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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Merger agreement. On February 26, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Apollo Residential Mortgage, Inc., a Maryland corporation (“AMTG”), and Arrow Merger Sub, Inc., a Maryland corporation and a wholly-owned subsidiary of the Company (the “Merger Sub”), pursuant to which the Company will acquire AMTG for an aggregate purchase price equal to 89.25% of AMTG’s book value as of a future determination date, plus the assumption of $172,500 of AMTG’s 8.0% Series A Cumulative Redeemable Perpetual Preferred Stock (the “AMTG Preferred Stock”). The book value of AMTG, and therefore the actual purchase price payable, will be determined as of the date that is three business days prior to the date on which the definitive proxy statement relating to the merger transaction is mailed to the stockholders of AMTG (the “Pricing Date”), and will be subject to adjustment under certain circumstances. Upon the closing, holders of AMTG common stock will receive a combination of cash and shares of Company common stock. The aggregate number of shares of Company common stock issuable under the Merger Agreement is limited to 13,400,000 shares at a value of $16.75 per share, and the remainder of the consideration will be paid in cash. In addition, each share of AMTG Preferred Stock will be converted into one share of preferred stock, par value $0.01 per share, of a newly-designated series of the Company’s preferred stock, which the Company expects will be designated as 8.00% Series C Cumulative Redeemable Perpetual Preferred Stock. The Merger Agreement and related transactions were approved by all of the members of the Company's Board of Directors (with the exception of Mark Biderman, who recused himself). Consummation of the merger transaction is subject to the satisfaction of customary closing conditions, including the registration and listing of the shares of ARI stock that will be issued in the merger transaction and the approval and adoption of the Merger Agreement by the holders of a majority of the shares of AMTG common stock entitled to vote on the transaction, including a majority of the votes entitled to be cast by persons unaffiliated with Apollo Global Management, LLC. Company stockholder approval will not be required in connection with the transaction. On April 6, 2016, the Company filed with the SEC a registration statement on Form S-4 that includes a preliminary proxy statement/prospectus relating to the proposed transaction. Arrangements with Athene. In connection with financing the transactions contemplated by the Merger Agreement, on February 26, 2016 the Company entered into certain arrangements with certain subsidiaries of Athene Holding Ltd., an insurance holding company whose operating subsidiaries’ business is primarily issuing and reinsuring retirement savings products (collectively, “Athene”). The arrangements include (i) a bridge loan commitment from Athene USA Corporation, pursuant to which Athene has committed to provide the Company with up to $200,000 of term loans to consummate the merger transaction, (ii) an asset purchase agreement which provides that, promptly following the closing of the merger transaction, the Company will sell to Athene up to approximately $1,200,000 (subject to increase or decrease in certain circumstances) of primarily non-Agency Residential Mortgage Backed Securities at a price to be set (based on a pre-agreed methodology) as of the Pricing Date, and (iii) a stock purchase agreement, under which Athene has committed to purchase, during a specified period of time following the closing of the merger transaction, up to $20,000 (subject to reduction in certain circumstances) of Company common stock in the open market at the then-current market price if the quoted price of a share of Company common stock on the New York Stock Exchange at any time during such period is less than $16.75 (which is the value per share at which the Company common stock is to be issued to holders of AMTG common stock in the merger). Letter Agreement with the Manager. Concurrently with the execution of the Merger Agreement, the Company entered into a Letter Agreement with the Manager, pursuant to which the Manager has agreed to perform such services and activities as may be necessary to enable the Company to consummate the merger transaction. In consideration of the services provided and to be provided to the Company by the Manager in connection with the merger transaction and the process leading to the merger transaction, the Company agreed to pay the Manager an aggregate amount of up to $500, in monthly installments of $150 payable on the first of each calendar month between the execution of the Merger Agreement and the closing of the merger