Goldman, Koch Said to Near Financing Deals With Ladder Capital

(Bloomberg) -- Goldman Sachs Group Inc. and the real estate investment arm of Koch Industries Inc. are close to agreements to provide Ladder Capital Corp. with new debt financing, enabling the mortgage real estate investment trust to further bolster its balance sheet, according to people with knowledge of the matter.

Koch Real Estate Investments, a subsidiary of billionaire Charles Koch's company, is in advanced talks to provide Ladder with a $200 million senior secured credit facility backed by existing loans and not tied to mark-to-market pricing, said the people, who asked not to be identified because the talks are private.

Goldman Sachs is in advanced discussions with Ladder Capital regarding a separate structured financing deal in which the bank will underwrite a commercial real estate collateralized loan obligation comprising about $500 million of loans at a roughly 65% advance rate on a matched-term, non-recourse and non-mark-to-market basis, said people with knowledge of the talks.

Representatives for Ladder, Koch and Goldman Sachs declined to comment.

The Koch facility was designed to provide Ladder with flexibility to work with its existing borrowers by alleviating near-term pressure on underlying loan collateral, one of the people said. It differs from traditional repurchase agreements, or so-called repo lines, which often trigger margin calls when borrowers are in default.

Equity Purchase

In addition to the credit facility, Koch has the right to purchase more than $30 million of Ladder's common stock at a premium to its current share price, some of the people said.

New York-based Ladder, led by Chief Executive Officer Brian Harris, has seen its share price drop by more than half this year, leaving it with a market capitalization of less than $1 billion.

The company said last month that it had boosted its unrestricted cash position to more than $600 million, in part through the sale of $380 million of loans and securities at an average price of 96% of par. Ladder has more than $6 billion of assets, including over $2.3 billion of unencumbered assets that are mostly first mortgage loans that serve as a source of potential additional liquidity, it said at the time.

In March, the pandemic caused panic in the U.S. mortgage market, forcing some firms to amend dividend policies and quickly unload billions of dollars in mortgage-backed securities to meet investor redemptions and manage liquidity issues.