424B3 1 tm2039039-6_424b3.htm 424B3 tm2039039-6_424b3 - none - 29.3439995s
 Filed Pursuant to Rule 424(b)(3)
 Registration No. 333-251863
JOINT PROXY STATEMENT/PROSPECTUS
[MISSING IMAGE: lg_readycapital-4c.jpg]
[MISSING IMAGE: lg_anworthmort-4c.jpg]
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
February 9, 2021
To the Stockholders of Ready Capital Corporation and the Stockholders of Anworth Mortgage Asset Corporation.
The board of directors (the “Ready Capital Board”) of Ready Capital Corporation (“Ready Capital”) and the board of directors (the “Anworth Board”) of Anworth Mortgage Asset Corporation (“Anworth”), each a Maryland corporation, each have approved an Agreement and Plan of Merger, dated as of December 6, 2020 (as such agreement may be amended or modified from time to time, the “Merger Agreement”), by and among Ready Capital, RC Merger Subsidiary, LLC, a Delaware limited liability company (“Merger Sub”), and Anworth, pursuant to which Anworth will merge with and into Merger Sub, with Merger Sub continuing as the surviving company (the “Merger”). Immediately following the Merger, the surviving company will be contributed to Ready Capital’s operating partnership subsidiary, Sutherland Partners, L.P., a Delaware limited partnership (the “Ready Capital Operating Partnership”), in exchange for units of limited partnership interests in the Ready Capital Operating Partnership (“Ready Capital OP Units”). As a result of the contribution, the surviving company will become a wholly owned subsidiary of the Ready Capital Operating Partnership. The closing of the Merger will occur as promptly as practicable following satisfaction of all closing conditions set forth in the Merger Agreement, but either Ready Capital or Anworth may terminate the Merger Agreement if the closing has not occurred by September 30, 2021. Upon completion of the Merger, Ready Capital will continue to operate under the “Ready Capital Corporation” name and its shares of common stock, par value $0.0001 per share (“Ready Capital Common Stock”), will continue to trade on the New York Stock Exchange under the symbol “RC”.
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each outstanding share of common stock, par value $0.01 per share, of Anworth (“Anworth Common Stock”) (other than shares held by Ready Capital, Merger Sub or any wholly owned subsidiary of Ready Capital, Merger Sub or Anworth (such shares, the “Cancelled Shares”)), will be converted into the right to receive from Ready Capital (i) 0.1688 shares of Ready Capital Common Stock (hereinafter, the “Exchange Ratio”), plus (ii) $0.61 in cash minus the Per Share Excess Amount (if any), in each case, subject to adjustment as provided in the Merger Agreement (the “Per Share Common Merger Consideration”). The Per Share Excess Amount means an amount per share by which certain termination and transaction expenses of Anworth exceed $32.5 million, if any. The Cancelled Shares will be cancelled and retired, and no consideration will be delivered in exchange thereof. Cash will be paid in lieu of any fractional shares of Ready Capital Common Stock that would have been received as a result of the Merger.
Certain outstanding phantom shares granted by Anworth under its 2014 Equity Compensation Plan and 2004 Equity Compensation Plan, as amended, will, at the effective time of the Merger, automatically become fully vested and then immediately cancelled in exchange for the right to receive the Per Share Common Merger Consideration. The remaining outstanding phantom shares granted by Anworth will, at the effective time of the Merger, automatically be cancelled without consideration.
Each outstanding dividend equivalent right granted by Anworth under its 2007 Dividend Equivalent Rights Plan shall, at the effective time of the Merger, automatically be cancelled; provided, that any accrued amounts that have not yet been paid with respect to such dividend equivalent rights will be paid to the holders thereof at the effective time of the Merger (or as soon as practicable thereafter but in no event later than the first payroll date following the effective time of the Merger), less applicable income and employment tax withholdings.
Each share of Anworth’s 8.625% Series A Cumulative Preferred Stock, $0.01 par value per share, will be converted into the right to receive one share of a newly designated series of Ready Capital preferred stock, par value $0.0001 per share, which will be classified and designated as Ready Capital’s 8.625% Series B Cumulative Preferred Stock; each share of Anworth’s 6.25% Series B Cumulative Convertible Preferred Stock, $0.01 par value per share, will be converted into the right to receive one share of a newly designated series of Ready Capital preferred stock, par value $0.0001 per share, which will be classified and designated as Ready Capital’s 6.25% Series C Cumulative Convertible Preferred Stock; and each share of Anworth’s 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share, will be converted into the right to receive one share of a newly designated series of Ready Capital preferred stock, par value $0.0001 per share, which will be classified and designated as Ready Capital’s 7.625% Series D Cumulative Redeemable Preferred Stock.
The Merger Agreement provides that each of Anworth and Ready Capital will declare and pay an additional dividend in cash on the last business day prior to the closing of the Merger with a record date that is three business days before the payment date. This additional per share dividend payable by Anworth will be an amount up to (i) the per share amount of Anworth’s then-most recent quarterly dividend, prorated for the number of days between the record date of Anworth’s last dividend, plus (ii) an additional amount (the “Anworth Additional Dividend Amount”), if any, necessary so that the aggregate dividend payable is equal to the amount necessary for Anworth to maintain its REIT qualification under the Internal Revenue Code of 1986, as amended, and avoid the imposition of income tax or excise tax under the Code. The additional per share dividend payable by Ready Capital will be an amount up to (i) the per share amount of Ready Capital’s then-most recent quarterly dividend, prorated for the number of days between the record date of Ready Capital’s last dividend, plus (ii) an additional amount equal to the quotient obtained by dividing (A) the Anworth Additional Dividend Amount, if any, by (B) the Exchange Ratio divided by 0.80.
Based on the number of shares of Anworth Common Stock outstanding on the close of business on February 4, 2021, the record date for the Ready Capital special meeting, and an Exchange Ratio of 0.1688, Ready Capital expects approximately 16,774,328 shares of Ready Capital Common Stock will be issued in connection with the Merger.

Ready Capital and Anworth will each hold a special meeting of their respective stockholders. Ready Capital’s special meeting will be held solely by means of remote communication live over the Internet on March 17, 2021, at 9:00 a.m., Eastern Time. Anworth’s special meeting will be held solely by means of remote communication live over the Internet on March 17, 2021, at 10:00 a.m., Pacific Time.
At the Ready Capital special meeting, the Ready Capital stockholders will be asked to (i) consider and vote on a proposal to approve the issuance of shares of Ready Capital Common Stock in the Merger (the “Ready Capital Common Stock Issuance Proposal”) and (ii) approve the adjournment of the Ready Capital special meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Ready Capital Common Stock Issuance Proposal (the “Ready Capital Adjournment Proposal”). The Ready Capital Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated therein, including the Merger and the issuance of shares of Ready Capital Common Stock (the “Ready Capital Common Stock Issuance”), are in the best interests of Ready Capital and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated therein, including the Merger and the Ready Capital Common Stock Issuance, (iii) directed that the Ready Capital Common Stock Issuance Proposal be submitted to the holders of Ready Capital Common Stock for consideration at the Ready Capital special meeting and (iv) resolved to recommend, in accordance with and subject to the provisions of the Merger Agreement, that the holders of Ready Capital Common Stock approve the Ready Capital Common Stock Issuance Proposal. The Ready Capital Board unanimously recommends that the Ready Capital stockholders vote “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal. Only those matters included in the notice of the Ready Capital special meeting (“Notice of Special Meeting of Ready Capital”) may be considered and voted upon at the Ready Capital special meeting.
At the Anworth special meeting, the Anworth stockholders will be asked to (i) consider and vote on a proposal (the “Anworth Merger Proposal”) to approve the Merger and the other transactions contemplated by the Merger Agreement and (ii) approve the adjournment of the Anworth special meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Anworth Merger Proposal (the “Anworth Adjournment Proposal”). The Anworth Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated therein, including the Merger, are in the best interests of Anworth and its stockholders, (ii) approved the Merger Agreement, the Merger, and the other transactions contemplated thereby, and declared that the transactions contemplated by the Merger Agreement, including the Merger, are advisable, (iii) directed that the Anworth Merger Proposal be submitted to the holders of Anworth Common Stock for consideration at the Anworth special meeting and (iv) resolved to recommend, in accordance with and subject to the provisions of the Merger Agreement, that the holders of Anworth Common Stock approve the Anworth Merger Proposal. The Anworth Board unanimously recommends that the Anworth stockholders vote “FOR” the Anworth Merger Proposal and “FOR” the Anworth Adjournment Proposal. Only those matters included in the notice of the Anworth special meeting (“Notice of Special Meeting of Anworth”) may be considered and voted upon at the Anworth special meeting.
This joint proxy statement/prospectus provides detailed information about the special meetings of Ready Capital and Anworth, the Merger Agreement, the Merger and other related matters. A copy of the Merger Agreement is included as Annex A to this joint proxy statement/prospectus. We encourage you to read this joint proxy statement/prospectus, the Merger Agreement and the other annexes to this joint proxy statement/prospectus carefully and in their entirety. In particular, you should carefully consider the discussion in the section of this joint proxy statement/prospectus entitled “Risk Factors” beginning on page 35. You may also obtain more information about each company from the documents they file with the Securities and Exchange Commission (the “SEC”).
Whether or not you plan to attend the Ready Capital special meeting or the Anworth special meeting virtually, as applicable, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or authorize a proxy to vote your shares through the Internet or by telephone. You may also authorize a proxy to vote your shares over the Internet using the Internet address on the enclosed proxy card or by telephone using the toll-free number on the enclosed proxy card. If you authorize a proxy to vote your shares through the Internet or by telephone, you will be asked to provide the company number and control number from the enclosed proxy card. If you attend and vote at a special meeting virtually over the Internet, your vote by ballot will revoke any proxy previously submitted.
Your vote is very important, regardless of the number of shares of stock you own. Whether or not you plan to attend the Ready Capital special meeting or the Anworth special meeting virtually, as applicable, please authorize a proxy to vote your shares of stock as promptly as possible to make sure that your shares of stock are represented at the applicable special meeting. Please note that the failure to vote, or authorize a proxy to vote, your shares of stock of Anworth is the equivalent of a vote against the Anworth Merger Proposal.
Thank you in advance for your continued support.
Sincerely,
Thomas E. Capasse
Chairman and Chief Executive Officer
Ready Capital Corporation
Joseph E. McAdams
Chief Executive Officer and President
Anworth Mortgage Asset Corporation
Neither the SEC nor any state securities regulatory agency has approved or disapproved of the securities to be issued in connection with the Merger or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is dated February 9, 2021, and is first being mailed to the stockholders of Ready Capital and the stockholders of Anworth on or about February 12, 2021.

 
[MISSING IMAGE: lg_readycapital-4c.jpg]
1251 Avenue of the Americas, 50th Floor
New York, NY 10020
NOTICE OF SPECIAL MEETING OF READY CAPITAL STOCKHOLDERS
TO BE HELD ON MARCH 17, 2021
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Ready Capital Corporation, a Maryland corporation (“Ready Capital”), will be held solely by means of remote communication live over the Internet at https://web.lumiagm.com/222056299 on March 17, 2021 at 9:00 a.m., Eastern Time, for the following purposes:
1.
to consider and vote on a proposal (the “Ready Capital Common Stock Issuance Proposal”) to approve the issuance of shares of common stock, par value $0.0001 per share, of Ready Capital (“Ready Capital Common Stock”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 6, 2020, by and among Ready Capital, RC Merger Subsidiary, LLC, a Delaware limited liability company, and Anworth Mortgage Asset Corporation, a Maryland corporation, as it may be amended from time to time, a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice; and
2.
to consider and vote on a proposal (the “Ready Capital Adjournment Proposal”) to adjourn the special meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes to approve the Ready Capital Common Stock Issuance Proposal.
Ready Capital will transact no other business at the Ready Capital special meeting or any postponement or adjournment thereof. Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the Ready Capital special meeting. The board of directors of Ready Capital (the “Ready Capital Board”) has fixed the close of business on February 4, 2021 as the record date (the “Ready Capital Record Date”) for the determination of Ready Capital stockholders entitled to notice of, and to vote at, the Ready Capital special meeting or any postponement or adjournment thereof. Accordingly, only stockholders at the close of business on the Ready Capital Record Date are entitled to notice of, and to vote at, the Ready Capital special meeting and any postponement or adjournment thereof.
The Ready Capital Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated therein, including the including the merger of Anworth with and into Merger Sub (the “Merger”) and the issuance of shares of Ready Capital Common Stock (the “Ready Capital Common Stock Issuance”), are in the best interests of Ready Capital and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated therein, including the Merger and the Ready Capital Common Stock Issuance, (iii) directed that the Ready Capital Common Stock Issuance Proposal be submitted to the holders of Ready Capital Common Stock for consideration at the Ready Capital special meeting and (iv) resolved to recommend, in accordance with and subject to the provisions of the Merger Agreement, that the holders of Ready Capital Common Stock approve the Ready Capital Common Stock Issuance Proposal. The Ready Capital Board unanimously recommends that the Ready Capital stockholders vote “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal.
Your vote is very important, regardless of the number of shares of Ready Capital Common Stock you own. Whether or not you plan to attend the Ready Capital special meeting virtually, please authorize a proxy to vote your shares as promptly as possible to make sure that your shares are represented at the Ready Capital special meeting. Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal. Even if you plan to attend the Ready Capital special meeting virtually, we urge you to authorize a proxy as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card or (3) completing, signing, dating and returning the enclosed proxy card in the accompanying postage-paid envelope prior to the Ready Capital special meeting to ensure that your
 

 
shares will be represented and voted at the Ready Capital special meeting. If you hold shares of Ready Capital Common Stock, in “street name” through a broker or other financial institution, you must follow the instructions provided by your broker or other financial institution regarding how to instruct your broker or financial institution to vote your shares of Ready Capital Common Stock.
Please note that if you hold shares of stock in different accounts, it is important that you vote or authorize a proxy to vote the shares of stock represented by each account. If you attend the Ready Capital special meeting virtually over the Internet, you may revoke your proxy and vote electronically at the Ready Capital special meeting, even if you have previously returned your proxy card or authorized a proxy to vote your shares through the Internet or by telephone. If your shares of Ready Capital Common Stock are held by a bank, broker or other nominee, and you plan to attend the Ready Capital special meeting virtually over the Internet and vote your shares electronically at the Ready Capital special meeting, you must first obtain a legal proxy from your broker, bank or other nominee to vote electronically at the virtual Ready Capital special meeting. Please carefully review the instructions in the enclosed joint proxy statement/prospectus and the enclosed proxy card or the information forwarded by your bank, broker or other nominee regarding each of these options.
You can virtually attend the Ready Capital special meeting on March 17, 2021 at 9:00 a.m. Eastern Time by accessing the online virtual meeting platform at https://web.lumiagm.com/222056299, but you are only entitled to participate, vote, and/or ask questions at the Ready Capital special meeting if you were a stockholder of record as of the Ready Capital Record Date, or you were a beneficial owner as of the Ready Capital Record Date, hold a valid legal proxy for the Ready Capital special meeting and you registered in advance as described in the accompanying proxy statement and provide a copy of the valid legal proxy.
To participate in the Ready Capital special meeting by voting and/or asking questions, you will need the 11-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you are a stockholder as of the Ready Capital Record Date, you may vote your shares electronically during the Ready Capital special meeting through the online virtual meeting platform by following the instructions provided when you log in to the online virtual meeting platform. On the day of the Ready Capital special meeting, stockholders may begin to log in to the online virtual meeting platform beginning at 8:45 a.m. Eastern Time, and the meeting will begin promptly at 9:00 a.m. Eastern Time. Please allow ample time for online login.
We will have technicians ready to assist you with any technical difficulties you may have accessing the Ready Capital special meeting. If you encounter any difficulties accessing or logging in to the Ready Capital special meeting, please call the technical support number displayed on the login page of the online virtual meeting platform.
This notice and the enclosed proxy statement/prospectus are first being mailed to Ready Capital stockholders on or about February 12, 2021.
By Order of the Board of Directors,
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Andrew Ahlborn
Secretary and Chief Financial Officer
New York, New York
February 9, 2021
 

