Arbor Realty Trust Closes $1B in Financing

Arbor Realty Trust secured a $1.15 billion refinancing from JPMorgan that will go toward paying off its Collateralized Loan Obligation bondholders.

The lender said the funds from JPMorgan will be used to redeem the bondholders of two large CLOs. The bondholders will be paid in full, the company said in a release.

JPMorgan is providing the refinancing as a repurchase line, also known as repo line, in which Arbor will use the proceeds to pay off its CLO bondholders. The refinancing also gives Arbor about $80 million in additional liquidity.

The news is a positive sign for Arbor. The lender has struggled with loan delinquencies and announced it will cut dividends in its last earnings. Last year, Bloomberg reported that Arbor faced a probe from the FBI and the Department of Justice. Arbor has become the subject of short-seller reports, which claim Arbor’s loans are distressed.

Much of the scrutiny about Arbor relates to its CLOs. The lender originates loans to multifamily owners and then securitizes them into something called a collateralized loan obligation, or CLO.

The Federal Reserve’s decision to raise interest rates put strain on some of Arbor’s multifamily borrowers, who were stuck with floating rating loans, and led to an uptick in delinquencies and foreclosures. Arbor then had to modify many of these loans by pushing out maturity dates and providing temporary rate relief.

But any broader concerns about Arbor’s loan book did not deter JPMorgan from extending a massive repurchase line to Arbor. The deal is unusually structured, allowing Arbor to essentially refinance its debt at a lower rate and even take home some additional proceeds.

In exchange for the financing, Arbor transferred $1.4 billion of assets into a repurchase facility, of which $1.3 billion consisted of assets in two of its CLOs. The line is mostly non-recourse, according to Arbor.

The two CLOs Arbor intends to unwind have a leverage point of about 77 percent with pricing of SOFR plus 2.24 percent. The repurchase facility offers an 80 percent leverage and has a lower rate than the CLOS, according to Arbor. The lender did not disclose the exact rate.

“This is an incredibly innovative transaction that creates tremendous efficiencies for us going forward,” Ivan Kaufman, Arbor’s CEO, said in a statement. “This result also continues to reinforce the quality of our loan book and the depth of our banking relationships.”