Western Asset Mortgage Capital Corporation Provides Company Update And Suspends First Quarter Dividend

PASADENA, Calif., March 27, 2020 /PRNewswire/ -- In light of the recent extraordinary capital markets volatility driven by concerns surrounding the COVID-19 pandemic, Western Asset Mortgage Capital Corporation (the "Company") WMC is providing the following update on its business. 

The COVID-19 pandemic has created unprecedented market conditions, severe illiquidity, volatility and disruption not seen since the Global Financial Crisis. These conditions spilled over into government bond markets, including the Agency MBS markets, causing an extreme lack of liquidity in mortgage markets. Combined with forced selling in the marketplace, illiquidity has led to swift and dramatic price declines. In addition, illiquidity is being exacerbated by inadequate demand for MBS among primary dealers due to balance sheet constraints. 

The Federal Reserve began its previously announced Agency CMBS purchase program on Friday, March 27. As anticipated, this action improved liquidity and price transparency for these bonds.  The Federal Reserve has announced that it will conduct additional purchase programs next week, as part of its broader Agency MBS purchase program although no assurance can be given as to the timing or amount, if any, of any purchases by the Federal Reserve.

The Company also provided the following updates:

• As of March 27, 2020 the Company has met its current margin calls. The Company has been working constructively with its counterparties throughout this challenging period. Given the difficult market conditions there can be no assurance that issues may not arise in the future.

• The Company estimates that its book value per share as of March 26, 2020 has declined in a range of approximately 55% to 60% since December 31, 2019.

• The Company is increasing portfolio liquidity and reducing leverage by selling securities and restructuring or eliminating the associated hedges.

• The Company is suspending its first quarter common stock dividend given the current market conditions and the need to preserve liquidity.

During these unprecedented market conditions, the Company remains focused on and committed to preserving long term value for its shareholders.

ABOUT WESTERN ASSET MORTGAGE CAPITAL CORPORATION

Western Asset Mortgage Capital Corporation is a real estate investment trust that invests in, acquires and manages a diverse portfolio of assets consisting of Agency CMBS, Agency RMBS, Non-Agency RMBS, Non-Agency CMBS, ABS, GSE Credit Risk Transfer Securities and Residential Whole, Bridge Loans and Commercial Loans. The Company's investment strategy may change, subject to the Company's stated investment guidelines, and is based on its manager Western Asset Management Company, LLC's perspective of which mix of portfolio assets it believes provide the Company with the best risk-reward opportunities at any given time. The Company is externally managed and advised by Western Asset Management Company LLC, an investment advisor registered with the Securities and Exchange Commission and a wholly-owned subsidiary of Legg Mason, Inc ("Legg Mason").

On February 18, 2020, Franklin Resources, Inc. ("Franklin") and Legg Mason announced that they had entered into an agreement under which Franklin would acquire Legg Mason and its affiliates, including Western Asset Management Company, LLC.   The transaction is expected to close in the third quarter of 2020 and is subject to customary closing conditions.  Upon completion of the transaction Western Asset Management Company, LLC would become a wholly owned subsidiary of Franklin.

Please visit the Company's website at www.westernassetmcc.com

FORWARD-LOOKING STATEMENTS

Certain items in this press release may constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to the Company's ability to take the actions described herein, including working with its counterparties, increasing portfolio liquidity and reducing leverage. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company can give no assurance that its expectations will be attained. Factors that may cause actual results to vary from our forward-looking statements include, but are not limited to, the economic and market impact of the COVID-19 pandemic, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability and terms of financing; general economic conditions; market conditions; conditions in the market for mortgage related investments; legislative and regulatory changes that could adversely affect the business of the Company; and other factors, including those set forth in the Risk Factors section of the Company's annual report on Form 10-K for the period ended December 31, 2019, and subsequent public reports filed with the SEC. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

SOURCE Western Asset Mortgage Capital Corporation