 
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ANWORTH MORTGAGE ASSET CORPORATION
1299 Ocean Avenue, 2nd Floor
Santa Monica, California 90401
(310) 255-4493
NOTICE OF SPECIAL MEETING OF ANWORTH STOCKHOLDERS
TO BE HELD ON MARCH 17, 2021
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the “Anworth special meeting”) of Anworth Mortgage Asset Corporation, a Maryland corporation (“Anworth”), will be held solely by means of remote communication live over the Internet at www.virtualshareholdermeeting.com/ANH2021SM on March 17, 2021 at 10:00 a.m., Pacific Time, for the following purposes:
1.
to consider and vote on a proposal (the “Anworth Merger Proposal”) to approve the merger of Anworth with and into RC Merger Subsidiary, LLC, a Delaware limited liability company (“Merger Sub”), with Merger Sub continuing as the surviving entity, and the other transactions contemplated in connection therewith (collectively, the “Merger”), pursuant to that certain Agreement and Plan of Merger, dated as of December 6, 2020, by and among Ready Capital Corporation, a Maryland corporation (“Ready Capital”), Merger Sub, a wholly owned subsidiary of Ready Capital, and Anworth (the “Merger Agreement”), as it may be amended from time to time, a copy of which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice; and
2.
to consider and vote on a proposal to adjourn the special meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes to approve the Anworth Merger Proposal (the “Anworth Adjournment Proposal”).
Anworth will transact no other business at the Anworth special meeting or any postponement or adjournment thereof. Please refer to the attached joint proxy statement/prospectus for further information with respect to the business to be transacted at the Anworth special meeting. The board of directors of Anworth (the “Anworth Board”) has fixed the close of business on February 4, 2021 as the record date (the “Anworth Record Date”) for the determination of the holders of shares of common stock, par value $0.01 per share, of Anworth (the “Anworth Common Stock”) entitled to the notice of, and to vote at, the Anworth special meeting or any postponement or adjournment thereof. Accordingly, only Anworth stockholders at the close of business on the Anworth Record Date are entitled to the notice of, and to vote at, the Anworth special meeting and any postponement or adjournment thereof.
The Anworth Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interests of Anworth and Anworth stockholders; (ii) approved the Merger Agreement, the Merger, and the other transactions contemplated thereby, and declared that the transactions contemplated by the Merger Agreement, including the Merger, are advisable; (iii) directed that the Anworth Merger Proposal be submitted to Anworth stockholders for consideration at the Anworth special meeting; and (iv) resolved to recommend, in accordance with and subject to the provisions of the Merger Agreement, that the holders of Anworth Common Stock approve the Anworth Merger Proposal. The Anworth Board unanimously recommends that the Anworth stockholders vote “FOR” the Anworth Merger Proposal and “FOR” the Anworth Adjournment Proposal.
Your vote is very important, regardless of the number of shares of Anworth Common Stock you own. Whether or not you plan to attend the Anworth special meeting virtually, please authorize a proxy to vote your shares of Anworth Common Stock as promptly as possible to make sure that your shares are represented at the Anworth special meeting. Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the Anworth Merger Proposal and “FOR” the Anworth Adjournment Proposal.
To ensure your representation at the Anworth special meeting, you are urged to vote your shares of Anworth Common Stock: (1) by phone, (2) via the Internet, before the meeting or during the meeting,
 

 
or (3) by marking, signing, dating, and promptly returning the proxy card in the enclosed postage-paid envelope for that purpose. Whether or not you plan to attend the virtual Anworth special meeting, we urge you to vote in advance of the Anworth special meeting by one of the methods described above. Any Anworth stockholder attending the virtual Anworth special meeting may vote at the Anworth special meeting even if he or she previously submitted a proxy.
Please note that if you hold shares of Anworth Common Stock in different accounts, it is important that you vote or authorize a proxy to vote the shares of Anworth Common Stock represented by each account. If you attend the Anworth special meeting virtually over the Internet, you may revoke your proxy and vote electronically at the Anworth special meeting, even if you have previously returned your proxy card or authorized, through the Internet or by telephone, a proxy to vote your shares of Anworth Common Stock.
You can virtually attend the Anworth special meeting on March 17, 2021 at 10:00 a.m. Pacific Time by accessing the online virtual meeting platform at www.virtualshareholdermeeting.com/ANH2021SM, but you are only entitled to participate, vote, and/or ask questions at the Anworth special meeting if you were a stockholder of record or beneficial owner as of the Anworth Record Date.
To participate in the Anworth special meeting by voting and/or asking questions, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you are a stockholder as of the Anworth Record Date, you may vote your shares electronically during the Anworth special meeting through the online virtual meeting platform by following the instructions provided when you log in to the online virtual meeting platform. On the day of the Anworth special meeting, stockholders may begin to log in to the online virtual meeting platform beginning at 9:45 a.m. Pacific Time, and the meeting will begin promptly at 10:00 a.m. Pacific Time. Please allow ample time for online login.
We will have technicians ready to assist you with any technical difficulties you may have accessing the Anworth special meeting. If you encounter any difficulties accessing or logging in to the Anworth special meeting, please call the technical support number displayed on the login page of the online virtual meeting platform.
This notice and the enclosed joint proxy statement/prospectus are first being mailed to Anworth stockholders on or about February 12, 2021.
Sincerely,
[MISSING IMAGE: sg_charlessiegel-bw.jpg]
Charles J. Siegel
Secretary and Chief Financial Officer
Santa Monica, California
February 9, 2021
 

 
ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and financial information about Ready Capital and Anworth from other documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your request. To obtain timely delivery, you must request the information no later than five business days before the date of the applicable special meeting. You can obtain copies of this joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus by requesting them from Ready Capital’s investor relations department, or Anworth’s proxy solicitor or investor relations departments
If you are a Ready Capital stockholder:
1251 Avenue of the Americas, 50th Floor
New York, New York 10020
(212) 257-4666
Attention: Investor Relations
If you are an Anworth stockholder:
Morrow Sodali LLC
509 Madison Avenue
New York, New York 10022
(800) 662-5200 (toll-fee)
(203) 658-9400
ANH@investor.morrowsodali.com
or
1299 Ocean Avenue, 2nd Floor
Santa Monica, California 90401
(310) 255-4438
Attention: John T. Hillman
Investors may also consult Ready Capital’s or Anworth’s website for more information concerning the Merger and other related transactions described in this joint proxy statement/prospectus. Ready Capital’s website is www.readycapital.com. Anworth’s website is www.anworth.com. Each company’s public filings are also available at www.sec.gov. The information contained on Ready Capital’s and Anworth’s websites is not part of this joint proxy statement/prospectus and is not incorporated herein by reference.
If you would like to request copies of this joint proxy statement/prospectus and any documents that are incorporated by reference into this joint proxy statement/prospectus, please do so by March 10, 2021 in order to receive them before the Ready Capital special meeting and by March 10, 2021 in order to receive them before the Anworth special meeting.
In addition, if you have questions about the Merger or the accompanying joint proxy statement/prospectus, would like additional copies of the joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, please contact Ready Capital’s investor relations department at (212) 257-4666, or Morrow Sodali, the proxy solicitor for Anworth, at (800) 662-5200 (toll free) in North America or +1 (203) 658-9400 outside of North America. You will not be charged for any of these documents that you request.
For more information, see “Where You Can Find More Information and Incorporation by Reference” beginning on page 229.
ABOUT THIS DOCUMENT
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 (Registration Statement No. 333-251863) filed by Ready Capital with the SEC, constitutes a prospectus of Ready Capital for purposes of the Securities Act of 1933, as amended (the “Securities Act”), with respect to (i) the shares of Ready Capital Common Stock to be issued to Anworth stockholders in exchange for shares of Anworth Common Stock and certain phantom shares of Anworth, (ii) the shares of Ready Capital Series B Preferred Stock to be issued to holders of Anworth Series A Preferred Stock, (iii) the shares of Ready Capital Series C Preferred Stock to be issued to holders of Anworth Series B Preferred Stock and (iv) the shares of Ready Capital Series D Preferred Stock to be issued to holders of Anworth Series C Preferred Stock, in each case pursuant to the Merger Agreement. This joint proxy statement/prospectus also constitutes a proxy statement for each of Ready Capital and Anworth for purposes of the Securities Exchange Act of 1934, as
 

 
amended (the “Exchange Act”). In addition, it constitutes a notice of special meeting with respect to the Ready Capital special meeting and a notice of special meeting with respect to the Anworth special meeting.
No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated February 9, 2021, and you should not assume that the information contained in, or incorporated by reference into, this joint proxy statement/prospectus is accurate as of any date other than that date (or, in the case of documents incorporated by reference, their respective dates). Neither the mailing of this joint proxy statement/prospectus to Ready Capital stockholders or Anworth stockholders nor the Ready Capital Common Stock Issuance to Anworth stockholders in the Merger pursuant to the Merger Agreement will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or to any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in or incorporated by reference into this joint proxy statement/prospectus regarding Ready Capital has been provided by Ready Capital and information contained in or incorporated by reference into this joint proxy statement/prospectus regarding Anworth has been provided by Anworth. Ready Capital and Anworth have both contributed to the information relating to the Merger contained in this joint proxy statement/prospectus.
 

 
TABLE OF CONTENTS
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ANNEX A: Agreement and Plan of Merger
ANNEX B: Opinion of Ready Capital’s Financial Advisor, Wells Fargo Securities, LLC
ANNEX C: Opinion of Anworth’s Financial Advisor, Credit Suisse Securities (USA) LLC
 
ii

 
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE MERGER
The following questions and answers are intended to address certain commonly asked questions regarding the Merger Agreement, the Merger and the Ready Capital and Anworth special meetings. These questions and answers do not address all questions that may be important to you as a stockholder of Ready Capital or Anworth. Please refer to the “Summary” beginning on page 16 and the more detailed information contained elsewhere in this joint proxy statement/prospectus, the annexes to this joint proxy statement/prospectus and the documents incorporated by reference in this joint proxy statement/prospectus, which you should read carefully. Unless stated otherwise, all references in this joint proxy statement/prospectus to:

“Anworth” refers to Anworth Mortgage Asset Corporation, a Maryland corporation.

“Anworth Adjournment Proposal” refers to the proposal to approve the adjournment of the Anworth special meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Anworth Merger Proposal.

“Anworth Board” refers to the board of directors of Anworth.

“Anworth Bylaws” refers to Anworth’s Amended Bylaws, as amended from time to time.

“Anworth Charter” refers to the charter of Anworth.

“Anworth Common Stock” refers to each outstanding share of common stock, par value $0.01 per share, of Anworth.

“Anworth Management Agreement” refers to that certain management agreement between Anworth and the Anworth Manager, dated as of December 31, 2011.

“Anworth Management Agreement Amendment” refers to the First Amendment to Management Agreement, dated as of December 6, 2020, by and among Anworth, the Anworth Manager, and Ready Capital.

“Anworth Manager” refers to Anworth Management LLC, Anworth’s external manager.

“Anworth Merger Proposal” refers to the proposal to the Anworth stockholders to approve the Merger.

“Anworth Preferred Stock” refers to Anworth Series A Preferred Stock, Anworth Series B Preferred Stock and Anworth Series C Preferred Stock.

“Anworth Record Date” means February 4, 2021.

“Anworth Series A Preferred Stock” refers to Anworth’s 8.625% Series A Cumulative Preferred Stock, $0.01 par value per share.

“Anworth Series B Preferred Stock” refers to Anworth’s 6.25% Series B Cumulative Convertible Preferred Stock, $0.01 par value per share.

“Anworth Series C Preferred Stock” refers to Anworth’s 7.625% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share.

“Closing” refers to the closing of the Merger.

“Code” refers to the Internal Revenue Code of 1986, as amended.

“Combined Company” refers to Ready Capital and its subsidiaries after the Closing.

“Credit Suisse” refers to Credit Suisse Securities (USA) LLC.

“Exchange Ratio” means 0.1688, subject to adjustment as provided in the Merger Agreement.

“GAAP” refers to the accounting principles generally accepted in the United States of America.

“Merger” refers to the merger of Anworth with and into Merger Sub, with Merger Sub continuing as the surviving company.

“Merger Agreement” refers to the Agreement and Plan of Merger, dated as of December 6, 2020, by and among Ready Capital, Merger Sub, and Anworth, as it may be amended or modified from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus.
 
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“Merger Sub” refers to RC Merger Subsidiary, LLC, a Delaware limited liability company and a wholly owned subsidiary of Ready Capital.

“NYSE” refers to the New York Stock Exchange.

“Per Share Cash Consideration” means a cash amount equal to (i) $0.61 minus (ii) the Per Share Excess Amount (if any), subject to adjustment as provided in the Merger Agreement.

“Per Share Common Merger Consideration” means (i) a number of shares of Ready Capital Common Stock based on the Exchange Ratio, plus (ii) the Per Share Cash Consideration, in each case, subject to adjustment as provided in the Merger Agreement.

“Per Share Excess Amount” means an amount per share by which certain termination and transaction expenses of Anworth exceed $32.5 million, if any.

“Per Share Preferred Merger Consideration” refers to the right of each share of Anworth Series A Preferred Stock to receive one share of Ready Capital Series B Preferred Stock, the right of each share of Anworth Series B Preferred Stock to receive one share of Ready Capital Series C Preferred Stock and the right of each share of Anworth Series C Preferred Stock to receive one share of Ready Capital Series D Preferred Stock.

“Ready Capital” refers to Ready Capital Corporation, a Maryland corporation.

“Ready Capital Adjournment Proposal” refers to the proposal to approve the adjournment of the Ready Capital special meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Ready Capital Common Stock Issuance Proposal.

“Ready Capital Board” refers to the board of directors of Ready Capital.

“Ready Capital Bylaws” refers to Ready Capital’s Amended and Restated Bylaws, as amended from time to time.

“Ready Capital Charter” refers to the charter of Ready Capital.

“Ready Capital Common Stock” refers to the common stock, par value $0.0001 per share, of Ready Capital.

“Ready Capital Common Stock Issuance Proposal” refers to the proposal to approve the Ready Capital Common Stock Issuance.

“Ready Capital Common Stock Issuance” refers to the issuance of shares of Ready Capital Common Stock to holders of Anworth Common Stock, as contemplated by the Merger Agreement.

“Ready Capital Management Agreement” refers to the Amended and Restated Management Agreement, among Ready Capital, certain of Ready Capital’s subsidiaries and the Ready Capital Manager, dated May 9, 2016, as amended.

“Ready Capital Management Agreement Amendment” refers to the First Amendment to the Amended and Restated Management Agreement of Ready Capital, dated December 6, 2020.

“Ready Capital Manager” refers to Waterfall Asset Management, LLC, Ready Capital’s external manager.

