8-K: Annaly Capital Launches 8.875% Series J Preferred Stock Offering

Annaly Capital Management successfully issues 11 million shares of new 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock, raising $266.3 million in net proceeds.

Summary

• Annaly Capital Management, Inc. filed Articles Supplementary on August 6, 2025, classifying 11,500,000 shares of common stock as 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock.
• The Series J Preferred Stock has a liquidation preference of $25.00 per share and will pay cumulative cash dividends at a fixed rate of 8.875% per annum ($2.21875 per share annually).
• Dividends will be payable quarterly in arrears on the last day of March, June, September, and December, with the first dividend due on December 31, 2025, in the amount of $0.88750 per share.
• The Series J Preferred Stock ranks senior to the Common Stock regarding dividend payments and liquidation rights.
• It is not redeemable before September 30, 2030, except under specific circumstances related to REIT qualification or a Change of Control.
• The company entered into an underwriting agreement on July 31, 2025, for the offer and sale of 10,000,000 shares, with an option for underwriters to purchase up to an additional 1,500,000 shares.
• Underwriters exercised their option to purchase 1,000,000 additional shares on August 5, 2025, bringing the total issued and sold to 11,000,000 shares.
• The issuance and sale closed on August 7, 2025, at a public offering price of $25.00 per share.
• After deducting underwriting discounts of $0.7875 per share, the net proceeds to the company were $24.2125 per share, totaling approximately $266.3 million for the 11,000,000 shares.
• Net proceeds are intended for acquiring targeted assets under the company's capital allocation policy, including Agency MBS pools, to-be-announced forward contracts, mortgage servicing rights, and residential credit assets, as well as for general corporate purposes.

Sentiment

Score: 7

Explanation: The successful completion of a significant preferred stock offering, including the partial exercise of the over-allotment option, indicates strong market confidence in Annaly's ability to raise capital and fund its investment strategy. The fixed dividend rate is attractive for income investors, and the capital infusion strengthens the company's financial flexibility.

Positives

• Successful capital raise of approximately $266.3 million through the issuance of 11,000,000 shares of Series J Preferred Stock, including the partial exercise of the over-allotment option, indicating strong market demand.
• The new Series J Preferred Stock offers a competitive fixed dividend rate of 8.875% per annum, providing an attractive income stream for investors.
• The capital infusion strengthens the company's financial position and provides funds for acquiring targeted assets and general corporate purposes, supporting future growth and operations.
• The company maintains its commitment to operate in a manner that enables it to continue to qualify as a Real Estate Investment Trust (REIT).

Negatives

• The issuance of preferred stock introduces additional dividend obligations that rank senior to common stock dividends.
• Holders of Series J Preferred Stock generally have no voting rights, except under limited circumstances such as failure to pay dividends for six or more full quarterly periods.

Risks

• Restrictions on ownership of the Series J Preferred Stock are in place to preserve the company's qualification as a Real Estate Investment Trust (REIT).
• Holders of Series J Preferred Stock have limited voting rights, which are only triggered if the company fails to pay dividends for six or more full quarterly dividend periods (whether or not consecutive) and under certain other circumstances.

Future Outlook

The company intends to use the net proceeds from this offering to acquire targeted assets under its capital allocation policy, including Agency MBS pools, to-be-announced forward contracts, mortgage servicing rights, and residential credit assets. It also plans to use proceeds for general corporate purposes and intends to continue operating in a manner that allows it to qualify as a REIT for the 2025 fiscal year and thereafter.

Management Comments

• The company's Chief Executive Officer and Co-Chief Investment Officer, David L. Finkelstein, signed the Underwriting Agreement.
• The Chief Corporate Officer & Chief Legal Officer, Anthony C. Green, signed the 8-K report and provided an opinion to the underwriters.

Industry Context

This preferred stock offering by Annaly Capital Management, a mortgage REIT, is a common strategy within the industry to raise capital for investment in mortgage-backed securities and other real estate-related assets. The fixed-rate nature of the preferred stock provides stable financing for the company's portfolio, which is typical for REITs seeking to manage their capital structure and fund asset acquisitions in a yield-sensitive market.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct comparison to industry standards.
• The company states that its insurance coverage is 'prudent and customary in the business in which it is engaged'.
• The company's IT Systems and Data controls, policies, procedures, and technological safeguards are stated to be 'reasonably consistent with industry standards and practices, or as required by applicable regulatory standards'.

Corporate Governance

Stakeholder Impact

• **Shareholders (Common Stock)**: The issuance of preferred stock introduces a new class of security that ranks senior to common stock for dividends and liquidation, potentially diluting common shareholders' claims on earnings and assets. However, the capital raise provides funds for asset acquisition and general corporate purposes, which could support long-term value.
• **Shareholders (Preferred Stock)**: Holders of the new Series J Preferred Stock will receive a fixed, cumulative cash dividend of 8.875% per annum, offering a stable income stream. They have a liquidation preference over common stock and limited voting rights under specific conditions of dividend non-payment.
• **Creditors**: The preferred stock ranks junior to the company's debt obligations, so it does not directly impact the seniority of existing creditors.
• **Company Operations**: The capital raised provides financial flexibility to acquire targeted assets and support general corporate purposes, potentially enhancing the company's investment capacity and operational stability.

Next Steps

• The company will apply to have the Series J Preferred Stock listed on the New York Stock Exchange (NYSE) under the symbol NLY.J.
• The company will pay cumulative cash dividends quarterly in arrears, with the first payment on December 31, 2025.
• The company intends to use the net proceeds to acquire targeted assets and for general corporate purposes.

Key Dates

Recommendation

The successful issuance of 11 million shares of 8.875% Series J Preferred Stock, including the partial exercise of the over-allotment option, demonstrates strong market confidence in Annaly Capital Management's ability to raise capital. This financing event provides the company with significant funds for asset acquisition and general corporate purposes, which is a positive for its operational stability and future investment capacity. For income-focused investors, the new preferred stock offers an attractive fixed dividend yield. However, for common stock investors, while the capital infusion is beneficial, the issuance of preferred stock introduces a senior claim on earnings and assets. Without more specific details on the expected accretion from the 'targeted assets' to be acquired, the immediate impact on common stock valuation is likely neutral to slightly positive, warranting a 'hold' recommendation for common stock, while the preferred stock itself may be a 'buy' for income-seeking portfolios.

Keywords

Annaly Capital Management, NLY, Preferred Stock, Series J, Fixed-Rate, Cumulative Redeemable, Capital Raise, REIT, Mortgage REIT, Dividend, Underwriting Agreement, SEC Filing, 8-K