transaction. Upon consummation of the merger transaction, an additional amount (based on an agreed formula) will be added to Stockholders’ Equity (as defined in the Management Agreement) for purposes of calculating the amount of the management fee payable to the Manager under the Management Agreement. In addition, the Manager acknowledged that, as a result of the merger transaction, the management agreement between AMTG and its manager, ARM Manager, LLC (the “AMTG Management Agreement”), will be assigned to the Company and, following the merger transaction, any management fees paid by the Company to ARM Manager, LLC pursuant to the AMTG Management Agreement will offset, and therefore reduce (but not below zero), the Company’s obligation to pay corresponding management fees to the Manager. For additional details regarding the terms and conditions of the Merger Agreement, the arrangements with Athene and related matters, refer to the registration statement on Form S-4, which includes the preliminary proxy statement/prospectus filed with the SEC on April 6, 2016, and to the Merger Agreement and other documentation filed as exhibits thereto. After the registration statement has been declared effective by the SEC, a definitive proxy statement/prospectus will be filed and mailed to each AMTG stockholder. The proxy statement/prospectus contains additional information regarding the proposed transaction, including risks associated with the proposed transaction. Legal Proceedings. From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of business. After the announcement of the execution of the Merger Agreement, two putative class action lawsuits challenging the proposed merger, captioned Aivasian v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001532 and Wiener v. Apollo Residential Mortgage, Inc., et al., No. 24-C-16-001837, were filed in the Circuit Court for Baltimore City, Maryland on March 7 and March 21, 2016, respectively. The complaints name as defendants the Company, Merger Sub, AMTG, the board of directors of AMTG (the “AMTG Board”), and Apollo Global Management, LLC and allege, among other things, that the members of the AMTG Board breached their fiduciary duties to AMTG’s stockholders. The complaints further allege, among other things, that the proposed merger involves inadequate consideration, was the result of an inadequate and conflicted sales process, and includes unreasonable deal protection devices that purportedly preclude competing offers. The complaints also allege that the Company, Merger Sub, and Apollo Global Management, LLC aided and abetted those alleged breaches of fiduciary duty. The complaints seek, among other things, certification of the proposed class, declaratory relief, preliminary and permanent injunctive relief, including enjoining or rescinding the mergers, unspecified damages, and an award of other unspecified attorneys’ and other fees and costs. On April 12, 2016, counsel for the parties filed with the Court a stipulation and proposed order of consolidation and appointment of interim lead counsel in both actions, which provides that plaintiffs will file an amended complaint by April 20, 2016. On April 20, 2016, counsel for the parties filed an amended stipulation and proposed order, which provides that plaintiffs will file an amended complaint by April 27, 2016. The defendants believe that the claims asserted in the complaints are without merit and intend to vigorously defend the lawsuits. KBC Bank Deutschland AG. In September 2013, the Company, together with other affiliates of Apollo, reached an agreement to make an investment in an entity that has agreed to acquire a minority participation in KBC Bank. The Company committed to invest up to approximately €38,000 (or $50,000), representing approximately 21% of the ownership in KBC Bank. In September 2014, the Company, through a wholly owned subsidiary, acquired a 59% ownership interest in Champ LP following which a wholly-owned subsidiary of Champ LP then acquired a 35% ownership interest in KBC Bank, which was subsequently renamed Bremer Kreditbank AG. In February 2015, the Company sold approximately 48% of its ownership interest in Champ LP at cost to an account managed by Apollo for approximately €16,314 (or $20,794), reducing its unfunded commitment to Champ LP to €3,229 (or $3,675). Through its interest in Champ LP, the Company now holds an indirect ownership interest of approximately 11% in BKB Bank. Loan Commitments. As described in "Note 5 - Commercial Mortgage Loans" and "Note 6 - Subordinate Loans", respectively, at March 31, 2016, the Company had $108,883 of unfunded commitments related to its commercial mortgage loan portfolio and $99,850 of unfunded commitments related to its subordinate loan portfolio.

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