“Ready Capital Operating Partnership” refers to the operating partnership subsidiary of Ready Capital, Sutherland Partners, L.P., a Delaware limited partnership.

“Ready Capital OP Units” refers to the units of limited partnership interests in the Ready Capital Operating Partnership.

“Ready Capital Preferred Stock” refers to Ready Capital Series B Preferred Stock, Ready Capital Series C Preferred Stock and Ready Capital Series D Preferred Stock.

“Ready Capital Record Date” means February 4, 2021.

“Ready Capital Series B Preferred Stock” refers to Ready Capital’s newly classified 8.625% Series B Cumulative Preferred Stock, par value $0.0001 per share.
 
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“Ready Capital Series C Preferred Stock” refers to Ready Capital’s newly classified 6.25% Series C Cumulative Convertible Preferred Stock, par value $0.0001 per share.

“Ready Capital Series D Preferred Stock” refers to Ready Capital’s newly classified 7.625% Series D Cumulative Redeemable Preferred Stock, par value $0.0001 per share.

“REIT” refers to a real estate investment trust as defined in Section 856 of the Code.

“Vesting Anworth Phantom Shares” means an aggregate of 70,000 outstanding phantom shares granted by Anworth under its 2014 Equity Compensation Plan and 2004 Equity Compensation Plan that will, at the effective time of the Merger, automatically become fully vested and then immediately cancelled in exchange for the right to receive the Per Share Common Merger Consideration.

“Wells Fargo” refers to Wells Fargo Securities, LLC.
Q:
What is the Merger?
A:
Ready Capital, Merger Sub and Anworth have entered into the Merger Agreement pursuant to which, and subject to the terms and conditions of the Merger Agreement, Anworth will merge with and into Merger Sub, with Merger Sub continuing as the surviving company and, following its contribution to the Ready Capital Operating Partnership, as a wholly owned subsidiary of the Ready Capital Operating Partnership. A copy of the Merger Agreement is attached as Annex A to this document. In order to complete the Merger, among other conditions described in the Merger Agreement and this joint proxy statement/prospectus, stockholders of Ready Capital must approve the Ready Capital Common Stock Issuance and stockholders of Anworth must approve the Merger.
Q:
Why am I receiving this joint proxy statement/prospectus?
A:
Ready Capital and Anworth are delivering this document to you because it is a joint proxy statement being used by both the Ready Capital Board and the Anworth Board to solicit proxies of their respective stockholders in connection with the approval of the Merger, the issuance of shares of Ready Capital Common Stock and related matters.
In order to approve the issuance of shares of Ready Capital Common Stock, Ready Capital has called a special meeting of its stockholders. This document serves as a proxy statement for the Ready Capital special meeting and describes the proposals to be presented at the Ready Capital special meeting.
Anworth has also called a special meeting of its stockholders to approve the Merger and approve related matters. This document serves as a proxy statement for the Anworth special meeting and describes the proposals to be presented at the Anworth special meeting.
Finally, this document is also a prospectus that is being delivered to all holders of Anworth Common Stock and Anworth Preferred Stock because, in connection with the Merger, Ready Capital is offering shares of Ready Capital Common Stock to the holders of Anworth Common Stock and shares of Ready Capital Preferred Stock to the holders of Anworth Preferred Stock, all as provided in the Merger Agreement and as described in this joint proxy statement/prospectus.
This joint proxy statement/prospectus contains important information about the Merger and the other proposals being considered and voted on at the Ready Capital and Anworth special meetings and important information to consider in connection with an investment in Ready Capital Common Stock and Ready Capital Preferred Stock. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares of Ready Capital Common Stock or Anworth Common Stock, as applicable, voted by proxy without attending the applicable special meeting virtually. Your vote is important and we encourage you to authorize your proxy as soon as possible.
Q:
What proposals are Ready Capital stockholders being asked to approve?
A:
The Ready Capital stockholders are being asked to approve the Ready Capital Common Stock Issuance Proposal in connection with the Merger. The approval of the Ready Capital Common Stock Issuance Proposal by the Ready Capital stockholders is a condition to the effectiveness of the Merger.
 
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The Ready Capital stockholders are also being asked to approve the Ready Capital Adjournment Proposal, if necessary. The approval of such proposal is not a condition to the effectiveness of the Merger.
Q:
What proposals are Anworth stockholders being asked to approve?
The Anworth stockholders are being asked to approve the Anworth Merger Proposal. The approval of the Anworth Merger Proposal by the Anworth stockholders is a condition to the effectiveness of the Merger.
The Anworth stockholders are also being asked to approve the Anworth Adjournment Proposal, if necessary. The approval of this proposal is not a condition to the effectiveness of the Merger.
Q:
Why are Ready Capital and Anworth proposing the Merger?
A:
The Ready Capital Board and the Anworth Board have determined that the Merger will provide a number of significant strategic opportunities and benefits and will be in the best interests of their respective stockholders. To review the Ready Capital Board’s and the Anworth Board’s reasons for the Merger in greater detail, see “The Merger — Recommendation of the Ready Capital Board and Its Reasons for the Merger” beginning on page 90 and “The Merger — Recommendation of the Anworth Board and Its Reasons for the Merger” beginning on page 86.
Q:
Were appraisals or valuations performed on the assets and liabilities of Ready Capital and Anworth in connection with the Merger?
A:
No third-party appraisals or valuations on the assets and liabilities of Ready Capital and Anworth were obtained in connection with the Merger.
Q:
What happens if the market price of Ready Capital Common Stock or Anworth Common Stock changes before the Closing?
A:
Changes in the market price of Ready Capital Common Stock or the market price of Anworth Common Stock at or prior to the effective time of the Merger will not change the number of shares of Ready Capital Common Stock that Anworth stockholders will receive.
Q:
Are there any conditions to completion of the Merger?
A:
Yes. In addition to the approvals of the Ready Capital stockholders and the Anworth stockholders, as described herein, there are a number of conditions that must be satisfied or waived for the Merger to be consummated. For a description of all the conditions to the Merger, see “The Merger Agreement — Conditions to Complete the Merger” beginning on page 135.
The following questions and answers apply to Ready Capital stockholders only:
Q:
When and where is the Ready Capital special meeting?
A:
The special meeting of Ready Capital stockholders will be held solely by means of remote communication virtually over the Internet at https://web.lumiagm.com/222056299 on March 17, 2021 at 9:00 a.m., Eastern Time.
Q:
How do I attend the Ready Capital special meeting?
A:
If you are a registered stockholder:
If you were a stockholder of record as of the close of business on February 4, 2021, you can attend the Ready Capital special meeting by accessing https://web.lumiagm.com/222056299 and entering the 11-digit control number on the proxy card previously sent to you by AST. Once you have completed these steps, select the “login” button, which will take you to the special meeting page where you can vote, submit written questions and listen to the meeting. If you are a stockholder of record and you have misplaced your 11-digit control number, please call AST at 1 (800) 937-5449.
If you are a beneficial owner:
If you were a beneficial owner as of the close of business on February 4, 2021 (i.e., you hold your shares in “street name” through an intermediary, such as a bank, broker or other nominee) or hold a proxy from
 
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a registered stockholder, you must register in advance in order to attend the Ready Capital special meeting. To register, please obtain a legal proxy from the bank, broker or other nominee that is the record holder of your shares and then submit the legal proxy, along with your name and email address, to AST to receive an 11-digit control number that may be used to access the special meeting site provided above. Requests for registration and submission of legal proxies should be labeled as “Legal Proxy” and must be received by AST no later than 5:00 p.m., Eastern Time, on March 12, 2021. All such requests should be submitted (1) by email to proxy@astfinancial.com, (2) by facsimile to (718) 765-8730, or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation Department, 6201 15th Avenue, Brooklyn, NY 11219. Obtaining a legal proxy may take several days and stockholders are advised to register as far in advance as possible. Once you have obtained your 11-digit control number from AST, please follow the steps set forth above for “Record Holders” to attend the Annual Meeting.
Record holders and beneficial owners should call AST at 1 (800) 937-5449 with any questions about attending the Annual Meeting. If you encounter any technical difficulty accessing the Annual Meeting, please visit https://go.lumiglobal.com/faq for assistance.
Q:
What matters will be voted on at the Ready Capital special meeting?
A:
Ready Capital stockholders will be asked to consider and vote on the following proposals:

the Ready Capital Common Stock Issuance Proposal; and

the Ready Capital Adjournment Proposal.
Ready Capital will transact no other business at the Ready Capital special meeting or any postponement or adjournment thereof.
Q:
How does the Ready Capital Board recommend that I vote on the proposals?
A:
The Ready Capital Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated therein, including the Merger and the Ready Capital Common Stock Issuance, are in the best interests of Ready Capital and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated therein, including the Merger and the Ready Capital Common Stock Issuance, (iii) directed that the Ready Capital Common Stock Issuance Proposal and the Ready Capital Adjournment Proposal be submitted to the holders of Ready Capital Common Stock for consideration at the Ready Capital special meeting and (iv) recommended that the holders of Ready Capital Common Stock approve the Ready Capital Common Stock Issuance Proposal and the Ready Capital Adjournment Proposal. The Ready Capital Board unanimously recommends that the Ready Capital stockholders vote “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal. For a more complete description of the recommendation of the Ready Capital Board, see “The Merger — Recommendation of the Ready Capital Board and Its Reasons for the Merger” beginning on page 90.
Q:
What constitutes a quorum for the Ready Capital special meeting?
A:
The presence, in person virtually or by proxy, of the holders of shares of Ready Capital Common Stock entitled to cast a majority of all the votes entitled to be cast at the Ready Capital special meeting will constitute a quorum at the Ready Capital special meeting. Ready Capital will include abstentions in the calculation of the number of shares considered to be present at the Ready Capital special meeting for purposes of determining the presence of a quorum at the Ready Capital special meeting. As of the close of business on February 4, 2021, the Ready Capital Record Date for the Ready Capital special meeting, there were 55,241,078 shares of Ready Capital Common Stock outstanding.
Q:
What vote is required for Ready Capital stockholders to approve the Ready Capital Common Stock Issuance Proposal?
A:
Approval of the Ready Capital Common Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast on the matter by holders of outstanding shares of Ready Capital Common Stock, provided a quorum is present.
 
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Q:
What vote is required for Ready Capital stockholders to approve the Ready Capital Adjournment Proposal?
A:
Approval of the Ready Capital Adjournment Proposal requires the affirmative vote of a majority of the votes cast on the matter by holders of outstanding shares of Ready Capital Common Stock, provided a quorum is present.
Q:
How are votes counted?
A:
For the Ready Capital Common Stock Issuance Proposal, you may vote “FOR”, “AGAINST” or “ABSTAIN”. If you do not return your proxy card or otherwise authorize a proxy to vote your shares or attend the meeting virtually over the Internet, your shares will not be considered present for the purpose of determining the presence of a quorum and will otherwise have no effect on the Ready Capital Common Stock Issuance Proposal. Under NYSE rules, abstentions will be considered as votes cast and, accordingly, will have the same effect as votes “AGAINST” the Ready Capital Common Stock Issuance Proposal. Broker non-votes, if any, will have no effect on the Ready Capital Common Stock Issuance Proposal.
For the Ready Capital Adjournment Proposal, you may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstentions and other shares not voted (whether by broker non-votes, if any, or otherwise) will not have an effect on the Ready Capital Adjournment Proposal, provided that a quorum is otherwise present.
Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal.
In addition, banks, brokers and other nominees that hold their customers’ shares in street name may not vote their customers’ shares on “non-routine” matters without instructions from their customers. As each of the proposals to be voted upon at the Ready Capital special meeting is considered “non-routine,” such organizations do not have discretion to vote on any of the proposals. As a result, if you fail to provide your broker, bank or other nominee with any instructions regarding how to vote your shares of Ready Capital Common Stock, your shares of Ready Capital Common Stock will not be considered present at the Ready Capital special meeting and will not be voted on any of the proposals.
Q:
Who is entitled to vote at the Ready Capital special meeting?
A:
All holders of Ready Capital Common Stock as of the close of business on Ready Capital Record Date, are entitled to vote at the Ready Capital special meeting. As of the Ready Capital Record Date, there were 55,241,078 issued and outstanding shares of Ready Capital Common Stock. Each holder of Ready Capital Common Stock on Ready Capital Record Date is entitled to one vote per share.
As of the close of business on the Ready Capital Record Date, directors and executive officers of Ready Capital and certain funds managed or advised by the Ready Capital Manager and its affiliates owned an aggregate of 14,528,289 shares of Ready Capital Common Stock entitled to vote at the Ready Capital special meeting. Ready Capital currently expects that Ready Capital’s directors and executive officers and certain funds managed or advised by the Ready Capital Manager and its affiliates will vote their shares of Ready Capital Common Stock “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal, although none of them are obligated to do so.
Q:
How do I vote at the Ready Capital special meeting?
A:
You can vote using the following the methods:

By Telephone — You can vote by telephone by calling 1-800-776-9437 in the United States or 1-718-921-8500 from foreign countries and following the instructions on the proxy card;

By Internet — You can vote over the Internet:

Before the Ready Capital special meeting by visiting www.voteproxy.com; or

During the Ready Capital special meeting by visiting https://web.lumiagm.com/222056299; or

By Mail — You can vote by mail by completing, signing, dating, and mailing the enclosed proxy card.
If you vote by proxy, the individuals named on the proxy card will vote your shares in the manner you indicate. You may specify whether your shares should be voted for or against each of the proposals. You
 
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may also specify you would like to abstain from voting for or against a proposal. If you do not indicate on your proxy card how your votes should be cast, your shares will be voted in accordance with the recommendation of the Ready Capital Board. Proxies authorized by telephone or the Internet must be received by 11:59 p.m., Eastern Time, on March 16, 2021.
Q:
How can I revoke or change my vote?
A:
You may revoke your proxy at any time before the vote is taken at the Ready Capital special meeting by:

authorizing a later proxy by telephone or through the Internet prior to 11:59 p.m., Eastern Time, on March 16, 2021; or

voting electronically at the Ready Capital special meeting.
Your attendance at the Ready Capital special meeting does not automatically revoke your previously submitted proxy.
Q:
Will Ready Capital be required to submit the Ready Capital Common Stock Issuance Proposal to the Ready Capital stockholders even if the Ready Capital Board has withdrawn, modified, or qualified its recommendation?
A:
Yes. Unless the Merger Agreement is terminated before the Ready Capital special meeting, Ready Capital is required to submit the Ready Capital Common Stock Issuance Proposal to its stockholders even if the Ready Capital Board has withdrawn, modified or qualified its recommendation that Ready Capital stockholders approve the Ready Capital Common Stock Issuance Proposal.
Q:
How will Ready Capital stockholders be affected by the Merger and the Ready Capital Common Stock Issuance?
A:
After the Merger, each Ready Capital stockholder will continue to own the shares of Ready Capital Common Stock that such stockholder held immediately prior to the Merger. As a result, each Ready Capital stockholder will continue to own common stock in the Combined Company, which will be a larger company with more assets. However, because Ready Capital will be issuing new shares of Ready Capital Common Stock to Anworth stockholders in the Merger, each outstanding share of Ready Capital Common Stock immediately prior to the Merger will represent a smaller percentage of the aggregate number of shares of Ready Capital Common Stock outstanding after the Merger. Ready Capital will also be issuing newly designated series of Ready Capital Series B Preferred Stock, Ready Capital Series C Preferred Stock and Ready Capital Series D Preferred Stock in the Merger.
Q:
Do the Ready Capital directors and executive officers and the Ready Capital Manager have any interests in the Merger?
A:
Yes. The Combined Company will continue to be managed by the Ready Capital Manager under the terms of the Ready Capital Management Agreement (as amended by the Ready Capital Management Agreement Amendment, as described below). Under the Ready Capital Management Agreement, the Ready Capital Manager provides the day-to-day management of Ready Capital’s business, including providing Ready Capital with its executive officers and all other personnel necessary to support its operations. In exchange for its services, Ready Capital pays the Ready Capital Manager a management fee and reimburses it for certain expenses incurred by it and its affiliates in rendering management services to Ready Capital. Certain directors and executive officers of Ready Capital are partners and employees of the Ready Capital Manager.
Pursuant to the Ready Capital Management Agreement, Ready Capital pays the Ready Capital Manager a management fee calculated and payable quarterly in arrears equal to 1.5% per annum of its stockholders’ equity (as defined in the Ready Capital Management Agreement) up to $500 million and 1.0% per annum of its stockholders’ equity in excess of $500 million. Following the Merger, Ready Capital stockholders’ equity will include the additional equity attributable to the acquisition of Anworth, thus the amount of the management fees payable to the Ready Capital Manager will also increase, which gives the Ready Capital Manager (and therefore, Ready Capital’s management), an incentive, not shared by Ready Capital stockholders, to negotiate and effect the Merger, possibly on terms less favorable to Ready
 
