Glen Allen-based Dynex Capital Inc. has reached an agreement in principle with plaintiffs in a class-action lawsuit filed against the real estate investment trust.
The lawsuit, filed in 2005 by the Teamsters Local 445 Freight Division Pension Fund, alleged violations of the federal securities laws. The suit was brought on behalf of a class of purchasers of MERIT Series 12-1 and MERIT Series 13 securitization financing bonds.
Dynex denies that it violated any federal securities laws and has agreed in principle to a settlement to eliminate the expense, burden and uncertainty of litigation, officials said.
Under a proposed settlement, the company would pay $7.5 million into an escrow account.
The settlement amount will be included as an expense in the company’s financial statements for the third quarter. The settlement will reduce earnings for the quarter by approximately 18.6 cents per common share.
The deal will not affect Dynex’s 27-cent dividend for the third quarter.
“This settlement will resolve legacy litigation so that we may continue to focus on the long-term future of our business,” Thomas B. Akin, the company’s chairman and CEO, said in a statement. “It will settle a significant uncertainty and does not materially impact the core operating or future earnings potential of the company.”
Separately, Dynex announced that it expects to exercise an option in October to refinance approximately $74.2 million in collateralized financings with repurchase agreement financing to take advantage of the lower interest rates and reduce overall borrowing costs.
The refinancing is expected to save the company approximately $2 million annually in interest costs and about $600,000 a year in amortization expense.
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