxv) performing repurchase agreement trading and certain clearing and operations services;”
2.
Section 7(a) of the Agreement is hereby deleted and replaced by the following:
“(a) Except as provided in Section 7(b)(xx) and 7(b)(xxi), the Manager shall be responsible for
(i) the expenses related to any and all personnel of the Manager and its Affiliates who provide
services to the Company pursuant to this Agreement or to the Manager pursuant to the Overhead
Sharing Agreement (including each of the officers of the Company and any directors of the
Company who are also directors, officers, employees or agents of the Manager, Bimini or any of
their Affiliates), including, without limitation, salaries, bonus and other wages, payroll taxes and
the cost of employee benefit plans of such personnel, and costs of insurance with respect to such
personnel and (ii) all other costs and expenses payable by the Manager under the Overhead
Sharing Agreement.”
3.
Section 7 of the Agreement is hereby amended by renumbering Section 7(b)(xxi) as Section
7(b)(xxiii), and by adding the following new Sections 7(b)(xxi) and 7(b)(xxii) of the Agreement as
follows:
“(xxi) beginning on the first business date immediately following the termination of the
Company’s agreements with AVM,
(a) fees for repurchase agreement funding transaction
services performed by personnel of the Manager which shall be calculated on a daily basis. The
fee for each day shall be equal to the product of (i) the outstanding principal balance of the
Company’s repurchase agreement funding in place as of the end of such day and (ii) the Basis
Point Factor, as described in Appendix A, divided by 360 ((principal * bps)/360); and
(b) a fee for the clearing and operational services provided by personnel of the Manager equal to
$10,000 per month;
(xxii) beginning on the first business date immediately following the termination of the
Company’s agreements with AVM,
the Company’s allocable share of fees incurred for
safekeeping, transactions and cash services provided by the Bank of New York
Mellon (the
“
BNYM fee
”). For purposes of this Section 7(b)(xxii), the Company’s “allocable share,” as
applied to the dollar amount of the BNYM fee, shall be equal to the Company’s percentage of all
assets under management by the Manager, inclusive of the assets of Bimini Capital Management,
Inc. (measured as of the first day of each month);”
4.
The AVM
Language in Section 7 of the Agreement is hereby deleted in its entirety and replaced
by the following:
“
For the avoidance of doubt, payment for safekeeping, transactions and cash services provided
to the Company by the Bank of New York
Mellon shall be made by the Company directly to the
Bank of New York
Mellon.
”
5.
Section 7(c) of the Agreement is hereby deleted in its entirety.
6.
Section 16(a) of the Agreement is hereby amended to amend and restate the notice information
for the Company as follows:
“The Company:
Orchid Island Capital, Inc.
3305 Flamingo Drive
Vero
Beach, FL 32963
Attention: Chief Executive Officer
Fax: 772-231-2896
with a copy to:
Vinson & Elkins L.L.P.
2200 Pennsylvania Avenue NW
Suite 500 West
Washington, DC 20037
Attention: S. Gregory Cope, Esq.
Fax: 202-879-8916”
7.
This Amendment constitutes an amendment or modification of the Agreement that is entered into
pursuant to Section 16(d) of the Agreement.
8.
Except as set forth in this Amendment, the parties acknowledge and agree that all other terms of
the Agreement shall remain in full force and effect.
9.
All prior agreements, promises, representations, or statements, whether oral or in writing,
regarding this Amendment are merged and integrated herein. This Amendment and the Agreement, as so
amended, constitute the entire agreement with respect to the subject matter hereof. No amendments,
waivers or modifications to the terms of the Agreement shall be valid unless set forth in writing and
signed by the Company and the Manager.
10.
This Amendment may be executed in counterparts, each of which will be deemed an original,
and all of which taken together shall constitute a single agreement.
[Signature page follows]
IN WITNESS WHEREOF
, the parties hereto have executed this Amendment as of the date
first written above.
ORCHID ISLAND CAPITAL,
INC.
By:
/s/ Robert E. Cauley
Name:
Robert E. Cauley
Title:
Chief Executive Officer
BIMINI ADVISORS, LLC
By:
/s/ George H. Haas, IV
Name:
George H. Haas, IV
Title:
Chief Financial Officer, Chief Investment Officer
and Secretary
Appendix A
Basis Point Factor
For purposes of calculating the daily fee set forth in Section 7(b)(xxi)(a) of the Agreement, (i) if
the aggregate outstanding principal balance of the Company’s repurchase agreement funding is equal to
or less than $5,000,000,000 (measured as of the end of each day), the Basis Point Factor to be applied
shall be equal to 1.5 basis points (or 0.00015) and (ii) if the aggregate outstanding principal balance of
the Company’s repurchase agreement funding is greater than $5,000,000,000 (measured as of the end of
each day), the Basis Point Factor to be applied for amounts in excess of $5,000,000,000 shall be equal to
1.0 basis points (or 0.00010).
orc8k20211117x991
ORCHID ISLAND CAPITAL, INC. AND
BIMINI CAPITAL MANAGEMENT,
INC. ANNOUNCE
THIRD AMENDMENT TO MANAGEMENT AGREEMENT
●
Third Amendment to Management Agreement
●
Internalization of Funding and Custody/Settlement Operations
●
Hiring of Patrick Doyle by Bimini Capital, Inc.
Vero
Beach, Fla., November 17, 2021 - Orchid Island Capital,
Inc. (“Orchid”) (NYSE: ORC) and Bimini Capital,
Inc. (“Bimini”) (OTCQB: BMNM)
jointly announced today that
effective as of November 16,
2021, Orchid and its
external manager, Bimini Advisors, LLC
(the “Manager”), entered
into a Third Amendment
(the “Amendment”) to
the Management
Agreement between
Orchid and
the Manager
dated February
20, 2013,
as previously
amended
(the “Agreement”).