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Capital than would otherwise have been achieved. Concurrently with entering into the Merger Agreement, Ready Capital, the Ready Capital Operating Partnership and the Ready Capital Manager entered into the First Amendment to the Amended and Restated Management Agreement (the “Ready Capital Management Agreement Amendment”). The Ready Capital Management Agreement Amendment provides that contingent upon the closing of the Merger, the Ready Capital Manager’s base management fee will be reduced by $1,000,000 per quarter for each of the first full four quarters following the Closing (the “Temporary Fee Reduction”).
The Ready Capital Management Agreement and the Ready Capital Management Agreement Amendment were negotiated between related parties, and the terms, including fees and other amounts payable, may not be as favorable to Ready Capital as if they had been negotiated with an unaffiliated third party.
The following questions and answers apply to Anworth stockholders only:
Q:
What will I receive for my Anworth Common Stock in the Merger?
A:
Under the terms of the Merger Agreement, (i) each share of Anworth Common Stock (other than the Cancelled Shares) will be converted into the right to receive (x) a number of shares of Ready Capital Common Stock based on the Exchange Ratio, plus (y) the Per Share Cash Consideration, subject to adjustment as provided in the Merger Agreement, with cash being paid in lieu of fractional shares of Ready Capital Common Stock that would have been received as a result of the Merger, (ii) each share of Anworth Series A Preferred Stock will be converted into the right to receive one share of newly classified Ready Capital Series B Preferred Stock, (iii) each share of Anworth Series B Preferred Stock will be converted into the right to receive one share of newly classified Ready Capital Series C Preferred Stock, and (iv) each share of Anworth Series C Preferred Stock will be converted into the right to receive one share of newly classified Ready Capital Series D Preferred Stock.
Q:
How will I receive the merger consideration if the Merger is completed?
A:
For Anworth stockholders, if you hold physical share certificates of Anworth Common Stock or Anworth Preferred Stock, you will be sent a letter of transmittal promptly after the Closing describing how you may exchange your shares for the merger consideration, and the exchange agent will forward to you the merger consideration to which you are entitled after receiving the proper documentation from you. If you hold your shares of Anworth Common Stock or Anworth Preferred Stock or Anworth Vesting Phantom Shares in uncertificated book-entry form, you will be sent a letter of transmittal promptly after the Closing describing how you may exchange your shares or Anworth Vesting Phantom Shares for the merger consideration, and the exchange agent will forward to you the merger consideration to which you are entitled after receiving the proper documentation from you. For more information, see the section entitled “The Merger Agreement — Exchange Procedures” beginning on page 120.
Q:
When and where is the Anworth special meeting, and how do I attend?
A:
The special meeting of Anworth stockholders will be held solely by means of remote communication virtually over the Internet on March 17, 2021 at 10:00 a.m., Pacific Time. On the date of the Anworth special meeting, you can virtually attend the Anworth special meeting by accessing the online virtual meeting platform at www.virtualshareholdermeeting.com/ANH2021SM. However, you are only entitled to vote and/or ask questions at the Anworth special meeting if you were a stockholder of record or beneficial owner as of the Anworth Record Date.
Q:
What matters will be voted on at the Anworth special meeting?
A:
You will be asked to consider and vote on the following proposals:

the Anworth Merger Proposal; and

the Anworth Adjournment Proposal.
Anworth will transact no other business at the Anworth special meeting or any postponement or adjournment thereof.
 
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Q:
How does the Anworth Board recommend that I vote on the proposals?
A:
The Anworth Board has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interests of Anworth and its stockholders, (ii) approved the Merger Agreement, the Merger, and the other transactions contemplated thereby, and declared that the transactions contemplated by the Merger Agreement, including the Merger, are advisable, (iii) directed that the Merger and the other transactions contemplated by the Merger Agreement be submitted to the holders of Anworth Common Stock for consideration at the Anworth special meeting, and (iv) recommended that the Anworth stockholders approve the Merger and the other transactions contemplated by the Merger Agreement.
The Anworth Board unanimously recommends that the Anworth stockholders vote “FOR” the Anworth Merger Proposal and “FOR” the Anworth Adjournment Proposal. For a more complete description of the recommendation of the Anworth Board, see “The Merger — Recommendation of the Anworth Board and Its Reasons for the Merger” beginning on page 86.
Q:
How do I vote at the Anworth special meeting?
A:
You can vote using the following the methods:

By Telephone — You can vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card;

By Internet — You can vote over the Internet:

Before the Anworth special meeting by visiting www.proxyvote.com; or

During the Anworth special meeting by visiting www.virtualshareholdermeeting.com/ANH2021SM; or

By Mail — You can vote by mail by completing, signing, dating, and mailing the enclosed proxy card.
If you vote by proxy, the individuals named on the proxy card will vote your shares in the manner you indicate. You may specify whether your shares should be voted for or against each of the proposals. You may also specify you would like to abstain from voting for or against a proposal. Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Anworth Board. Proxies authorized by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on March 16, 2021.
Q:
How can I revoke or change my vote?
A:
You may revoke your proxy at any time before the vote is taken at the Anworth special meeting by:

authorizing a later proxy by telephone or through the Internet prior to 11:59 p.m., Eastern Time, on March 16, 2021; or

voting electronically at the Anworth special meeting.
Your attendance at the Anworth special meeting does not automatically revoke your previously submitted proxy.
Q:
Do the Anworth directors and executive officers have any interests in the Merger?
A:
Yes. In considering the Anworth Board’s recommendation for Anworth stockholders to approve the Anworth Merger Proposal, Anworth stockholders should be aware that the directors and executive officers of Anworth have interests in the Merger that may be different from, or in addition to, the interests of Anworth stockholders generally and that may present actual or potential conflicts of interests. These interests include:

two of Anworth’s directors are owners and employees of the Anworth Manager, and in connection with the consummation of the Merger, the Anworth Management Agreement will be terminated and the Anworth Manager will be paid a termination fee; and
 
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continued indemnification and insurance coverage for the directors and executive officers of Anworth in accordance with the Merger Agreement.
Upon the Closing, Dominique Mielle, an independent director on the Anworth Board, will be appointed to the Ready Capital Board and will be entitled to compensation pursuant to Ready Capital’s independent director compensation program.
The Anworth Board was aware of these interests and considered them, among other matters, when approving the Merger Agreement and the transactions contemplated thereby, including the Merger. For additional information, see “The Merger — Interests of Anworth’s Directors and Executive Officers in the Merger” beginning on page 112.
Q:
What constitutes a quorum for the Anworth special meeting?
A:
The Anworth Bylaws provide that the presence in person virtually or by proxy of Anworth stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting constitutes a quorum at each meeting of Anworth stockholders. Abstentions will be counted for the purpose of determining a quorum.
Q:
What vote is required for Anworth stockholders to approve the Anworth Merger Proposal?
A:
Approval of the Merger Proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Anworth Common Stock entitled to vote on the Anworth Merger Proposal. Holders of Anworth Preferred Stock are not entitled to vote on the Anworth Merger Proposal.
Q:
What vote is required for Anworth stockholders to approve the Anworth Adjournment Proposal?
A:
Approval of the Anworth Adjournment Proposal will require, provided a quorum is present, the affirmative vote of a majority of the votes cast on the matter by holders of shares of Anworth Common Stock. Holders of Anworth Preferred Stock are not entitled to vote on the Anworth Adjournment Proposal.
Q:
How are votes counted?
A:
For the Anworth Merger Proposal, holders of Anworth Common Stock may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstaining, failing to vote and broker non-votes, if any, will have the same effect as a vote “AGAINST” the Anworth Merger Proposal.
For the Anworth Adjournment Proposal, holders of Anworth Common Stock may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstaining, failing to vote and broker non-votes, if any, will not have an effect on the Anworth Adjournment Proposal provided that a quorum is otherwise present.
Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the Anworth Merger Proposal and “FOR” the Anworth Adjournment Proposal.
In addition, banks, brokers and other nominees that hold their customers’ shares in street name may not vote their customers’ shares on “non-routine” matters without instructions from their customers. As each of the proposals to be voted upon at the Anworth special meeting is considered “non-routine,” such organizations do not have discretion to vote on any of the proposals. As a result, if you fail to provide your broker, bank or other nominee with any instructions regarding how to vote your shares of Anworth Common Stock, your shares of Anworth Common Stock will not be considered present at the Anworth special meeting and will not be voted on any of the proposals.
Q:
Who is entitled to vote at the Anworth special meeting?
A:
All holders of Anworth Common Stock as of the close of business on February 4, 2021, the Anworth Record Date for the Anworth special meeting, are entitled to vote at the Anworth special meeting. As of the Anworth Record Date, there were 99,303,982 issued and outstanding shares of Anworth Common Stock. Each holder of Anworth Common Stock on the Anworth Record Date is entitled to one vote per share.
 
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Q:
Will Anworth be required to submit the Anworth Merger Proposal to the Anworth stockholders even if the Anworth Board has withdrawn, modified, or qualified its recommendation?
A:
Yes. Unless the Merger Agreement is terminated before the Anworth special meeting, Anworth is required to submit the Anworth Merger Proposal to its stockholders even if the Anworth Board has withdrawn, modified or qualified its recommendation that Anworth stockholders approve the Merger.
Q:
How will Anworth stockholders be affected by the Merger?
A:
Under the terms of the Merger Agreement, each share of Anworth Common Stock (other than the Cancelled Shares) will be converted into the right to receive (i) a number of shares of Ready Capital Common Stock based on the Exchange Ratio, plus (ii) the Per Share Cash Consideration, subject to adjustment as provided in the Merger Agreement. As such, after the Merger is completed, Anworth Common Stock will no longer be listed on the NYSE and will be deregistered under the Exchange Act, and Anworth stockholders as of immediately prior to Closing are expected to own in the aggregate approximately 23% of the Combined Company’s outstanding shares of common stock. Also as a result of the Merger, under the terms of the Merger Agreement, each share of Anworth Series A Preferred Stock will be converted into the right to receive one share of newly classified Ready Capital Series B Preferred Stock, each share of Anworth Series B Preferred Stock will be converted into the right to receive one share of newly classified Ready Capital Series C Preferred Stock, and each share of Anworth Series C Preferred Stock will be converted into the right to receive one share of newly classified Ready Capital Series D Preferred Stock.
The following questions and answers apply to Ready Capital stockholders and Anworth stockholders:
Q:
Have any Ready Capital stockholders or Anworth stockholders already agreed to vote in favor of the proposals?
A:
To Ready Capital’s and Anworth’s knowledge, no Ready Capital stockholder has entered into any agreement to vote any of their shares of Ready Capital Common Stock either in favor or against any proposal at the Ready Capital special meeting, and no Anworth stockholder has entered into any agreement to vote any of their shares of Anworth Common Stock either in favor or against any proposal at the Anworth special meeting.
Q:
What happens if I sell my stock before the special meetings?
A:
The record date for each company’s special meeting is earlier than the date of each company’s special meeting and the date that the Merger is expected to be completed. If you sell your stock after your company’s record date but before the date of your company’s special meeting, you will retain any right to vote at your company’s special meeting, but, for Anworth stockholders, you will have transferred your right to receive the merger consideration. For Anworth stockholders, in order to receive the merger consideration, you must hold your stock through completion of the Merger.
Q:
What is the difference between a stockholder of record and a beneficial owner?
A:
If your shares of Ready Capital Common Stock or Anworth Common Stock are registered directly in your name with Ready Capital’s or Anworth’s transfer agent, respectively, you are considered the stockholder of record with respect to those shares.
If your shares of Ready Capital Common Stock or Anworth Common Stock are held in a stock brokerage account, or by a bank, trustee or other nominee, you are considered the beneficial owner of shares held in “street name.” As the beneficial owner, you have the right to direct your broker, bank, trustee or nominee on how to vote the shares that you beneficially own and you are also invited to attend the applicable special meeting. However, beneficial owners generally cannot vote their shares directly because they are not the stockholder of record; instead, beneficial owners must instruct the broker, bank, trustee or other nominee how to vote their shares.
 
