NEW YORK--(BUSINESS WIRE)--Two Harbors Investment Corp. (NYSE: TWO) announced today that it has provided PRCM Advisers LLC with a notice of termination of the Management Agreement between the Company and the Manager. The Company terminated the Management Agreement for “cause” in accordance with Section 15(a) thereof on the basis of the Manager’s material breaches of the Management Agreement and gross negligence in the performance of its duties thereunder. The notice of termination specifies that the Management Agreement will terminate on August 14, 2020. No termination fee will be payable to the Manager in connection with the termination.
The Company previously disclosed that it had elected not to renew the Management Agreement on the basis of unfair compensation payable to the Manager in accordance with Section 13(a)(ii) thereof. In connection with the non-renewal, the Company had expected the Management Agreement to terminate on September 19, 2020, at which time the Company would have been required to pay the Manager a termination fee previously estimated to be approximately $144 million. Because the Management Agreement is now being terminated for cause, however, no termination fee will be payable to the Manager.
Following the termination of the Management Agreement, Two Harbors will become a self-managed company. We expect to continue to be managed by our strong and experienced senior management team along with the other personnel currently providing services to Two Harbors. The Board anticipates a smooth and timely transition of all functions necessary to operate the Company’s business without interruption.
As previously disclosed, an independent committee comprised of all of the independent members of the Company’s Board of Directors (the “Independent Committee”) was formed to, among other duties, review and evaluate the performance of, and the fees and expenses payable to, the Manager. As part of its duties, the Independent Committee reviewed and evaluated possible breaches of the Management Agreement and acts of gross negligence on the part of the Manager, including without limitation certain events occurring after the non-renewal announcement. Based on its review, the Independent Committee unanimously determined that there had occurred certain material breaches of the Management Agreement by the Manager, its agents and/or its assignees that are incapable of being cured within the time period set forth therein and certain events of gross negligence on the part of the Manager in the performance of its duties under the Management Agreement. The Independent Committee therefore approved the termination of the Management Agreement pursuant to Section 15(a) thereof. The Independent Committee was advised by Goodwin Procter LLP, as its legal counsel.
Two Harbors Investment Corp.
Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in Minnetonka, Minnesota, and is externally managed and advised by PRCM Advisers LLC, a wholly owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.
