Lument Finance Trust, Inc. Announces Amendments to Credit and Guaranty Agreement

Key Points for Investors

• Amendments to Financial Covenants: The company has amended certain financial covenants, including adjustments to its maximum total net leverage ratio, minimum tangible net worth, and introduced a minimum liquidity financial covenant.
• Interest Rate on Secured Term Loans: Borrowings under the amended agreement bear interest at a fixed rate of 9.75% per annum, with scheduled step-ups of 0.50% every three months after February 20, 2029, until maturity.
• Payment of Lender Fees: The company has agreed to pay lenders a customary fee for the amendment and to reimburse certain expenses incurred in connection with the amendments.
• Direct Financial Obligation: The amendments result in the creation of a direct financial obligation for the company.
• Exhibits Incorporated by Reference: The full text of the Fifth and Sixth Amendments are attached as exhibits to the SEC filing.
• Signatories: The amendments were executed by James A. Briggs, Chief Financial Officer, on behalf of Lument Finance Trust, Inc., and related entities, as well as by representatives of Cortland Capital Market Services LLC (Administrative Agent and Collateral Agent) and J.P. Morgan Investment Management (Investor Advisor for various lender funds).

Detailed Information and Potential Implications

Amended Credit and Guaranty Agreement

Lument Finance Trust, Inc. (“the Company”) announced the execution of the Fifth and Sixth Amendments to its Credit and Guaranty Agreement. These amendments are significant for shareholders as they directly impact the Company’s financial covenants and future borrowing costs.

• Financial Covenants:
  • Adjustment of the maximum total net leverage ratio, potentially allowing the company to operate with higher leverage under certain conditions.
  • Revision of the minimum tangible net worth requirement, which may impact the Company’s balance sheet management.
  • Introduction of a minimum liquidity covenant, designed to ensure the Company maintains an adequate cash buffer.
• Interest Rate Structure:
  • The Secured Term Loans now carry a fixed interest rate of 9.75% per annum.
  • This rate is subject to increases: by 0.50% per annum for the first three months after February 20, 2029, and further 0.50% step-ups every three months thereafter until the maturity date.

  This escalating interest rate structure could increase the Company’s cost of capital over time, which may affect future earnings and cash flows.

• Fees and Expenses:
  • The Company has agreed to pay a customary amendment fee to the lenders.
  • The Company will also reimburse certain lender expenses related to the amendments.
• Direct Financial Obligation:
  • The amendments create a direct financial obligation for Lument Finance Trust, Inc., binding the Company to the revised terms and covenants.

Implications for Shareholders

• Potential Impact on Share Value:
  • Changes to leverage and liquidity covenants may provide the Company with greater financial flexibility but could also introduce additional risk if leverage increases.
  • The step-up in interest rates will increase borrowing costs over time, potentially impacting profitability and dividend capacity.
  • The creation of a direct financial obligation, along with increased costs, may be viewed as credit-negative by some investors, especially if leverage rises or liquidity falls close to covenant thresholds.
  • These amendments and their financial implications are material and could influence the Company’s share price, especially if investors perceive increased financial risk or reduced earnings potential.
• Other Notable Points:
  • The amendments were executed by key officers and lender representatives, signaling formal commitment to the revised terms.
  • Details of the new financial covenants and obligations are available in the attached exhibits of the SEC filing for further investor review.

Additional Information

• Trading Information:
  • Lument Finance Trust, Inc. common stock trades on the New York Stock Exchange under the symbol “LFT”.
  • The 7.875% Series A Cumulative Redeemable Preferred Stock trades under the symbol “LFTPrA”.
• Company Structure and Governance:
  • The amendments and resulting obligations have been signed by the Chief Financial Officer, indicating board-level oversight of these significant changes.

Conclusion

The amendments to the Credit and Guaranty Agreement represent a significant development for Lument Finance Trust, Inc. shareholders. Investors should closely monitor the Company’s leverage, liquidity, and cost of capital, as these factors will influence future returns and risk profiles. The step-up in interest rates, in particular, is a key consideration for forward-looking valuation models.

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