Terms

Series

7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

Liquidation Preference

$25.00

Coupon Rate

7.625%

Rate Type

Fixed To Floating

Annual Dividend

$1.91

Payment Frequency

Quarterly

Cumulative

Yes

Perpetual

Yes

Convertible

Yes

Callable

Yes

First Call Date

July 27, 2027

First Call Price

$25.00

Capital Stack Ranking

Junior To: All Existing And Future Indebtedness, Any Future Senior Stock, Indebtedness And Liabilities Of Subsidiaries; Pari Passu With: Series A Preferred Stock (8.125% Series A Fixed-To-Floating Rate Cumulative Redeemable Preferred Stock), Any Future Parity Stock; Senior To: Common Stock, Junior Stock (Any Future Stock Ranking Junior)

Regulatory (Basel III) Call

No

Tax Classification

Reit Passthrough

Qualifies for QDI

No

Qualifies for DRD

No

Shares Offered

10,000,000

Prospectus Summary

Two Harbors Investment Corp. (NYSE: TWO), a Maryland-based REIT, is offering 10,000,000 shares of its Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock at a $25.00 liquidation preference per share. The stock pays a fixed annual coupon of 7.625% ($1.90625 per share) through July 27, 2027, then switches to a floating rate of three-month LIBOR plus 535.2 basis points. The first optional redemption date is July 27, 2027, at $25.00 per share. This is a cumulative preferred, meaning any missed dividends accrue and must be paid in full before any distributions can be made on common stock or other junior securities. The Series B Preferred Stock sits above common stock and future Junior Stock in the capital structure, and ranks pari passu with Two Harbors' existing Series A Preferred Stock. However, it is effectively junior to all of the company's existing and future indebtedness — approximately $20.5 billion as of March 31, 2017 — and junior to the indebtedness of all operating subsidiaries, which have no legal obligation to fund preferred dividends. Because Two Harbors is a holding company that conducts substantially all business through subsidiaries, the preferred stock is structurally subordinated to subsidiary-level liabilities. There is no traditional bank regulatory capital call; instead, the stock may be redeemed before July 27, 2027 solely to preserve the issuer's REIT qualification, or upon a Change of Control. At par, the Series B Preferred Stock yields 7.625% annually, paid quarterly on April 27, July 27, October 27, and January 27, with the first payment on October 27, 2017. Because Two Harbors is a REIT, dividends are generally characterized as ordinary income (REIT pass-through distributions) rather than qualified dividend income, and typically do not qualify for the 15%/20% preferential QDI rate for individual investors or the dividends-received deduction for corporate holders. Dividend payments can be interrupted if the company lacks distributable earnings or is restricted by Maryland law; if six or more quarterly dividends are skipped, preferred holders gain the right to elect two additional board directors, though no cash obligation is accelerated.

Summarized from the SEC prospectus filing.

Distribution History

Floating Rate Terms

Conversion Terms

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If the issuer fails to pay cumulative dividends on the Series B Preferred Stock, it is restricted from paying dividends on common stock and any Junior Stock. Additionally, if six or more quarterly dividends are in arrears, preferred holders gain limited voting rights to elect two directors.

Other Preferreds from Two Harbors Investments Corp

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 48 (Average)