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Q:
What happens if I am both a Ready Capital stockholder and an Anworth stockholder?
A:
If you are both a Ready Capital stockholder and an Anworth stockholder on the applicable company’s record date, you are entitled to vote at the special meeting of each company. You will receive separate proxy cards for each company and must complete, sign and date each proxy card and return each proxy card in the appropriate preaddressed postage-paid envelope or, if available, by authorizing a proxy to vote your shares by one of the other methods specified in your proxy card or voting instruction card for each company.
Q:
If I am a beneficial owner of Ready Capital or Anworth shares, will my broker, bank or other nominee vote my shares for me?
A:
No. If you hold your shares in a stock brokerage account or if your shares are held by a bank or other nominee (that is, in “street name”), you must provide your broker, bank or other nominee with instructions on how to vote your shares. Unless you instruct your broker, bank or other nominee to vote your shares held in street name, your shares will NOT be voted. You should follow the procedures provided by your bank, broker or nominee regarding the voting of your shares.
Q:
When is the Merger expected to be consummated?
A:
The Merger is expected to be consummated by the end of the first quarter of 2021, although Ready Capital and Anworth cannot assure completion by any particular date, if at all. Because the Merger is subject to a number of conditions, including the approval of the Ready Capital Common Stock Issuance Proposal by the requisite vote of the Ready Capital stockholders and the approval of the Anworth Merger Proposal by the requisite vote of the Anworth stockholders, the exact timing of the Merger cannot be determined at this time and Ready Capital and Anworth cannot guarantee that the Merger will be completed at all.
Q:
Following the Merger, what percentage of Ready Capital Common Stock will current Ready Capital stockholders and Anworth stockholders own?
A:
Immediately following the completion of the Merger, based on the number of issued and outstanding shares of Ready Capital Common Stock and Anworth Common Stock (excluding Cancelled Shares) as of February 4, 2021, and the Exchange Ratio of 0.1688:

the shares of Ready Capital Common Stock held by the Ready Capital stockholders as of immediately prior to Closing are expected to represent in the aggregate approximately 77% of the Combined Company’s outstanding shares of common stock; and

Anworth stockholders as of immediately prior to Closing are expected to own in the aggregate the remaining approximately 23% of the Combined Company’s outstanding shares of common stock.
The exact equity stake of Ready Capital stockholders and Anworth stockholders in the Combined Company immediately following the Merger will depend on the number of shares of Ready Capital Common Stock and Anworth Common Stock issued and outstanding immediately prior to the Merger.
Q:
What happens if the Merger is not completed?
A:
If the Ready Capital Common Stock Issuance Proposal or the Anworth Merger Proposal is not approved by Ready Capital stockholders or Anworth stockholders, respectively, or if the Merger is not completed for any other reason, Anworth stockholders will not have their Anworth Common Stock exchanged for Ready Capital Common Stock and cash in connection with the Merger. Instead, Anworth and Ready Capital would remain separate companies. Under certain circumstances, Ready Capital may be required to pay Anworth a termination fee or an expense amount, or Anworth may be required to pay Ready Capital a termination fee or expense amount, as described under “The Merger Agreement — Termination Fees and Expenses” beginning on page 138.
Q:
Am I entitled to exercise appraisal rights?
A:
No. Neither holders of Ready Capital Common Stock nor holders of Anworth Common Stock or Anworth Preferred Stock will be entitled to appraisal rights. Subject to the limited circumstances set forth
 
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in Section 3-202(d) of the Maryland General Corporation Law (the “MGCL”), the MGCL does not provide for appraisal rights or other similar rights to stockholders of a corporation in connection with a merger of a corporation if the shares of such corporation are listed on a national securities exchange (including the NYSE) on the record date for determining stockholders entitled to vote on the transaction. The circumstances of the Merger do not satisfy the conditions set forth in Section 3-202(d) of the MGCL that would trigger such appraisal rights or similar rights for the holders of Anworth Common Stock or Anworth Preferred Stock.
Q:
Will the Combined Company have the same business strategy as Anworth following the Merger?
A:
No. The Combined Company will follow Ready Capital’s current business strategy. Ready Capital’s strategies and policies may be amended or waived at the discretion of the Ready Capital Board without a vote of the Ready Capital stockholders. Ready Capital has no present intention to modify any of these objectives and policies, and it is anticipated that any modification would occur only if business and economic factors affecting Ready Capital make its stated strategies and policies unworkable or imprudent. For information on Ready Capital’s business strategy, see “Description of Policies of Ready Capital” on page 218.
Q:
What regular dividends will Ready Capital be permitted to pay prior to Closing?
A:
The Merger Agreement permits Ready Capital to continue to pay regular quarterly dividends with respect to the Ready Capital Common Stock and the Ready Capital OP Units, regular quarterly dividends payable with respect to any Ready Capital preferred stock and preferred stock of Ready Capital Subsidiary REIT I, LLC consistent with past practice and the terms of such preferred stock, dividends or distributions required by the organizational documents of Ready Capital or any of its subsidiaries, and any distribution that is reasonably necessary to maintain its REIT qualification under the Code and avoid or reduce the imposition of any corporate level tax or excise tax under the Code.
Q:
What regular dividends will Anworth be permitted to pay prior to Closing?
A:
The Merger Agreement permits Anworth to continue to pay regular quarterly dividends with respect to Anworth Common Stock of up to $0.05 per share, regular quarterly dividends with respect to Anworth Preferred Stock and any dividends or distributions that are required by the organizational documents of Anworth or any of its subsidiaries or are reasonably necessary to maintain its REIT qualification under the Code and avoid or reduce the imposition of any corporate level tax or excise tax under the Code.
Q:
What additional dividends are Ready Capital and Anworth permitted to pay?
A:
Pursuant to the Merger Agreement, prior to the date of Closing each of Anworth and Ready Capital will declare and pay an interim dividend to their respective holders. The per share dividend payable by Anworth will be an amount up to (i) the per share amount of Anworth’s then-most recent quarterly dividend, prorated for the number of days between the record date of Anworth’s last dividend, plus (ii) an additional amount (the “Anworth Additional Dividend Amount”), if any, necessary so that the aggregate dividend payable is equal to the amount necessary for Anworth to maintain its REIT qualification under the Code and avoid the imposition of income tax or excise tax under the Code. The per share dividend payable by Ready Capital will be an amount up to (i) the per share amount of Ready Capital’s then-most recent quarterly dividend, prorated for the number of days between the record date of Ready Capital’s last dividend, plus (ii) an additional amount equal to the quotient obtained by dividing (A) the Anworth Additional Dividend Amount, if any, by (B) the Exchange Ratio divided by 0.80. The payment date for each respective interim dividend will be the close of business on the last business day prior to the date of Closing, subject to funds being legally available therefor, and the record date for which will be three business days before the payment date.
Q:
Will my dividend payments continue after the Merger?
A:
Following completion of the Merger, holders of Ready Capital Common Stock will be entitled to receive dividends or other distributions when, as and if authorized by the Ready Capital Board and declared by Ready Capital out of funds legally available therefor. Anworth’s quarterly dividend per share of Anworth Common Stock for the quarter ended September 30, 2020 was $0.05. Ready Capital’s quarterly dividend
 
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per share for the quarter ended September 30, 2020 was $0.30. Based on the Exchange Ratio of 0.1688, a holder of the Anworth Common Stock will have received 0.1688 shares of the Ready Capital Common Stock for each share of Anworth Common Stock converted in the Merger, which translates into a pro forma quarterly dividend of $0.05064 per share for the quarter ended September 30, 2020. Anworth’s quarterly dividend per share of Anworth Common Stock for the quarter ended December 31, 2020 was $0.05. Ready Capital’s quarterly dividend per share for the quarter ended December 31, 2020 was $0.35, which translates into a pro forma quarterly dividend of $0.05908 per share for each share of Anworth Common Stock for the quarter ended December 31, 2020. However, there is no guarantee or assurance that Ready Capital can maintain its current level of quarterly dividend payment on the Ready Capital Common Stock.
In addition, holders of the newly issued Ready Capital Preferred Stock to be issued to the former holders of Anworth Preferred Stock will be entitled to receive dividends or other distributions in accordance with the terms of such Ready Capital Preferred Stock when, as and if authorized by the Ready Capital Board and declared by Ready Capital out of funds legally available therefor.
Q:
Are there risks associated with the Merger that I should consider in deciding how to vote?
A:
Yes. There are a number of risks related to the Merger that are discussed in this joint proxy statement/ prospectus described in the section entitled “Risk Factors” beginning on page 35.
Q:
What are the material U.S. federal income tax consequences of the Merger to Anworth stockholders and Ready Capital stockholders?
A:
The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code, and the closing of the Merger is conditioned on the receipt by each of Anworth and Ready Capital of an opinion from its respective tax counsel to that effect. Provided the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, U.S. stockholders of shares of Anworth Common Stock will generally recognize gain (but not loss) in an amount equal to the lesser of: (i) the amount of cash received pursuant to the Merger (excluding any cash received in lieu of fractional shares of Ready Capital Common Stock) and (ii) the amount of gain realized (i.e., the excess sum of the amount of cash, other than cash received in lieu of a fractional share of Ready Capital Common Stock, and the fair market value of the Ready Capital Common Stock received pursuant to the Merger over such holder’s adjusted U.S. federal income tax basis in its shares of Anworth Common Stock surrendered). A holder of Anworth Common Stock generally will recognize gain or loss with respect to cash received in lieu of a fractional share of Ready Capital Common Stock in the Merger measured by the difference, if any, between the amount of cash received for such fractional share and the holder’s tax basis in such fractional share. Holders of Anworth Preferred Stock will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of Ready Capital Preferred Stock in exchange for shares of Anworth Preferred Stock in connection with the Merger. The holders of Ready Capital Common Stock generally will not recognize any gain or loss for U.S. federal income tax purposes.
The tax consequences to you of the Merger will depend on your own situation. You should consult your tax advisor for a full understanding of the tax consequences to you (including the application and effect of any state, local or non-U.S. income and other tax laws) of the Merger. For more information regarding the tax consequences of the Merger to holders of Anworth Common Stock, please see “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the Merger” and “— The Combined Company” beginning on page 148.
Q:
How can I obtain additional information about Ready Capital and Anworth?
A:
Ready Capital and Anworth each file annual, quarterly and current reports, proxy statements and other information with the SEC. Each company’s filings with the SEC may be accessed on the Internet at http://www.sec.gov. Copies of the documents filed by Ready Capital with the SEC will be available free of charge on Ready Capital’s website at https://www.readycapital.com/ or by contacting Ready Capital Investor Relations at InvestorRelations@readycapital.com or at (212) 257-4666. Copies of the documents filed by Anworth with the SEC will be available free of charge on Anworth’s website at http://www.anworth.com or by contacting Anworth Investor Relations at jhillman@anworth.com or at (310) 255-4438. The information provided on each company’s website is not part of this joint proxy
 
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statement/prospectus and is not incorporated by reference into this joint proxy statement/prospectus. For a more detailed description of the information available and information incorporated by reference, please see “Where You Can Find More Information and Incorporation by Reference” on page 229.
Q:
Where can I find the voting results of the Ready Capital and Anworth special meetings?
A:
The preliminary voting results will be announced at the applicable special meeting. In addition, within four business days following certification of the final voting results, Ready Capital and Anworth will each file the final voting results with the SEC on a Current Report on Form 8-K.
Q:
What else do I need to do now?
A:
You are urged to read this joint proxy statement/prospectus carefully and in its entirety, including its annexes and the information incorporated by reference herein, and to consider how the Merger affects you. Even if you plan to attend your company’s special meeting virtually, please authorize a proxy to vote your shares by voting via the Internet, telephone or by completing, signing, dating and returning the enclosed proxy card. You can also attend your company’s special meeting virtually over the Internet and vote, or change your prior proxy authorization. If you hold your shares in “street name” through a bank, broker or other nominee, then you should have received this joint proxy statement/prospectus from that nominee, along with that nominee’s proxy card which includes voting instructions and instructions on how to change your vote. Please see the questions “How do I vote at the Ready Capital special meeting?” on page 6 and “How do I vote at the Anworth special meeting” on page 9.
Q:
Will a proxy solicitor be used?
A:
Ready Capital has not retained a proxy solicitor in connection with the solicitation of proxies for the Ready Capital special meeting. In addition to mailing proxy solicitation materials, Ready Capital’s directors, officers and employees may also solicit proxies by telephone or by any other electronic means of communication deemed appropriate. No additional compensation will be paid to Ready Capital’s directors, officers or employees for such services.
Anworth has engaged Morrow Sodali LLC (“Morrow Sodali”) to assist in the solicitation of proxies for the Anworth special meeting, and Anworth estimates it will pay Morrow Sodali a fee of approximately $13,500. Anworth has also agreed to reimburse Morrow Sodali for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify Morrow Sodali against certain losses, costs and expenses. In addition to mailing proxy solicitation materials, proxies may be solicited from Anworth stockholders by the directors, officers and employees of Anworth or the Anworth Manager by telephone or by any other appropriate means of communications. No additional compensation, except for reimbursement of reasonable out-of-pocket expenses, will be paid to the directors, officers and employees of Anworth or the Anworth Manager in connection with such solicitation services.
Q:
Who can answer my questions?
A:
If you have any questions about the Merger or the other matters to be voted on at the Ready Capital special meeting or the Anworth special meeting, how to submit your proxy, or need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact:
If you are a Ready Capital stockholder:
Ready Capital Corporation
1251 Avenue of the Americas, 50th Floor
New York, New York 10020
(212) 257-4666
Attention: Investor Relations
If you are an Anworth stockholder:
Morrow Sodali LLC
509 Madison Avenue
New York, New York 10022
(800) 662-5200 (toll-fee)
(203) 658-9400
ANH@investor.morrowsodali.com
 
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SUMMARY
The following summary highlights selected information in this joint proxy statement/prospectus and may not contain all the information that may be important to you with respect to the Merger Agreement, the Merger or the special meetings. Accordingly, you are encouraged to read this joint proxy statement/prospectus, including its annexes and the information incorporated by reference herein, carefully and in its entirety. Each item in this summary includes a page reference directing you to a more complete description of that topic. See also “Where You Can Find More Information and Incorporation by Reference” on page 229.
The Companies
Ready Capital Corporation (Page 58)
Ready Capital Corporation
1251 Avenue of the Americas
50th Floor
New York, New York 10020
(212) 257-4600
Ready Capital is a multi-strategy real estate finance company that originates, acquires, finances and services small to medium balance commercial (“SBC”) loans, Small Business Administration (“SBA”) loans, residential mortgage loans, and to a lesser extent, mortgage backed securities (“MBS”) collateralized primarily by SBC loans, or other real estate-related investments. Ready Capital’s loans generally range in original principal amounts up to $35 million and are used by businesses to purchase real estate used in their operations or by investors seeking to acquire small multi-family, office, retail, mixed use or warehouse properties. Ready Capital’s acquisition and origination platforms consist of four operating segments: loan acquisitions, SBC originations, SBA originations, acquisitions and servicing, and residential mortgage banking. Ready Capital is externally managed and advised by the Ready Capital Manager, an investment advisor registered with the SEC under the Investment Advisors Act of 1940, as amended.
Ready Capital is a Maryland corporation that elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2011. As long as Ready Capital qualifies as a REIT, Ready Capital is generally not subject to U.S. federal income tax on its net taxable income to the extent that Ready Capital annually distributes all of its net taxable income to stockholders. Certain of Ready Capital’s assets that produce non-qualifying income are held in taxable REIT subsidiaries (“TRSs”). Unlike other subsidiaries of a REIT, the income of a TRS is subject to federal and state income taxes. Ready Capital is organized in a traditional umbrella partnership REIT (“UpREIT”) format pursuant to which Ready Capital serves as the general partner of, and conducts substantially all of its business through, Sutherland Partners, LP, which serves as Ready Capital’s operating partnership subsidiary. Ready Capital also intends to operate its business in a manner that will permit it to be excluded from registration as an investment company under the Investment Company Act of 1940, as amended.
Ready Capital’s objective is to provide attractive risk-adjusted returns to its stockholders, primarily through dividends and secondarily through capital appreciation.
Ready Capital Common Stock is listed on the NYSE, trading under the symbol “RC”.
Ready Capital’s principal executive offices are located at 1251 Avenue of the Americas, 50th Floor, New York, New York 10020, and its telephone number is (212) 257-4600.
RC Merger Subsidiary, LLC (Page 59)
RC Merger Subsidiary, LLC
1251 Avenue of the Americas
50th Floor
New York, New York 10020
(212) 257-4600
 