The Manager is a wholly-owned subsidiary of Bimini.
Pursuant to the Agreement, the Manager
performs management services relating
to the mortgage-backed securities
portfolio, business activities and
day-to-day operations of Orchid.
In consideration for those
services, the Manager
receives management fees as well
as reimbursement of certain costs
and expenses from Orchid.
Also pursuant to
the Agreement, certain repurchase agreement
trading, clearing and administrative services
are provided to Orchid
by AVM,
L.P.
(“AVM”).
Orchid pays the fees for those services directly to AVM.
Bimini and
the Manager
are taking
steps to
internalize the
repurchase agreement
trading, clearing
and administrative
services that are
currently provided by AVM.
Pursuant to the Amendment,
Orchid and the Manager
have agreed
that
Orchid’s
agreements
with
AVM
will
be
terminated
and
the
Manager
will
become
responsible
for
the
performance of repurchase agreement trading, clearing and administrative
services.
Following
termination
of
the
AVM
arrangements
and
in
consideration
for
the
repurchase
agreement
trading,
clearing and
administrative services
to
be performed
by the
Manager,
Orchid will
pay the
following fees
to the
Manager:
●
A daily fee for
repurchase agreement funding transaction services
equal to the
product of the outstanding
principal balance
of repurchase
agreement funding
in place
as of
the end
of such
day and
the applicable
basis point factor set forth in the Amendment, divided by 360; and
●
A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per
month.
Pursuant to
the
Amendment, Orchid
is
also required
to
pay its
allocable share
of
fees incurred
for
safekeeping,
transactions and cash services provided to Orchid by
the Bank of New York Mellon (the “BNYM Fee”) directly to
the Bank of New York Mellon.
Orchid’s allocable share of the BNYM Fee
will be equal to Orchid’s percentage of
all the assets under management by the Manager,
inclusive of the assets of Bimini (measured as of the first
day of
each month).
AVM
also performs repurchase agreement trading, clearing and administrative services for Bimini with respect to
its
mortgage-backed
securities
portfolio.
The
Manager’s
internalization
of
these
services
will
allow
Bimini
to
terminate
its
arrangements
with
AVM,
and
the
Manager
will
become
responsible
for
the
performance
of
these
services for Bimini.
Bimini
has hired
Patrick Doyle,
effective
as
of December
1, 2021,
to lead
the Manager’s
repurchase agreement
trading, clearing and administrative services.
From 1998 until joining Bimini, Mr. Doyle was employed by AVM,
most recently as Head of Funding and Liquidity.
Commenting on the Amendment, the internalization
of certain functions and the hiring of Patrick
Doyle, Robert E.
Cauley, the Chairman and CEO of Orchid and Bimini, stated, “We are very pleased to welcome Pat to
Bimini.
Pat
has significant expertise and experience in the repo markets, as well as
extensive knowledge of the settlement and
operations related practices
of our business.
As a manager
of repo funding
operations at AVM, Pat has worked
with
Bimini
since
2003.
Once these
critical
functions
are
being
performed by
Bimini
for
Orchid,
we
will
be
able
to
provide
them
in
an
efficient
and
cost-effective
manner
with
the
help
of
one
of
the
funding
market’s
leading
professionals.”
Mr.
Doyle
added,
“The
opportunity
to
work
with
Bimini
is
very
exciting
for
me.
I
have
been
working with Bimini as a client since their inception in 2003. This opportunity is a natural
fit for both of us. I look
forward
to
enhancing
Bimini’s
abilities
to
fund
their
portfolios
under
management,
to
create
new
operational
efficiencies, and to enhance the management of liquidity risks.”
About Orchid Island Capital, Inc.
Orchid Island Capital, Inc. is a specialty finance company that invests on a leveraged basis in Agency RMBS. Our
investment strategy focuses on, and
our portfolio consists of,
two categories of Agency RMBS:
(i) traditional pass-
through Agency RMBS, such as mortgage pass-through certificates and collateralized mortgage
obligations issued
by
Fannie
Mae,
Freddie
Mac
or
Ginnie
Mae,
and
(ii)
structured
Agency
RMBS. The
Company
is
managed by
Bimini Advisors, LLC, a registered investment adviser with the Securities
and Exchange Commission.
About Bimini Capital Management, Inc.
Bimini Capital
Management, Inc.
invests primarily
in, but
is not
limited to
investing in,
residential mortgage-related
securities issued
by Fannie
Mae, Freddie
Mac and Ginnie
Mae. Its
objective is
to earn
returns on
the spread
between
the
yield on
its assets
and its
costs, including
the interest
expense on
the funds
it borrows.
In addition,
Bimini
generates a significant portion of
its revenue serving as
the manager of the MBS
portfolio of Orchid Island
Capital,
Inc.
Forward-Looking Statements
This
press
release
contains
forward-looking
statements
within
the
meaning
of
the
Private
Securities
Litigation
Reform Act of
1995 and
other federal
securities laws.
These forward-looking
statements include,
but are not
limited
to,
statements
about
the
transition
of
services
from
AVM
to
the
Manager
and
the
performance
of
repurchase
agreement
funding,
clearing
and
administrative services
by
the
Manager.
These forward-looking
statements are
based upon Orchid’s and Bimini’s present expectations, but these statements are
not guaranteed to occur. Investors
should not place
undue reliance upon forward-looking
statements. For further
discussion of the
factors that could
affect outcomes, please refer
to the “Risk Factors”
section of the Annual
Report on Form 10-K
for the fiscal year
ended December 31, 2020 of Bimini and Orchid, respectively.