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Western Asset Mortgage Capital closes offering of convertible senior notes

Western Asset Mortgage Capital Corp. on Dec. 12 completed the issuance and sale of $50 million aggregate principal amount of its 6.75% convertible senior notes due Oct. 1, 2022.

The notes were issued at a price to the public of 101.25% of the principal amount plus accrued and unpaid interest.

Net proceeds from the sale of the notes, after deducting the underwriter's discount and commission and estimated offering expenses, are expected to be about $49.9 million. The company intends to use the net proceeds primarily for general corporate purposes, including to opportunistically invest in credit-sensitive investments consisting of residential whole loans, commercial loans and nonagency commercial mortgage-backed securities.

The notes are a further issuance of, are fully fungible with and rank equally in right of payment with and form a single series with the $115 million of notes issued in October 2017 and the $40 million of notes issued in August 2019. As a result of the additional notes issuance, the aggregate principal amount outstanding of the 6.75% senior notes due 2022 is about $205 million.

The notes are senior unsecured obligations of the company. Interest on the notes will be paid semiannually in arrears on April 1 and Oct. 1 of each year.

On or after July 1, 2022, the company may redeem the notes for cash, in whole or from time to time in part, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but excluding the redemption date.

The notes are convertible before July 1, 2022, upon the satisfaction of certain conditions and at any time on or after July 1, 2022, until the business day preceding the maturity date.

Western Asset Mortgage Capital may settle conversions in cash, common shares or a combination of these. The conversion rate is subject to adjustment upon the occurrence of certain specified events.

The conversion rate currently equals 83.1947 common shares per $1,000 principal amount of notes, which is equivalent to a conversion price of about $12.02 per common share, representing an approximate 15% premium based on the closing price of the company's common stock of $10.48 per share on Dec. 9.

JMP Securities LLC was the sole underwriter for the offering.