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Merger Sub is a Delaware limited liability company that was formed on December 3, 2020 solely for the purpose of effecting the Merger. Upon Closing, the Merger will be consummated whereby Anworth will be merged with and into Merger Sub, with Merger Sub continuing as the surviving company. Merger Sub has not conducted any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.
Anworth Mortgage Asset Corporation (Page 59)
Anworth Mortgage Asset Corporation
1299 Ocean Avenue, 2nd Floor
Santa Monica, California 90401
(310) 255-4493
Anworth is a specialty finance mortgage company that primarily invests in, finances, and manages a leveraged portfolio of residential mortgage-backed securities and residential mortgage loans that are either rated “investment grade” or are guaranteed by federally sponsored enterprises, such as Fannie Mae or Freddie Mac. Anworth seeks to generate net income for distribution to its stockholders primarily based upon the spread between the interest income on its mortgage assets and its borrowing costs to finance such mortgage assets.
Anworth was incorporated as a Maryland corporation on October 16, 1997 and commenced operations on March 17, 1998. Anworth has elected to be taxed as a REIT. As a REIT, Anworth generally will not be subject to federal or state income taxes to the extent that it distributes its taxable net income to its stockholders. To date, Anworth has routinely distributed to its stockholders substantially all of the taxable net income generated from its operations. In order to qualify as a REIT, Anworth must meet various ongoing requirements under the tax law, including requirements relating to the composition of its assets, the nature of its income, minimum distribution requirements, and requirements relating to the ownership of its stock.
Anworth is externally managed and advised by the Anworth Manager pursuant to the Anworth Management Agreement. Anworth’s day-to-day operations are being conducted by the Anworth Manager through the authority delegated to it under the Anworth Management Agreement and pursuant to the policies established by, and under the supervision of, the Anworth Board. In addition to administering Anworth’s day-to-day operations, the Anworth Manager is responsible for (i) the selection, purchase, and sale of Anworth’s investment portfolio; (ii) Anworth’s financing and hedging activities; and (iii) providing Anworth with portfolio management, administrative, and other services relating to Anworth’s assets and operations as may be appropriate.
Anworth’s common stock is traded on the New York Stock Exchange under the symbol “ANH”. Anworth’s website is www.anworth.com.
The Combined Businesses (Page 60)
Upon completion of the Merger, Ready Capital will remain a publicly traded corporation focused on acquiring, originating, managing, servicing and financing primarily SBC loans. Upon completion of the Merger, Ready Capital is expected to have a pro forma common equity market capitalization of approximately $901.6 million, based on the $12.52 per share closing price of Ready Capital Common Stock on February 4, 2021. Additionally, Ready Capital will issue three newly designated NYSE listed series of Ready Capital Preferred Stock in the Merger with a pro forma aggregate liquidation preference of $114.6 million as of September 30, 2020. Following the completion of the Merger, Ready Capital will continue to be externally managed by the Ready Capital Manager.
The combined business will continue to be operated through Ready Capital and its subsidiaries, which will include the surviving company and its subsidiaries.
The common stock of the Combined Company will continue to be listed on the NYSE, trading under the symbol “RC”. The newly issued shares of Ready Capital Series B Preferred Stock will trade under the symbol “RC PRB”, the newly issued shares of Ready Capital Series C Preferred Stock will trade under the symbol “RC PRC” and the newly issued shares of Ready Capital Series D Preferred Stock will trade under the symbol “RC PRD”.
 
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Ready Capital’s principal executive offices will remain located at 1251 Avenue of the Americas, 50th Floor, New York, New York 10020, and its telephone number will be (212) 257-4600.
The Merger
The Merger Agreement (Page 119)
Ready Capital, Merger Sub and Anworth have entered into the Merger Agreement attached as Annex A to this joint proxy statement/prospectus, which is incorporated herein by reference. Ready Capital and Anworth encourage you to carefully read the Merger Agreement in its entirety because it is the principal document governing the Merger and the other transactions contemplated by the Merger Agreement.
The Merger (Page 69)
Subject to the terms and conditions of the Merger Agreement, Anworth will merge with and into Merger Sub, with Merger Sub continuing as the surviving company from the Merger. Immediately following the Merger, the surviving company will be contributed to the Ready Capital Operating Partnership in exchange for Ready Capital OP Units in the Ready Capital Operating Partnership. As a result of the contribution transaction, the surviving company will become a wholly owned subsidiary of the Ready Capital Operating Partnership.
Immediately upon completion of the Merger, the continuing Ready Capital stockholders as of immediately prior to Closing are expected to own in the aggregate approximately 77% of the Combined Company’s outstanding shares of common stock, and the Anworth stockholders as of immediately prior to Closing are expected to own in the aggregate the remaining approximately 23%, based on the number of issued and outstanding shares of Ready Capital Common Stock and Anworth Common Stock (excluding Cancelled Shares) as of February 4, 2021, and the Exchange Ratio of 0.1688. The exact equity stake of Ready Capital stockholders and Anworth stockholders in the Combined Company immediately following the Merger will depend on the number of shares of Ready Capital Common Stock and Anworth Common Stock issued and outstanding immediately prior to the Merger. Once the Merger is consummated, the Combined Company will retain the name “Ready Capital Corporation”, will continue to be listed on the NYSE, and its common stock will continue to trade under the symbol “RC”.
Consideration for the Merger (Page 119)
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each outstanding share of Anworth Common Stock (other than the Cancelled Shares) will be converted into the right to receive (i) a number of shares of Ready Capital Common Stock based on the Exchange Ratio, plus (ii) the Per Share Cash Consideration, in each case, in accordance with, subject to adjustment as provided in, the Merger Agreement, in each case, subject to adjustment as provided in the Merger Agreement.
The Vesting Anworth Phantom Shares will, at the effective time of the Merger, automatically become fully vested and then immediately cancelled in exchange for the right to receive the Per Share Common Merger Consideration. The remaining outstanding phantom shares granted by Anworth will, at the effective time of the Merger, automatically be cancelled without consideration.
Each outstanding dividend equivalent right granted by Anworth shall, at the effective time of the Merger, automatically be cancelled; provided, that any accrued amounts that have not yet been paid with respect to such dividend equivalent rights will be paid to the holders thereof at the effective time of the Merger (or as soon as practicable thereafter but in no event later than the first payroll date following the effective time of the Merger), less applicable income and employment tax withholdings
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of Anworth Series A Preferred Stock will be converted into the right to receive one share Ready Capital Series B Preferred Stock, each share of Anworth Series B Preferred Stock will be converted into the right to receive one share of Ready Capital Series C Preferred Stock, and each share of
 
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Anworth Series C Preferred Stock will be converted into the right to receive one share of Ready Capital Series D Preferred Stock.
The Merger will trigger the “fundamental change” rights of the holders of Anworth Series B Preferred Stock, which require Anworth to purchase for cash the Anworth Series B Preferred Stock at a purchase price equal to 100% of the liquidation preference of the Anworth Series B Preferred Stock to be purchased plus accrued and unpaid dividends. Anworth is not required to purchase the Anworth Series B Preferred Stock upon a fundamental change if a third party makes an offer to purchase the Anworth Series B Preferred Stock and purchases all Anworth Series B Preferred Stock validly delivered and not withdrawn by holders of Anworth Series B Preferred Stock. Following the Closing, Ready Capital will make an offer to purchase the shares of Ready Capital Series C Preferred Stock (which will be issued in exchange for the ANH Series B Preferred Stock on a one-for-one basis) in accordance with the applicable procedures.
The Merger Agreement provides that Anworth and Ready Capital will pay an additional dividend in cash on the last business day prior to the Closing with a record date that is three business days before the payment date. For additional information on this additional dividend, see “The Merger — Dividends” beginning on page 116.
Based on the number of shares of Anworth Common Stock and Vesting Anworth Phantom Shares outstanding on February 4, 2021 and the Exchange Ratio of 0.1688, it is expected that approximately 16,774,328 shares of Ready Capital Common Stock will be issued in connection with the Merger. Based on the number of shares of Anworth Series A Preferred Stock outstanding on February 4, 2021, it is expected that approximately 1,919,378 shares of newly classified Ready Capital Series B Preferred Stock will be issued in connection with the Merger. Based on the number of shares of Anworth Series B Preferred Stock outstanding on February 4, 2021, it is expected that approximately 779,743 shares of newly classified Ready Capital Series C Preferred Stock will be issued in connection with the Merger. Based on the number of shares of Anworth Series C Preferred Stock outstanding on February 4, 2021, it is expected that approximately 2,010,278 shares of newly classified Ready Capital Series D Preferred Stock will be issued in connection with the Merger.
No fractional shares of Ready Capital Common Stock will be issued in the Merger, and the value of any fractional interests to which a holder would otherwise be entitled will be paid in cash.
Recommendation of the Ready Capital Board and Its Reasons for the Merger (Page 90)
On December 4, 2020, following careful consideration, the Ready Capital Board unanimously (i) determined that the Merger Agreement and the transactions contemplated therein, including the Merger and the Ready Capital Common Stock Issuance, are in the best interests of Ready Capital and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated therein, including the Merger and the Ready Capital Common Stock Issuance, (iii) directed that the Ready Capital Common Stock Issuance Proposal be submitted to the holders of Ready Capital Common Stock for consideration at the Ready Capital special meeting and (iv) resolved to recommend, in accordance with and subject to the provisions of the Merger Agreement, that the holders of Ready Capital Common Stock approve the Ready Capital Common Stock Issuance Proposal. Certain factors considered by the Ready Capital Board in reaching its decision to authorize, approve and adopt the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement can be found in the section entitled “The Merger — Recommendation of the Ready Capital Board and Its Reasons for the Merger” beginning on page 90. The Ready Capital Board unanimously recommends that Ready Capital stockholders vote “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal.
Recommendation of the Anworth Board and Its Reasons for the Merger (Page 86)
On December 6, 2020, after careful consideration, the Anworth Board, acting upon the unanimous recommendation of the strategic review committee, comprised of the independent directors of the Anworth Board and formed for the purpose of, among other things, evaluating and making a recommendation to the Anworth Board with respect to the Anworth Management Agreement Amendment, the Merger Agreement and the transactions contemplated thereby (the “Anworth Strategic Review Committee”), unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger,
 
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are in the best interests of Anworth and its stockholders, (ii) approved the Merger Agreement, the Merger, and the other transactions contemplated thereby, and declared that the transactions contemplated by the Merger Agreement, including the Merger, are advisable, (iii) directed that the Merger and the other transactions contemplated by the Merger Agreement be submitted to the holders of Anworth Common Stock for consideration at the Anworth special meeting, and (iv) recommended that the Anworth stockholders approve the Merger and the transactions contemplated by the Merger Agreement. Certain factors considered by the Anworth Strategic Review Committee in reaching its decision to recommend, and the Anworth Board in reaching its decision to approve, the Merger Agreement, the Merger, and the transactions contemplated by the Merger Agreement can be found in the section entitled “The Merger — Recommendation of the Anworth Board and Its Reasons for the Merger” beginning on page 86. The Anworth Board unanimously recommends that the Anworth stockholders vote “FOR” the Anworth Merger Proposal and “FOR” the Anworth Adjournment Proposal.
Summary of Risk Factors Related to the Merger (Page 35)
You should carefully consider the following important risks, together with all of the other information included in this joint proxy statement/prospectus and the risks related to the Merger and the related transactions described under the section “Risk Factors” beginning on page 35, before deciding how to vote:

The Merger is subject to a number of conditions which, if not satisfied or waived in a timely manner, would delay the Merger or adversely impact Ready Capital’s and Anworth’s ability to complete the transaction.

Failure to consummate the Merger as currently contemplated or at all could adversely affect the price of Ready Capital Common Stock, Anworth Common Stock or Anworth Preferred Stock and the future business and financial results of Ready Capital and/or Anworth.

The Merger Agreement contains provisions that could discourage a potential competing acquirer of either Ready Capital or Anworth or could result in any competing acquisition proposal being at a lower price than it might otherwise be.

The pendency of the Merger could adversely affect Ready Capital’s and Anworth’s business and operations.

The market value of Ready Capital Common Stock received by Anworth stockholders will fluctuate based on the trading price of Ready Capital Common Stock.

The Merger and related transactions are subject to Ready Capital stockholder approval and Anworth stockholder approval.

The voting power of Ready Capital stockholders and Anworth stockholders will be diluted by the Merger.

If the Merger is not consummated by September 30, 2021, either Ready Capital or Anworth may terminate the Merger Agreement.

The market price of Ready Capital Common Stock may decline as a result of the Merger and the market price of Ready Capital Common Stock after the consummation of the Merger may be affected by factors different from those affecting the price of Ready Capital Common Stock or the price of Anworth Common Stock before the Merger.

Shares of Ready Capital Common Stock received by Anworth stockholders as a result of the Merger will have different rights from shares of Anworth Common Stock.

Directors and executive officers of Anworth may have interests in the Merger that are different from, or in addition to, the interests of Anworth stockholders.

Completion of the Merger may trigger change in control or other provisions in certain agreements to which Anworth is a party.

Several lawsuits have been filed against Ready Capital, Merger Sub, Anworth and/or the Anworth Board challenging the adequacy of public disclosures related to the Merger and an adverse ruling may prevent the Merger from being completed.
 
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If the Merger does not qualify as a reorganization, Anworth stockholders may recognize a taxable gain.

Following the Merger, the Combined Company may be unable to realize the anticipated synergies or other expected benefits of the Merger on the anticipated timeframe or at all.

Following the Merger, the Combined Company may not pay dividends at or above the rate currently paid by Ready Capital or Anworth.

The Combined Company will have a significant amount of indebtedness and may need to incur more in the future.

The Combined Company is expected to incur substantial expenses related and unrelated to the Merger.

The historical and unaudited pro forma condensed combined financial information included elsewhere in this joint proxy statement/prospectus may not be representative of the Combined Company’s results after the Merger, and accordingly, you have limited financial information on which to evaluate the Combined Company following the Merger.

The Combined Company may incur adverse tax consequences if it or Anworth has failed or fails to qualify as a REIT for U.S. federal income tax purposes.

The contribution of Merger Sub to the Ready Capital Operating Partnership could fail to qualify as a transaction in which neither gain nor loss is recognized for U.S. federal income tax purposes.

Investment in the Combined Company’s stock has various tax risks.

The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and to the businesses of Ready Capital and Anworth, and may have an adverse impact on the performance, financial condition and results of operations of the Combined Company.
The Ready Capital Special Meeting (Page 61)

Date, Time and Place.   The special meeting of Ready Capital stockholders will be held solely by means of remote communication live over the Internet on March 17, 2021 at 9:00 a.m., Eastern Time.

Purpose.   At the Ready Capital special meeting, Ready Capital stockholders will be asked to consider and vote upon the Ready Capital Common Stock Issuance Proposal and the Ready Capital Adjournment Proposal.

Record Date; Voting Rights.   Ready Capital stockholders at the close of business on February 4, 2021 are entitled to vote at the Ready Capital special meeting and any postponement or adjournment thereof. Each holder of Ready Capital Common Stock on the Ready Capital Record Date is entitled to one vote per share.

Quorum.   The presence, virtually or by proxy, of the holders of shares of Ready Capital Common Stock entitled to cast a majority of all votes entitled to be cast at the Ready Capital special meeting, will constitute a quorum at the Ready Capital special meeting. Abstentions will be counted for the purpose of determining a quorum.

Required Vote.   Approval of the Ready Capital Common Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast on the matter by holders of outstanding shares of Ready Capital Common Stock, provided a quorum is present. Approval of the Ready Capital Adjournment Proposal also requires the affirmative vote of a majority of the votes cast on the matter by holders of outstanding shares of Ready Capital Common Stock, provided a quorum is present.
As of the close of business on the Ready Capital Record Date, directors and executive officers of Ready Capital and certain funds managed or advised by the Ready Capital Manager and its affiliates owned an aggregate of 14,528,289 shares of Ready Capital Common Stock entitled to vote at the Ready Capital special meeting. Ready Capital currently expects that Ready Capital’s directors and executive officers and certain funds managed or advised by the Ready Capital Manager and its affiliates will vote their shares of Ready Capital Common Stock “FOR” the Ready Capital Common Stock Issuance Proposal and “FOR” the Ready Capital Adjournment Proposal, although none of them are obligated to do so.
 
