Item 1.01 Entry into a Material Definitive Agreement.
As described below, on May 4, 2020, Front Yard Residential Corporation (Front Yard or the Company) entered into a Termination and
Settlement Agreement with certain affiliates of Amherst Residential, LLC (Amherst) to terminate that certain Agreement and Plan of Merger, dated as of February 17, 2020 (the Merger Agreement), by and among the Company,
BAF Holdings, LLC (Parent) and BAF Sub, LLC, a wholly-owned subsidiary of Parent (Merger Sub). As contemplated by the Termination and Settlement Agreement, Amherst has agreed to pay the Company a $25 million cash
termination fee, purchase from the Company 4.4 million shares of Front Yard common stock for an aggregate cash purchase price of $55 million ($12.50 per share) pursuant to an Investment Agreement (as described below), and provide the
Company with a $20 million committed Non-Negotiable Promissory Note (as described below).
Investment
Agreement
On May 4, 2020, in connection with the Termination and Settlement Agreement (as described below), Front Yard entered into an Investment
Agreement (the Investment Agreement) by and between the Company and Amherst Single Family Residential Partners VI, LP (the Purchaser), an affiliate of Amherst, pursuant to which, among other things, the Company agreed to
issue and sell to the Purchaser, and the Purchaser agreed to purchase, 4.4 million shares of Front Yard common stock (the Acquired Shares) from the Company at a price of $12.50 per share for an aggregate cash purchase price of
$55 million (the Purchase Price). The closing of the transaction will be scheduled as promptly as practicable and no later than May 19, 2020. The Purchaser has also agreed to a customary standstill for a two-year period and a restriction on transferring the Acquired Shares for one year (other than to permitted transferees). Beginning on the first anniversary of the closing date, the Purchaser will be entitled to
transfer up to 1.1 million of the Acquired Shares per quarter on a cumulative basis.
The Investment Agreement is filed as Exhibit 10.1 hereto and is
incorporated herein by reference. The foregoing description of the Investment Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.
Promissory Note
On May 4, 2020, in connection with
the Termination and Settlement Agreement, Front Yard entered into a Non-Negotiable Promissory Note (the Promissory Note) by and between Front Yard and Amherst SFRP VI REIT, LLC (the Amherst
Noteholder), pursuant to which, among other things, the Amherst Noteholder committed to make advances from time to time to Front Yard in an aggregate principal amount of up to $20 million.
The Promissory Note matures on May 4, 2022 and the outstanding principal balance thereof bears interest at LIBOR plus 5.00% per annum. Advances under the
Promissory Note are available in multiple draws with minimum draw increments of $500,000, subject to prior written notice and absence of an event of default. Amounts under the Promissory Note can be repaid at any time and from time to time, without
premium or penalty, and amounts repaid may be reborrowed.
The Promissory Note contains a limited set of customary representations and warranties,
covenants and events of default, and does not contain any financial covenants.
The Promissory Note is filed as Exhibit 10.2 hereto and is incorporated
herein by reference. The foregoing description of the Promissory Note does not purport to be complete and is qualified in its entirety by reference to such exhibit.
Amendment of Repurchase Facility with Credit Suisse and Termination of Nomura Facility
On April 30, 2020, Front Yard and certain of its affiliates entered into an amendment of its repurchase facility (the CS Amendment and the
repurchase facility amended thereby, the CS Repurchase Facility) with Credit Suisse AG (CS), pursuant to which the effective maturity date of the CS Repurchase Facility was extended to the earlier of (i) June 30,
2020 and (ii) the date of the occurrence of an event of default thereunder.
Certain other amendments to the CS Repurchase Facility implemented by
the CS Amendment include a revised pricing schedule and an increased funding fee on future purchases thereunder.
On May 1, 2020, Front Yard and
certain of its affiliates entered into an amendment to the Third Amended and Restated Master Repurchase Agreement and related transaction documents (the Omnibus CS Amendment) with CS, pursuant to which, among other amendments, the buyers
thereunder agreed to extend additional credit in an aggregate principal amount of approximately $33.3 million.
The proceeds of the incremental amounts
advanced under the CS Repurchase Facility on the effective date of the Omnibus CS Amendment were used to repay in full the Nomura Facility (as defined and described further below).
The information set forth in Item 1.02 hereof is incorporated herein by reference.
Item 1.02 Termination of a Material Definitive Agreement.
Termination and Settlement Agreement
On May 4,
2020, Front Yard entered into a Termination and Settlement Agreement (the Termination and Settlement Agreement), by and among the Company, Parent, Merger Sub, and the Purchaser, pursuant to which, among other things, Parent will pay
$25 million in cash (the Settlement Payment) to the Company by May 5, 2020 and the Merger Agreement will be terminated by mutual written consent of the Company and Parent, effective upon receipt by the Company of the full
amount of the Settlement Payment. Under the Termination and Settlement Agreement, the parties agreed to release each other from all claims and actions arising out of or related to the Merger Agreement, the Equity Commitment Letter, the Limited
Guarantee, the Debt Commitment Letter, and the Voting Agreements (as such terms are defined in the Merger Agreement) or the transactions or payments contemplated by any of the foregoing.
The Termination and Settlement Agreement is filed as Exhibit 10.3 hereto and is incorporated herein by reference. The foregoing description of the Termination
and Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibit.