atax_8k0710.htm

Date of report (Date of earliest event reported): July 10, 2014

AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
(Exact name of registrant as specified in its charter)

Delaware	000-24843	47-0810385
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1004 Farnam Street, Suite 400, Omaha, Nebraska		68102
(Address of principal executive offices)		(Zip Code)

(402) 444-1630
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

As of July 10, 2014, America First Multifamily Investors, L.P. (the “Partnership”), and its affiliate, ATAX TEBS II, LLC, entered into a number of agreements relating to a new long-term debt financing facility provided through the securitization of 13 of the Partnership’s mortgage revenue bonds (the “Bonds”) with the Federal Home Loan Mortgage Corporation (“Freddie Mac”) pursuant to Freddie Mac’s Tax-Exempt Bond Securitization program, also known as the “TEBS” program (the “TEBS Financing”). The closing for the TEBS Financing occurred on July 10, 2014. The gross proceeds from the TEBS Financing were approximately $94.7 million, which were used to pay a portion of the outstanding balance due on the Partnership’s tender option bond facilities, purchase rate caps, pay costs of insurance and fund escrow accounts.

The TEBS Financing provides the Partnership with a long-term variable rate debt facility at interest rates reflecting prevailing short-term tax-exempt rates. Under the TEBS Financing, the Partnership transferred all of the Bonds, with a total outstanding principal amount of approximately $118.4 million, to ATAX TEBS II, LLC, a special purpose entity controlled by the Partnership (the “Sponsor”). The Bonds were securitized by transferring these assets to Freddie Mac in exchange for Class A and Class B Freddie Mac Multifamily Variable Rate Certificates, Series M-031 (collectively, the “TEBS Certificates”) issued by Freddie Mac. The TEBS Certificates represent beneficial interests in the securitized assets held by Freddie Mac.

The Class A TEBS Certificates were issued in an initial principal amount of approximately $94.7 million and were sold through a placement agent to unaffiliated investors. The Class B TEBS Certificates were issued in an initial principal amount of approximately $23.7 million and were retained by the Sponsor. The holders of the Class A TEBS Certificates are entitled to receive regular payments of interest from Freddie Mac at a variable rate which resets periodically based on the weekly Securities Industry and Financial Markets Association (“SIFMA”) floating index rate plus certain credit, facility, remarketing, and servicing fees (the “Facility Fees”). As of closing, the SIFMA rate was equal to 0.04% and the total Facility Fees were approximately 1.4%, resulting in a total initial cost of borrowing of approximately 1.5%.

Payment of interest on the Class A TEBS Certificates will be made from the interest payments received by Freddie Mac from the Bonds held by Freddie Mac on designated interest payment dates prior to any payments of interest on the Class B TEBS Certificates held by the Sponsor. As the holder of the Class B TEBS Certificates, the Sponsor is not entitled to receive interest payments on the Class B TEBS Certificates at any particular rate, but will be entitled to all payments of principal and interest on the Bonds after payment of principal and interest due on the Class A TEBS Certificates and payment of all Facility Fees and associated expenses. Accordingly, the amount of interest paid to the Sponsor on the Class B TEBS Certificates is expected to vary over time, and could be eliminated altogether, due to fluctuations in the interest rate payable on the Class A TEBS Certificates, Facility Fees, expenses, and other factors.

In order to mitigate its exposure to interest rate fluctuations on the variable rate TEBS Financing, the Sponsor also entered into interest rate cap agreements with Barclays Bank PLC, the Royal Bank of Canada, and Sumitomo Mitsui Banking Corporation, each in an initial notional amount of approximately $31.6 million, which effectively limits the interest payable by the Sponsor on Class A TEBS Certificates to a fixed rate of 3.0% per annum on the combined notional amounts of the interest rate cap agreements through August 15, 2019.

Freddie Mac has guaranteed payment of scheduled principal and interest payments on the Class A TEBS Certificates and also has guaranteed payment of the purchase price of any Class A TEBS Certificates that are tendered to Freddie Mac in accordance with their terms but which cannot be remarketed to new holders within five business days. The Sponsor is obligated to reimburse Freddie Mac for certain expenses, including any payments made by Freddie Mac under its guaranty. These obligations of the Sponsor are also guaranteed by the Partnership. The Partnership also entered into various subordination agreements with Freddie Mac under which the Partnership has subordinated its rights and remedies with respect to the tax-exempt and taxable bonds and mortgage loans made by it to the owners of properties securing certain of the Bonds to the rights of Freddie Mac as the holder of the Bonds.

Following is a brief description of the principal agreements affecting the rights and obligations of the Partnership and/or the Sponsor in connection with the TEBS Financing. Each of the following documents is attached as an exhibit to this Current Report on Form 8-K and is incorporated by reference herein. Each such description is qualified in its entirety by reference to the full text of the document so described.

Under the Sale, Contribution and Assignment Agreement between the Partnership and the Sponsor, the Partnership sold and conveyed the Bonds with a total outstanding principal amount of approximately $118.4 million. The Sponsor securitized the Bonds with Freddie Mac and received gross proceeds of approximately $94.7 million and the Class B TEBS Certificate in the principal amount of approximately $23.7 million. Under the Sale, Contribution and Assignment Agreement, the Sponsor kept the Class B TEBS Certificate and delivered the gross proceeds per the direction of the Partnership. The difference between the outstanding principal of the Bonds, plus accrued and unpaid interest on the Bonds as of the closing date, and the cash purchase price paid by the Sponsor to the Partnership, was treated as a capital contribution to the Sponsor by the Partnership. The Sale, Contribution and Assignment Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Under the Subordinate Bonds Custody Agreement by and among The Bank of New York Mellon Trust Company, N.A. (the “Custodian”), Freddie Mac, the Partnership, and the Sponsor, the Sponsor deposited 15 additional subordinate bonds (the “Subordinate Bonds”), with a total outstanding principal amount of approximately $11.6 million, into an account with the Custodian. The Sponsor is entitled to all payments of principal and interest on the Subordinate Bonds and has not pledged the Subordinated Bonds. The Sponsor, however, may not sell or transfer the Subordinate Bonds without the written consent of Freddie Mac. The Subordinate Bonds Custody Agreement is attached hereto as Exhibit 10.2 and is incorporated herein by reference.

Under the Bond Exchange, Reimbursement, Pledge and Security Agreement between Freddie Mac and the Sponsor (the “Bond Exchange Agreement”), the Sponsor transferred 13 Bonds with a principal balance of approximately $118.4 million to Freddie Mac in exchange for the Class A and Class B TEBS Certificates. The Bond Exchange Agreement provides, among other things, that the Sponsor will reimburse Freddie Mac (subject to certain limitations set forth therein) for (i) actual losses, if any, resulting from breaches of the Sponsor’s representations and warranties, subject to certain conditions set forth in the Bond Exchange Agreement, and (ii) certain advances made by Freddie Mac in its capacity as credit enhancer of the Class A TEBS Certificates. The Bond Exchange Agreement also sets forth the circumstances in which the parties may or are required to release any of the Bonds underlying the TEBS Certificates. Among other things, the Sponsor may elect to purchase all (but not less than all) of the Bonds from Freddie Mac on either July 15, 2019 or July 15, 2024. The Sponsor also retains a right to require a Bond to be released from Freddie Mac in the event of a payment default on the Bond which remains uncured for two consecutive scheduled payment dates or 60 days, whichever is shorter, by paying Freddie Mac the unpaid principal and accrued interest on the Bond plus a yield maintenance payment. In addition, the Sponsor has a limited right to substitute new bonds for existing Bonds held by Freddie Mac in certain circumstances. The Bond Exchange Agreement is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

The rights, preferences, tender option and disposition provisions, remarketing provisions, and other terms of the Class A and Class B TEBS Certificates are set forth in the Series Certificate Agreement between Freddie Mac, in its corporate capacity, and Freddie Mac, in its capacity as administrator (the “Series Certificate Agreement”). Pursuant to the Series Certificate Agreement, Freddie Mac serves as administrator of the TEBS Certificates. As administrator, Freddie Mac will, among other things, distribute interest and principal payments generated by the Bonds held by Freddie Mac to the holders of the TEBS Certificates in accordance with the distribution provisions of the Series Certificate Agreement. Freddie Mac also serves as credit enhancer of the Class A TEBS Certificates pursuant to the Series Certificate Agreement, and as such guarantees the payment of principal of the Bonds and interest on the Class A TEBS Certificates. In addition, Freddie Mac serves as liquidity provider in respect of the tender and remarketing of the Class A TEBS Certificates pursuant to the tender option and remarking provisions of the Series Certificate Agreement. The Series Certificate Agreement also sets forth the provisions pursuant to which distributions due to the holders of the Class B TEBS Certificates are applied to reimburse Freddie Mac for credit advances and liquidity advances made by it in its capacity as credit enhancer and liquidity provider for the Class A TEBS Certificates. The Series Certificate Agreement also governs the termination of Freddie Mac’s obligations with respect to the TEBS Certificates and the mandatory tender and termination of the TEBS Certificates. The Series Certificate Agreement (including the Standard Terms and Definitions incorporated therein) are attached hereto as Exhibit 10.4 and are incorporated herein by reference.