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Your vote as a Ready Capital stockholder is very important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the Ready Capital special meeting virtually.
The Anworth Special Meeting (Page 65)

Date, Time and Place.   The Anworth special meeting of Anworth stockholders will be held solely by means of remote communication live over the Internet on March 17, 2021 at 10:00 a.m., Pacific Time.

Purpose.   At the Anworth special meeting, the holders of Anworth Common Stock will be asked to approve the Anworth Merger Proposal and the Anworth Adjournment Proposal.

Record Date; Voting Rights.   Holders of record of Anworth Common Stock at the close of business on February 4, 2021 are entitled to receive this notice and to vote at the Anworth special meeting and any postponement or adjournment thereof. Each holder of record of Anworth Common Stock on the record date is entitled to one vote per share with respect to each proposal.

Quorum.   The presence, virtually or by proxy of the holders of shares of Anworth Common Stock entitled to cast a majority of all the votes entitled to be cast at the Anworth special meeting, will constitute a quorum at the Anworth special meeting. Abstentions will be counted for the purpose of determining a quorum.

Required Vote.   Approval of the Anworth Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Anworth Common Stock entitled to vote on the Anworth Merger Proposal. Approval of the Anworth Adjournment Proposal requires, provided a quorum is present, the affirmative vote of a majority of the votes cast on the matter by holders of shares of Anworth Common Stock at the meeting.
As of the close of business on the Anworth Record Date, the directors and executive officers of Anworth owned approximately 1.9% of the outstanding shares of Anworth Common Stock entitled to vote at the Anworth special meeting. Anworth currently expects that the Anworth directors and officers will vote their shares of Anworth Common Stock in favor of the Anworth Merger Proposal, although none of them are obligated to do so.
Opinion of Ready Capital’s Financial Advisor (Page 100)
Ready Capital retained Wells Fargo Securities, LLC (“Wells Fargo”) as financial advisor to Ready Capital in connection with a potential acquisition of Anworth. On December 6, 2020, Wells Fargo rendered its oral opinion to the Ready Capital Board, which was subsequently confirmed in writing by delivery of Wells Fargo’s written opinion dated the same date, that, as of December 6, 2020 and based upon and subject to the procedures followed, assumptions made, matters considered and limitations and qualifications on the review undertaken by Wells Fargo in preparing its opinion, the merger consideration to be paid to holders of Anworth Common Stock in the Merger was fair, from a financial point of view, to Ready Capital.
Wells Fargo’s opinion was for the information and use of the Ready Capital Board (in its capacity as such) in connection with its evaluation of the Merger. Wells Fargo’s opinion only addressed the fairness, from a financial point of view, to Ready Capital, of the merger consideration to be paid to holders of Anworth Common Stock in the Merger and did not address any other aspect or implication of the Merger. The summary of Wells Fargo’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, matters considered and limitations and qualifications on the review undertaken by Wells Fargo in connection with the preparation of its opinion. However, neither Wells Fargo’s written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be, and they do not constitute, advice or a recommendation to the Ready Capital Board or any stockholder of Ready Capital or any other person as to how such holder should vote or act on any matter relating to the Merger. For a description of the opinion that the Ready Capital Board received from Wells Fargo, see the section entitled “The Merger — Opinion of Ready Capital’s Financial Advisor” beginning on page 100.
 
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Opinion of Anworth’s Financial Advisor (Page 92)
On December 6, 2020, Credit Suisse Securities (USA) LLC rendered its oral opinion to the Anworth Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Anworth Board dated the same date) as to, as of December 6, 2020, the fairness, from a financial point of view, to the holders of Anworth Common Stock (other than excluded holders) of the merger consideration to be received by such holders of Anworth Common Stock (other than excluded holders) in the Merger pursuant to the Merger Agreement.
Credit Suisse’s opinion was directed to the Anworth Board (in its capacity as such), and only addressed the fairness, from a financial point of view, to the holders of Anworth Common Stock (other than excluded holders) of the merger consideration to be received by such holders of Anworth Common Stock (other than excluded holders) in the Merger pursuant to the Merger Agreement and did not address any other aspect or implication (financial or otherwise) of the Merger. The summary of Credit Suisse’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and they do not constitute, advice or a recommendation to any Anworth stockholder as to how such holder should vote or act on any matter relating to the Merger. For a description of the opinion that the Anworth Board received from Credit Suisse, see the section entitled “The Merger — Opinion of Anworth’s Financial Advisor” beginning on page 92.
Directors and Management of Ready Capital After the Merger (Page 140)
Following the consummation of the Merger, the number of directors on the Ready Capital Board will be increased to eight and will include all of the current seven directors of the Ready Capital Board and an additional independent director from the Anworth Board: Dominique Mielle. Each of the executive officers of Ready Capital immediately prior to the effective time of the Merger will continue as an executive officer of the Combined Company following the effective time of the Merger.
Interests of Ready Capital Directors and Executive Officers in the Merger (Page 114)
In considering the recommendation of the Ready Capital Board to approve the Ready Capital Common Stock Issuance, Ready Capital stockholders should be aware that directors and executive officers of Ready Capital have certain interests in the Merger that may be different from, or in addition to, the interests of Ready Capital stockholders generally and that may present actual or potential conflicts of interests. The Ready Capital Board was aware of these interests and considered them, among other matters, in reaching its decision to approve the Merger Agreement and the transactions contemplated thereby.
Ready Capital will continue to be managed by the Ready Capital Manager under the terms of the Ready Capital Management Agreement (as amended by the Ready Capital Management Agreement Amendment). Under the Ready Capital Management Agreement, the Ready Capital Manager provides the day-to-day management of Ready Capital’s business, including providing Ready Capital with its executive officers and all other personnel necessary to support its operations. In exchange for its services, Ready Capital pays the Ready Capital Manager a management fee as well as reimburses it for certain expenses incurred by it and its affiliates in rendering management services to Ready Capital. Certain directors and executive officers of Ready Capital are partners and employees of the Ready Capital Manager.
Pursuant to the Ready Capital Management Agreement, Ready Capital pays the Ready Capital Manager a management fee calculated and payable quarterly in arrears equal to 1.5% per annum of its stockholders’ equity (as defined in the Ready Capital Management Agreement) up to $500 million and 1.0% per annum of its stockholders’ equity in excess of $500 million. Following the Merger, Ready Capital stockholders’ equity will include the additional equity attributable to the acquisition of Anworth, thus the amount of the management fees payable to the Ready Capital Manager will also increase, which gives the Ready Capital Manager (and therefore, Ready Capital’s management), an incentive, not shared by Ready Capital stockholders, to negotiate and effect the Merger, possibly on terms less favorable to Ready Capital than would
 
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otherwise have been achieved. Pursuant to the Ready Capital Management Agreement Amendment, the Ready Capital Manager has agreed to reduce its base management fee by $1,000,000 for each of the first four fiscal quarters following the Merger.
The Ready Capital Management Agreement and the Ready Capital Management Agreement Amendment were negotiated between related parties, and the terms, including fees and other amounts payable, may not be as favorable to Ready Capital as if they had been negotiated with an unaffiliated third party.
For additional information, see “The Merger — Interests of Ready Capital’s Directors and Executive Officers in the Merger” beginning on page 114.
Interests of Anworth’s Directors and Executive Officers in the Merger (Page 112)
In considering the Anworth Board’s recommendation for Anworth stockholders to approve the Anworth Merger Proposal, Anworth stockholders should be aware that directors and executive officers of Anworth have interests in the Merger that may be different from, or in addition to, the interests of Anworth stockholders generally and that may present actual or potential conflicts of interests. These interests include:

continued indemnification and insurance coverage for the directors and executive officers of Anworth in accordance with the Merger Agreement; and

upon the Closing, Dominique Mielle, an independent director currently on the Anworth Board, will be appointed to the Ready Capital Board and will be entitled to compensation pursuant to Ready Capital’s independent director compensation program.
Anworth Management Agreement
Anworth is currently externally managed by the Anworth Manager pursuant to the Anworth Management Agreement. In connection with the entry into the Merger Agreement, the Anworth Management Agreement was amended pursuant to the Anworth Management Agreement Amendment. The Anworth Management Agreement Amendment provides that upon the Closing, the Anworth Management Agreement will terminate, and as a result of such termination, Anworth will pay the Anworth Manager a termination fee of $20.3 million, and Ready Capital or Merger Sub (as the surviving company following the Merger) will reimburse the Anworth Manager for certain unpaid expenses and pay to the Anworth Manager all accrued and unpaid management fees then owed under the Anworth Management Agreement, as and when specified in the Anworth Management Agreement Amendment. For a more detailed summary of the material terms of the Anworth Management Agreement Amendment, see “Amendments to Management Agreements — Anworth — Anworth Management Agreement Amendment” on page 142.
Messrs. Joseph E. McAdams, the Chairman of the Board, Chief Executive Officer, and President of Anworth, and Lloyd McAdams, a member of the Anworth Board, own an interest in the Anworth Manager, and therefore will receive a part of the payments that will be due to the Anworth Manager in connection with the termination of the Anworth Management Agreement. Prior to Anworth’s entry into the Anworth Management Agreement Amendment, the Anworth Strategic Review Committee (which is comprised of the independent directors of the Anworth Board, and does not include Messrs. Joseph E. McAdams and Lloyd McAdams) approved the Anworth Management Agreement Amendment. The Anworth Strategic Review Committee also recommended that the Anworth Board approve, and the Anworth Board approved, the Anworth Management Agreement Amendment.
For additional information, see “The Merger — Interests of Anworth’s Directors and Executive Officers in the Merger” beginning on page 112.
Anworth Management Agreement Amendment (Page 142)
The Anworth Manager has agreed, in a separate agreement with Anworth, to amend the Anworth Management Agreement pursuant to the Anworth Management Agreement Amendment to provide that the Anworth Management Agreement will terminate at the effective time of the Merger, and as a result of such termination, Anworth will pay the Anworth Manager a termination fee of $20.3 million, and Ready Capital or Merger Sub (as the surviving company following the Merger) will reimburse the Anworth Manager for
 
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certain unpaid expenses and pay to the Anworth Manager all accrued and unpaid management fees then owed under the Anworth Management Agreement, as and when specified in the Anworth Management Agreement Amendment.
Conditions to Complete the Merger (Page 135)
A number of conditions must be satisfied or, to the extent permitted by law, waived before the Merger can be consummated. These include, among others:

the approval of the Anworth Merger Proposal by Anworth stockholders;

the approval of the Ready Capital Common Stock Issuance Proposal by Ready Capital stockholders;

effectiveness of the registration statement on Form S-4, of which this joint proxy statement/prospectus constitutes a part, and no stop order suspending the effectiveness of the Form S-4 having been initiated or threatened by the SEC;

no injunction or law prohibiting the Merger;

approval for listing on the NYSE of the shares of Ready Capital Common Stock, Ready Capital Series B Preferred Stock, Ready Capital Series C Preferred Stock and Ready Capital Series D Preferred Stock, to be issued in the Merger or reserved therefor, subject to official notice of issuance;

accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications;

the absence of a material adverse effect on either Ready Capital or Anworth;

material performance and compliance with each party’s covenants;

the receipt of tax opinions relating to the REIT status of each of Ready Capital and Anworth and relating to the qualification of the Merger as a reorganization under Section 368(a) of the Code;

the effectiveness of the Ready Capital Management Agreement Amendment; and

the effectiveness of the Anworth Management Agreement Amendment.
Regulatory Approvals Required for the Merger (Page 114)
Ready Capital and Anworth are not aware of any material federal or state regulatory requirements that must be complied with, or approvals that must be obtained, in connection with the Merger or the other transactions contemplated by the Merger Agreement.
Listing of Ready Capital Common Stock and Ready Capital Preferred Stock and Deregistration of Anworth Common Stock (Page 117)
It is a condition to the completion of the Merger that the shares of Ready Capital Common Stock, Ready Capital Series B Preferred Stock, Ready Capital Series C Preferred Stock and Ready Capital Series D Preferred Stock issuable in connection with the Merger be approved for listing on the NYSE, subject to official notice of issuance. After the Merger is completed, the Anworth Common Stock and Anworth Preferred Stock will no longer be listed on the NYSE and will be deregistered under the Exchange Act.
Accounting Treatment (Page 114)
Because both Ready Capital and Anworth have significant pre-combination activities, the Merger will be accounted for as a business combination by the Combined Company in accordance with Accounting Standards Codification Topic 805, “Business Combinations,” which is referred to as ASC 805. In applying the acquisition method specified by ASC 805, it is necessary to identify the accounting acquirer, which may be different from the legal acquirer. Factors considered in identifying an accounting acquirer include, but are not limited to, the relative size of the merging companies, the relative voting interests of the respective stockholders after consummation of a merger, and the composition of senior management and the board after consummation of a merger. Based upon consideration of those factors, Ready Capital has been designated as the accounting acquirer, resulting in an acquisition of Anworth. The assets (including identifiable intangible
 
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assets) and liabilities (including executory contracts and other commitments) of Anworth will be recorded at their respective fair values at the date of the Merger. The consideration transferred in a business combination is typically measured by reference to the fair value of equity issued or other assets transferred by the accounting acquirer. Accordingly, the fair value of the consideration transferred will be measured based on the aggregate number of shares of common stock Ready Capital issued to the stockholders of Anworth multiplied by the closing price of Ready Capital Common Stock on the day immediately preceding the merger plus the aggregate amount of Per Share Cash Consideration. The fair value of the consideration will also include the aggregate market value of the Ready Capital Preferred Stock that will be issued to holders of Anworth Preferred Stock. If the fair value of the consideration transferred exceeds the fair value of the net assets and liabilities acquired, the excess will be recorded as goodwill. Alternatively, if the fair value of the net assets and liabilities acquired exceeds the fair value of consideration transferred, the transaction could result in a bargain purchase gain. Consolidated financial statements of the Combined Company issued after the Merger will reflect these fair value adjustments and the combined results of operations subsequent to the effective date of the Merger. Because Ready Capital is designated as the accounting acquirer, its historical financial statements will become the historical financial statements of the Combined Company upon consummation of the Merger. See “Merger — Accounting Treatment” on page 114.
Comparison of Rights of Ready Capital stockholders and Anworth stockholders (Page 212)
Holders of Anworth Common Stock will have different rights following the effective time of the Merger because they will hold shares of Ready Capital Common Stock instead of shares of Anworth Common Stock, and there are differences between the governing documents of Ready Capital and Anworth. For more information regarding the differences in rights of Ready Capital stockholders and Anworth stockholders, see “Comparison of Rights of Ready Capital stockholders and Anworth stockholders” beginning on page 212.
Appraisal Rights (Page 115)
Neither holders of Ready Capital Common Stock nor holders of Anworth Common Stock or Anworth Preferred Stock will be entitled to appraisal rights.
No Solicitation; Change in Recommendations (Page 130)
From and after the date of the Merger Agreement until the effective time of the Merger or if earlier, the termination of the Merger Agreement, each of Ready Capital and Anworth will not, and will cause its subsidiaries and will instruct its representatives not to, among other things, directly or indirectly:

initiate, solicit or knowingly encourage the making of a Competing Proposal (as defined in “The Merger Agreement — Competing Proposals” beginning on page 130);

engage in any discussions or negotiations with any person with respect to a Competing Proposal;

furnish any non-public information regarding Ready Capital or Anworth or any of their subsidiaries, as applicable, or access to the properties, assets or employees of Ready Capital or Anworth or any of their subsidiaries, as applicable, to any person in connection with or in response to any Competing Proposal;

enter into any binding or nonbinding letter of intent or agreement in principle, or other agreement providing for a Competing Proposal (other than certain confidentiality agreements);

withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to the other party, the Ready Capital board recommendation or the Anworth board recommendation, as applicable, or publicly recommend the approval or adoption of, or publicly approve or adopt, any Competing Proposal;
Notwithstanding the restrictions set forth above, at any time prior to obtaining the applicable approval of the Ready Capital stockholders at the Ready Capital special meeting or the Anworth stockholders at the Anworth special meeting, each of Ready Capital and Anworth may, directly or indirectly through one or more of its representatives, engage in discussions or negotiations with any person with respect to a Ready Capital Competing Proposal or Anworth Competing Proposal (as defined in “The Merger Agreement — Competing Proposals” beginning on page 130), as applicable, or furnish non-public information regarding Ready Capital
 
