10-Q: Annaly Capital Management Announces New Share Distribution Agreements

Annaly Capital Management enters into distribution agency agreements with multiple sales agents to offer and sell up to $2 billion of its common stock.

Summary

• Annaly Capital Management, Inc. has entered into distribution agency agreements with several sales agents to issue and sell shares of its common stock.
• The aggregate offering price for the shares is up to $2,000,000,000.
• The sales will be conducted through 'at-the-market' offerings.
• BTIG, LLC is one of the sales agents, with the agreement effective May 8, 2025.
• Alternative Agreements were entered into with Barclays Capital Inc., BNP Paribas Securities Corp., BofA Securities, Inc., Citizens JMP Securities, LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co, LLC, Piper Sandler & Co., RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC.
• The sales agents will receive compensation up to 1.25% of the gross sales price of the shares sold.
• The company has the right to terminate the agreement at any time, as does the sales agent.
• The agreement automatically terminates on May 8, 2030.
• The company has filed a quarterly report on Form 10-Q for the period ended March 31, 2025.
• The number of shares of the registrants Common Stock outstanding on April 30, 2025 was 605,089,071.

Sentiment

Score: 6

Explanation: The document is neutral in tone, outlining the terms of the distribution agreement without expressing strong positive or negative sentiment. The potential capital raise could be viewed positively for growth or negatively for dilution, depending on the investor's perspective.

Positives

• The agreements provide Annaly with a flexible mechanism to raise capital over time.
• The 'at-the-market' offering structure allows the company to sell shares gradually, potentially minimizing market impact.
• The company maintains the right to terminate the agreement at any time.

Negatives

• The sales agents are not obligated to sell any shares.
• The company's net proceeds will be reduced by the sales agents' commissions and any transaction fees.
• The company's earnings per share may be diluted as a result of the issuance of new shares.

Risks

• There is no guarantee that the sales agents will be successful in selling the shares.
• The company may be in possession of material non-public information, which could restrict its ability to sell shares.
• The market price of the common stock could be negatively impacted by the offering.
• The company is exposed to credit risk on commercial mortgage-backed securities, residential mortgage loans, CRT securities and other non-Agency mortgage-backed securities.
• MSR values may also be adversely impacted by rising borrower delinquencies which would reduce servicing income and increase overall costs to service the underlying mortgage loans.

Future Outlook

The company expects the Fed to continue to attempt to reduce its balance sheet over a longer period than initially anticipated.

Management Comments

• Fed officials are waiting for further evidence about an economic slowdown or higher inflation before making further adjustments to the Federal Funds Target Rate (Fed Funds Target Rate).
• Federal Reserve Chair Jerome Powell has emphasized that it is too soon to determine the appropriate monetary policy response to the tariffs, while acknowledging their inflationary impact.

Industry Context

The mortgage origination and servicing industry is consolidating, as seen in the merger announcement of Rocket Companies and Mr. Cooper Group Inc.

Stakeholder Impact

• Shareholders may experience dilution of their ownership interest if the company issues a significant number of new shares.
• The company may use the proceeds from the offering to fund new investments, which could benefit shareholders in the long run.
• The company's employees may benefit from the company's growth and expansion.

Next Steps

• The company will issue and sell shares of its common stock through the sales agents from time to time.
• The company will consult with the sales agents prior to issuing any press releases or public statements related to the agreements.

Key Dates

Keywords

common stock, distribution agency agreement, at-the-market offering, securities, sales agent, Annaly Capital Management, shares