Ninth Circuit Ruling on PennyMac's Preferred Shares Leaves Key Legal Questions Unresolved
The Ninth Circuit recently ruled that a fixed-rate dividend is not automatically prohibited by the LIBOR Act, rejecting a weak argument from shareholders of PennyMac Mortgage Investment Trust (PMT). However, critical issues remain unresolved, including whether PMT’s fallback provisions comply with the law. The case has been remanded to district court for further proceedings. The ruling did little to settle broader concerns about how preferred shares PMT-A and PMT-B are treated under contract terms related to LIBOR transition. Investors should note that while PennyMac won a narrow legal point, many key questions affecting the valuation of these securities remain open. The market initially reacted with slight declines but quickly stabilized. The litigation centers on contractual language rather than broad interpretations of the LIBOR Act itself. As such, future court decisions will likely hinge heavily on precise wording in PMT’s agreements.
Tickers: $PMT
Topics: corporate litigation LIBOR transition preferred shares