TORONTO, March 21, 2019 (GLOBE NEWSWIRE) -- (TSX: ERM) Eclipse Residential Mortgage Investment Corporation (“Eclipse” or the “Corporation”) announces that it is calling a special meeting of holders (the “Shareholders”) of common shares (the “Common Shares”) to consider and vote upon an extraordinary resolution approving the sale of all or substantially all of the assets of the Corporation, the voluntary delisting of the Common Shares from the Toronto Stock Exchange (the “TSX”) and the distribution of the remaining net assets and voluntary dissolution of the Corporation (together, the “Proposed Transactions”).

The Corporation has had strong performance since its inception in June 2013. Since inception, the Corporation increased its monthly dividend twice and increased its net book value by investing in a diversified portfolio (the “Portfolio”) comprised primarily of interests in single family residential mortgages that seeks to preserve capital and generate sufficient income to permit the Corporation to pay monthly dividends. A total of $3.76 per share has been paid in dividends since inception, and when combined with the growth in net book value, this represents an average return of 8.1% per annum. Despite this strong performance, management and MCAP Financial Limited Partnership (the “Mortgage Consultant”) believe that policy changes introduced over the past several years by the federal and provincial governments and other regulatory bodies, intended to address housing market risks, have continued to have a slowing effect on housing activity. These changes have affected the ability of the Corporation to execute its investment strategy to acquire junior tranches of uninsured first mortgages. As previously disclosed by the Corporation, the Corporation has not been able to acquire any newly originated junior tranche mortgages since 2017. Based on advice from the Mortgage Consultant, the board of directors of the Corporation (the “Board”) and Brompton Funds Limited (the “Manager”) came to the unanimous conclusion that the Corporation would not be able to continue to invest in sufficient volumes of appropriate mortgage investments at current Portfolio yields that match the Corporation’s original business strategy. Furthermore, if this trend continues and junior tranches of uninsured mortgages are unavailable for purchase, the Corporation will not be able to continue to maintain the Corporation’s current dividend level. Accordingly, the Corporation and the Mortgage Consultant reported that they would explore investment and strategic alternatives in respect of the Portfolio.

Following such strategic review of Portfolio options, which included the sale of the Portfolio and investigating the purchase of alternative investments, the Corporation entered into an asset purchase agreement dated March 21, 2019 (the “Asset Purchase Agreement”) with YTM Capital Mortgage Income Fund (“YTM”) to sell the Portfolio to YTM (the “Asset Sale”). The sale provides an opportunity to realize an attractive value for the Corporation’s assets in an environment where the Common Shares trade at an approximate discount of 5% to the net book value of the Corporation. The purchase price in respect of the Portfolio (the “Purchase Price”) will be determined as at the closing date of the Asset Sale and will be comprised of cash consideration equal to the principal amount of the Portfolio plus accrued and unpaid interest as at the closing date. If the closing of the Asset Sale occurred on March 21, 2019, the Corporation would receive aggregate cash consideration of approximately $45.3 million, which would result in dissolution proceeds of approximately $9.65 per Common Share, a premium of approximately 4.7% to the 20-day volume weighted average price of the Common Shares on the TSX. The Corporation expects the actual aggregate proceeds of the Asset Sale to be different than $45.3 million as run-off and transactions in the Portfolio continue to occur prior to closing. Until the closing date, the Corporation expects to continue its monthly distributions.

In considering the Asset Sale, the Corporation formally engaged MNP LLP (“MNP”) to provide an opinion (the “Fairness Opinion”) with respect to the fairness of the Asset Sale to the Corporation. The Fairness Opinion states that, based upon and subject to the assumptions, limitations and qualifications set out therein, MNP is of the opinion that as at March 19, 2019, the Asset Sale is fair, from a financial point of view, to the Shareholders.

The Board has determined that the Proposed Transactions are in the best interests of the Corporation. Accordingly, the Board recommends that Shareholders vote in favour of the extraordinary resolution implementing the Proposed Transactions.

Eclipse will hold a special meeting on or about May 8, 2019 to consider and vote on the Proposed Transactions (the “Meeting”). Shareholders of record at the close of business on April 8, 2019 will be entitled to vote at the Meeting. Details of the Proposed Transactions will be further outlined in Eclipse’s notice of meeting and management information circular that will be prepared and delivered to Shareholders in connection with the Meeting and will be available on www.sedar.com on or about April 16, 2019.

In order to become effective, the extraordinary resolution implementing the Proposed Transactions must be approved by a two-thirds majority of Shareholders present in person or represented by proxy at the Meeting or any adjournment or postponement thereof. Affiliates of both the Manager and MCAP Commercial LP, an affiliate of MCAP Financial Limited Partnership, are Shareholders in the Corporation and intend to vote in favour of the Proposed Transactions. Certain officers and directors of the Corporation also intend to vote in favour of the Proposed Transactions. If approved, the Proposed Transactions are expected to be implemented in or about mid-May, 2019.

About Brompton Funds
Brompton Funds, a division of Brompton Group which was founded in 2000, is an experienced investment fund manager with over $2 billion in assets under management. Brompton’s investment solutions include TSX-traded funds and mutual funds. For further information, please contact your investment advisor, call Brompton’s investor relations line at 416-642-6000 (toll-free at 1-866-642-6001), email info@bromptongroup.com or visit our website at www.bromptongroup.com.

About MCAP
One of Canada’s largest mortgage financing companies, MCAP originates and services all mortgages for Eclipse. MCAP has more than 30 years of experience underwriting and servicing Canadian Single-Family Residential Mortgages, with over $74 billion in mortgage assets managed for banks, lifecos, credit unions and institutional investors.

Certain statements contained in this news release constitute forward-looking information within the meaning of Canadian securities laws. This news release includes forward-looking information and statements pertaining to, among other things, the Proposed Transactions, the receipt of applicable regulatory and third-party approvals for the Proposed Transactions, completion of the Proposed Transactions and consideration to be received by the Shareholders upon completion of the Proposed Transactions. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

Numerous risks and uncertainties could cause the actual events and results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: the conditions to the consummation of the Proposed Transactions may not be satisfied or waived; risks relating to the failure to obtain necessary third party and regulatory approvals for the Proposed Transactions; the Proposed Transactions may be modified, restructured or terminated; and events or series of events may cause business interruptions.