Pursuant to the Limited Support Agreement between the Partnership and Freddie Mac, the Partnership has guaranteed the obligations of the Sponsor pursuant to the provisions of the Bond Exchange Agreement that require the Sponsor to indemnify Freddie Mac with respect to the matters described above under the description of the Bond Exchange Agreement. The Limited Support Agreement is attached hereto as Exhibit 10.5 and is incorporated herein by reference.

The Sponsor also has entered into interest rate cap agreements with Barclays Bank PLC, the Royal Bank of Canada, and Sumitomo Mitsui Banking Corporation (the “Rate Cap Agreements”). Under each of the Rate Cap Agreements, the Sponsor and the respective counterparty have agreed to make payments to each other which effectively limits the interest payable by the Sponsor on Class A TEBS Certificates to a fixed rate of 3.0% per annum on the notional amount of the Rate Cap Agreements. The initial notional amount of each Rate Cap Agreement is $31,565,000, which, when aggregated, equals the principal amount of the Class A TEBS Certificates issued pursuant to the TEBS Financing. Each Rate Cap Agreement has a term running through August 15, 2019. The Rate Cap Agreements are attached hereto as Exhibits 10.6, 10.7, and 10.8 and are incorporated herein by reference. The rate cap notional amounts will amortize in accordance with the total Bond amortization of the underlying portfolio.

The Partnership and the Sponsor entered into a previous TEBS financing in September 2010 relating to a long-term debt financing facility provided through a similar securitization of the Partnership’s Bonds with Freddie Mac, and entered into various agreements in connection therewith with Freddie Mac, The Bank of New York Mellon Trust, N.A., Barclays Bank PLC, and the Royal Bank of Canada. For a description of this prior TEBS financing, see the Current Report on Form 8-K filed by the Partnership with the SEC on September 8, 2010, which is incorporated by reference herein. Other than the September 2010 TEBS financing, there is no affiliation between the Partnership or the Sponsor, on the one hand, and Freddie Mac, The Bank of New York Mellon Trust, N.A., Barclays Bank PLC, The Bank of New York Mellon, Sumitomo Mitsui Banking Corporation, or the Royal Bank of Canada on the other hand, and the terms of each of the foregoing agreements were determined by arm’s-length negotiations.

On July 10, 2014, the Partnership completed the TEBS Financing and, in connection therewith, transferred the Bonds, with a total outstanding principal amount of approximately $118.4 million, to the Sponsor as described in Item 1.01 of this report. The information set forth under Item 1.01 above with respect to the transfer of the Bonds in connection with the TEBS II Financing is hereby incorporated by reference into this Item 2.01.

	Exhibit No.		Description

	10.1		Sale, Contribution and Assignment Agreement dated July 10, 2014 between America First Multifamily Investors, L.P. and ATAX TEBS II, LLC.

	10.2		Subordinate Bonds Custody Agreement dated July 10, 2014 by and among The Bank of New York Mellon Trust Company, N.A., the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS II, LLC.

	10.3		Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation and ATAX TEBS II, LLC.

	10.4		Series Certificate Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator.

	10.5		Limited Support Agreement dated July 1, 2014 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation.

	10.6		Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Barclays Bank PLC.

	10.7		Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and the Royal Bank of Canada.

	10.8		Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Sumitomo Mitsui Banking Corporation.

	99.1		Press Release dated July 11, 2014.

Exhibit No.		Description

10.1		Sale, Contribution and Assignment Agreement dated July 10, 2014 between America First Multifamily Investors, L.P. and ATAX TEBS II, LLC.

10.2		Subordinate Bonds Custody Agreement dated July 10, 2014 by and among The Bank of New York Mellon Trust Company, N.A., the Federal Home Loan Mortgage Corporation, America First Multifamily Investors, L.P., and ATAX TEBS II, LLC.

10.3		Bond Exchange, Reimbursement, Pledge and Security Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation and ATAX TEBS II, LLC.

10.4		Series Certificate Agreement dated July 1, 2014 between the Federal Home Loan Mortgage Corporation, in its corporate capacity, and the Federal Home Loan Mortgage Corporation, in its capacity as administrator.

10.5		Limited Support Agreement dated July 1, 2014 between America First Multifamily Investors, L.P. and the Federal Home Loan Mortgage Corporation.

10.6		Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Barclays Bank PLC.

10.7		Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and the Royal Bank of Canada.

10.8		Rate Cap Agreement dated July 7, 2014 between ATAX TEBS II, LLC and Sumitomo Mitsui Banking Corporation.

99.1		Press Release dated July 11, 2014.

	AMERICA FIRST MULTIFAMILY INVESTORS, L.P.
Date: July 16, 2014

	By:	/s/ Mark A. Hiatt
		Printed Name: Mark A. Hiatt
		Title: Chief Executive Officer