8-KMaterial AgreementsFinancial Events

Rocket Companies, Inc. 8-K Report, Material Agreement (Oct 15, 2020)

Filed October 15, 2020For Securities:RKT

Summary

Rocket Companies, Inc. (RKT) announced a significant expansion of its funding capacity through a new Master Repurchase Agreement (MRA) with Bank of Montreal. This agreement, effective October 9, 2020, provides $500.0 million in uncommitted financing for the origination of GSE-eligible mortgage loans, with a maturity date of October 9, 2021. This new facility contributes to a notable increase in the company's total funding capacity, which rose to $27.75 billion as of October 9, 2020, up from $22.28 billion at the end of Q2 2020 and $19.13 billion at the end of 2019. The Master Repurchase Agreement includes standard covenants and events of default, such as change of control provisions and financial maintenance requirements related to debt-to-tangible net worth ratios, pre-tax net income, liquidity, and tangible net worth. Failure to comply with these terms could result in the termination of financing and acceleration of outstanding amounts. This strategic move underscores Rocket Companies' commitment to bolstering its liquidity and operational capabilities to support continued mortgage origination growth.

Key Highlights

  • 1Rocket Companies, through its subsidiary Quicken Loans, LLC, entered into a Master Repurchase Agreement (MRA) with Bank of Montreal.
  • 2The MRA provides $500.0 million in uncommitted financing for the origination of GSE-eligible mortgage loans.
  • 3The financing facility has a maturity date of October 9, 2021.
  • 4Interest on borrowings will be based on one-month LIBOR plus an applicable margin.
  • 5The agreement includes customary covenants and events of default, such as change of control and financial maintenance covenants (debt-to-tangible net worth, pre-tax net income, liquidity, tangible net worth).
  • 6As of October 9, 2020, Rocket Companies' total funding capacity increased to $27.75 billion, a significant rise from previous periods.
  • 7This increase in funding capacity reflects the company's strategy to enhance liquidity for mortgage loan origination.

Frequently Asked Questions

The MRA with Bank of Montreal provides Rocket Companies with $500.0 million in uncommitted financing to support the origination of Government-Sponsored Enterprise (GSE)-eligible mortgage loans.

This new $500.0 million facility contributes to a significant increase in Rocket Companies' total funding capacity. As of October 9, 2020, their total funding capacity reached $27.75 billion, up from $22.28 billion on June 30, 2020, and $19.13 billion on December 31, 2019.

The MRA has a maturity date of October 9, 2021, and interest is calculated based on one-month LIBOR plus an applicable margin. It also contains standard covenants, events of default (including change of control), and financial maintenance requirements related to leverage, profitability, and liquidity.

If Rocket Companies fails to meet its obligations under the covenants or if an event of default occurs, the financing under the MRA may be terminated, and any outstanding amounts could become immediately due and payable. This highlights the importance of maintaining strong financial performance and compliance with the agreement's terms.