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or Anworth or any of their respective subsidiaries, or access to the properties, assets or employees of Ready Capital or Anworth or any of their respective subsidiaries, with any person if (i) Ready Capital or Anworth receives a written, bona fide Ready Capital Competing Proposal or Anworth Competing Proposal, as applicable, from such person that was not solicited at any time following the execution of the Merger Agreement and (ii) such Ready Capital Competing Proposal or Anworth Competing Proposal, as applicable, did not arise from a material breach of the obligations set forth in certain provisions of the Merger Agreement, in each case, if certain conditions are met and the Ready Capital Board or the Anworth Board or any committee thereof, as applicable, determines, after consultation with its financial advisors and outside legal counsel, that such proposal is, or could be reasonably expected to lead to a Superior Proposal (as defined in “The Merger Agreement — Superior Proposals” beginning on page 132).
At any time prior to obtaining the applicable approval of its stockholders at its stockholder meetings, each of Ready Capital and Anworth may effect a change in its board recommendation in response to a bona fide written Ready Capital Competing Proposal or Anworth Competing Proposal, as applicable, from a third party that was, among other things, not solicited at any time following the execution of the Merger Agreement and did not arise from a material breach of the obligations set forth in certain provisions of the Merger Agreement, if the Ready Capital Board or the Anworth Board or any committee thereof, as applicable, among other things, determines, after consultation with its financial advisors and outside legal counsel and taking into account any revised proposal that the other party may have made, that such Ready Capital Competing Proposal or Anworth Competing Proposal is a Superior Proposal (as defined in “The Merger Agreement — Superior Proposals” beginning on page 132). Anworth may terminate the Merger Agreement in order to enter into a definitive agreement with respect to an Anworth Superior Proposal, if prior to doing so, among other things, the Anworth Board or any committee thereof determines, after consultation with its financial advisors and outside legal counsel and taking into account any revised proposal that Ready Capital may have made, that a Competing Proposal is an Anworth Superior Proposal and Anworth pays Ready Capital a termination fee of $15.0 million.
See “The Merger Agreement — Competing Proposals” beginning on page 130.
Termination of the Merger Agreement (Page 138)
The Merger Agreement may be terminated at any time before the effective time of the Merger by the mutual written consent of Ready Capital and Anworth.
The Merger Agreement may also be terminated prior to the effective time of the Merger by either Ready Capital or Anworth if:

any governmental entity of competent jurisdiction has issued a final and non-appealable order, decree, ruling or injunction or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger, or if any law has been adopted prior to the effective time of the Merger that permanently makes the consummation of the Merger illegal or otherwise permanently prohibited;

the Merger has not been consummated on or before 5:00 p.m. New York, New York time, on September 30, 2021 (provided that this termination right will not be available to any party whose breach of any representation, warranty, covenant or agreement under the Merger Agreement has been the cause of or resulted in the failure of the Merger to occur on or before that date);

(i) the other party breaches certain covenants or other agreements contained in the Merger Agreement or any representation and warranty of the other party contained in the Merger Agreement fails to be true and correct which (x) would give rise to the failure of certain conditions to Closing if it was continuing as of the date of Closing and (y) cannot be or has not been cured (or is incapable of becoming true or does not become true) by a certain time; provided, however, that the terminating party is not then also in breach of any representation, warranty, covenant or other agreement contained in the Merger Agreement, or (ii) the other party willfully or materially breaches certain other covenants of the Merger Agreement;

Ready Capital stockholders have failed to approve the issuance of shares of Ready Capital Common Stock in connection with the Merger, or Anworth stockholders have failed to approve the Merger and the other transactions contemplated by the Merger Agreement, as applicable; or
 
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the other party’s board of directors has effected a change in its board recommendation prior to the time that such party has obtained the applicable approval of its stockholders at its respective stockholder meeting.
Anworth also may terminate the Merger Agreement if, prior to the time that Anworth has obtained the approval of its stockholders at the Anworth stockholder meeting, the Anworth Board determines to terminate the Merger Agreement in connection with an Anworth Superior Proposal and, concurrently with the termination of the Merger Agreement, Anworth enters into a definitive agreement providing for the implementation of such Anworth Superior Proposal; provided, however, that such termination shall not be effective unless Anworth concurrently pays to Ready Capital a termination fee of $15.0 million.
For more information regarding termination of the Merger Agreement, see “The Merger Agreement — Termination of the Merger Agreement” beginning on page 138.
Termination Fees and Expenses (Page 138)
Generally, all fees and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement will be paid by the party incurring those fees and expenses; provided that, in certain circumstances, including a change of recommendation or, in the case of Anworth, the acceptance of an Anworth Superior Proposal, Ready Capital or Anworth, as applicable, would be required to pay the other party a termination fee of $15,000,000. In addition, upon termination of the Merger Agreement by Ready Capital or Anworth under specified circumstances, Ready Capital or Anworth, as applicable, would be required to pay the other party an agreed expense amount of $3,000,000.
For further discussion of the termination fees, see “The Merger Agreement — Termination Fees and Expenses” beginning on page 138.
Material U.S. Federal Income Tax Consequences (Page 143)
The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code, and the closing of the Merger is conditioned on the receipt by each of Anworth and Ready Capital of an opinion from its respective tax counsel to that effect. Provided that the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, the holders of Anworth Common Stock will generally recognize gain (but not loss) in an amount equal to the lesser of: (i) the amount of cash received pursuant to the Merger (excluding any cash received in lieu of fractional shares of Ready Capital Common Stock) and (ii) the amount of gain realized (i.e., the excess sum of the amount of cash, other than cash received in lieu of a fractional share of Ready Capital Common Stock, and the fair market value of the Ready Capital Common Stock received pursuant to the Merger over such holder’s adjusted U.S. federal income tax basis in its shares of Anworth Common Stock surrendered). A holder of Anworth Common Stock generally will recognize gain or loss with respect to cash received in lieu of a fractional share of Ready Capital Common Stock in the Merger measured by the difference, if any, between the amount of cash received for such fractional share and the holder’s tax basis in such fractional share. Holders of Anworth Preferred Stock will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of Ready Capital Preferred Stock in exchange for shares of Anworth Preferred Stock in connection with the Merger. The holders of Ready Capital Common Stock generally will not recognize any gain or loss for U.S. federal income tax purposes.
The tax consequences to you of the Merger will depend on your own situation. You should consult your tax advisor for a full understanding of the tax consequences to you (including the application and effect of any state, local or non-U.S. income and other tax laws) of the Merger. For more information regarding the U.S. federal income tax consequences of the Merger to holders of Anworth Common Stock and the ownership of Ready Capital Common Stock, please see “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the Merger” and “— The Combined Company” beginning on page 148.
Description of Ready Capital Stock (Page 183)
As of February 4, 2021, 55,241,078 shares of Ready Capital Common Stock were issued and outstanding and zero shares of Ready Capital preferred stock were issued and outstanding. Based on the Exchange Ratio
 
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of 0.1688, upon consummation of the Merger, the Combined Company would be expected to have approximately 16,774,328 shares of newly issued Ready Capital Common Stock, 1,919,378 shares of newly classified Ready Capital Series B Preferred Stock, 779,743 shares of Ready Capital Series C Preferred Stock and 2,010,278 shares of newly classified Ready Capital Series D Preferred Stock.
Voting rights are vested in the holders of the Ready Capital Common Stock, and such holders are entitled to receive dividends on such Ready Capital Common Stock if, as and when authorized by the Ready Capital Board, and declared by Ready Capital out of assets legally available therefor.
Selected Historical Financial Information of Ready Capital
The following selected historical financial information for each of the years during the five-year period ended December 31, 2019 and the selected balance sheet data as of December 31 for each of the years in the five-year period ended December 31, 2019, have been derived from Ready Capital’s audited consolidated financial statements and related notes included in Ready Capital’s Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference herein. The selected historical financial information as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 have been derived from Ready Capital’s unaudited interim consolidated financial statements and related notes included in Ready Capital’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is incorporated herein by reference. The following selected historical financial information as of September 30, 2019 has been derived from Ready Capital’s unaudited interim consolidated financial statements and related notes included in Ready Capital’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which is not included or incorporated herein by reference.
The information set forth below is not necessarily indicative of future results and you should read the selected historical financial information presented below together with the consolidated financial statements and the related notes thereto and management’s discussion and analysis of financial condition and results of operations of Ready Capital included in Ready Capital’s Annual Report on Form 10-K for the year ended December 31, 2019 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, which are incorporated herein by reference. See also “Where You Can Find More Information and Incorporation by Reference” on page 229.
 
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(In thousands, except share
data)
As of and
for the
Nine Months
Ended
September 30,
2020
As of and
for the
Nine Months
Ended
September 30,
2019
As of and
for the
Year Ended
December 31,
2019
As of and
for the
Year Ended
December 31,
2018
As of and
for the
Year Ended
December 31,
2017
As of and
for the
Year Ended
December 31,
2016
As of and
for the
Year Ended
December 31,
2015
Income Statement Data
Interest income
$ 193,826 $ 165,510 $ 229,916 $ 169,499 $ 138,305 $ 137,023 $ 148,955
Interest expense
(134,162) (110,919) (151,880) (109,238) (74,646) (57,772) (47,806)
Provision for loan losses
(34,984) (2,559) (3,684) (1,701) (2,363) (7,819) (19,643)
Other non-interest income (expense)
251,351 129,206 (9,848) 4,283 (12,843) (6,217) (28,275)
Provision (benefit) for income taxes
22,626 45,516 10,552 (1,386) (1,839) (9,651) (7,810)
Income tax benefit (provision)
(4,116) 8,604 2,088 61,457 45,814 55,564 45,421
Loss from discontinued operations, net of tax
(2,158) (653)
Net income (loss)
18,510 54,120 75,056 61,457 45,814 53,406 44,768
Net income (loss) attributable to Ready Capital Corporation
17,959 52,540 72,968 59,258 43,290 49,169 40,383
Basic earnings per share:
Continuing operations
$ 0.32 $ 1.29 $ 1.72 $ 1.84 $ 1.38 $ 1.93 $ 1.62
Net income
$ 0.32 $ 1.29 $ 1.72 $ 1.84 $ 1.38 $ 1.85 $ 1.59
Diluted earnings per share:
Continuing operations
$ 0.31 $ 1.29 $ 1.72 $ 1.84 $ 1.38 $ 1.93 $ 1.62
Net income
$ 0.31 $ 1.29 $ 1.72 $ 1.84 $ 1.38 $ 1.85 $ 1.59
Dividends declared per share
of common stock
$ 0.95 $ 1.20 $ 1.60 $ 1.57 $ 1.48 $ 1.61 $ 1.78
Weighted-average basic shares of common stock outstanding(a)
53,534,497 40,517,231 42,011,750 32,085,975 31,350,102 26,647,981 25,287,277
Balance Sheet Data
Total assets
$ 5,317,510 $ 4,123,019 $ 4,977,018 $ 3,036,843 $ 2,523,503 $ 2,605,267 $ 2,329,781
Total liabilities
$ 4,493,340 $ 3,384,008 $ 4,132,234 $ 2,472,768 $ 1,968,036 $ 2,053,165 $ 1,849,568
Total Ready Capital Corporation Stockholders’ equity
$ 824,170 $ 739,011 $ 825,412 $ 544,831 $ 536,073 $ 513,097 $ 441,321
Total non-controlling interests
$ 18,900 $ 19,264 $ 19,372 $ 19,244 $ 19,394 $ 39,005 $ 38,892
(a)
Includes vested Restricted Stock Units (“RSUs”).
The following table provides information regarding Ready Capital’s cash flows for the years ended December 31, 2019, 2018 and 2017 (in thousands):
Year Ended December 31,
2019
2018
2017
Net cash (used in) provided by operating activities
$ (52,397) $ 140,297 $ 352,489
Net cash (used in) provided by investing activities
(1,212,792) (580,759) (235,728)
Net cash (used in) provided by financing activities
1,298,199 444,478 (106,502)
Net increase (decrease) in cash, cash equivalents and restricted cash
33,010 4,016 10,259
Cash, cash equivalents and restricted cash – beginning of year
94,970 90,954 80,695
Cash, cash equivalents and restricted cash – end of year
$ 127,980 $ 94,970 $ 90,954
Selected Historical Financial Information of Anworth
The following selected historical financial information for each of the years during the five-year period ended December 31, 2019, and the selected balance sheet data as of December 31 of each of the years in the
 
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five-year period ended December 31, 2019, have been derived from Anworth’s audited consolidated financial statements and related notes thereto included in Anworth’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which is incorporated herein by reference.
The following selected historical financial information as of September 30, 2020 and for the nine months ended September 30, 2020 and 2019 have been derived from Anworth’s unaudited interim consolidated financial statements and related notes thereto included in Anworth’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, which is incorporated herein by reference. The following selected historical financial information as of September 30, 2019 has been derived from Anworth’s unaudited interim consolidated financial statements and related notes thereto included in Anworth’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, which is not included or incorporated herein by reference.
The information set forth below is not necessarily indicative of future results, and you should read the selected historical financial information presented below together with the consolidated financial statements and the related notes thereto, and management’s discussion and analysis of financial condition and results of operations of Anworth, included in Anworth’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and its Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020 and September 30, 2020, which are incorporated herein by reference. See also “Where You Can Find More Information and Incorporation by Reference” on page 229.
 
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As of and For the
Nine Months Ended
September 30,
As of and For the Years Ended December 31,
(In thousands, except per share data and days)
2020
2019
2019
2018
2017
2016
2015
Statements of Operations Data
Days in period
273 272 365 365 365 366 365
Interest income net of amortization of premium and discount
$ 68,825 $ 119,320 $ 154,395 $ 159,972 $ 142,748 $ 140,452 $ 145,498
Interest expense
(39,541) (93,699) (118,756) (115,307) (82,519) (70,420) (43,621)
Provision for credit losses on loans
(620) (203)
Net interest income
$ 28,664 $ 25,621 $ 35,639 $ 44,665 $ 60,229 $ 70,032 $ 101,674
Expenses
(8,899) (10,044) (13,306) (13,503) (13,305) (14,219) (13,980)
Other (loss) income
(146,877) (100,739) (77,752) (37,650) 7,448 (33,320) (72,990)
Net (loss) income
$ (127,112) $ (85,162) $ (55,419) $ (6,488) $ 54,372 $ 22,493 $ 14,704
Dividends on preferred stock
(6,892) (6,892) (9,189) (9,189) (8,173) (6,583) (6,437)
Net (loss) income available to common stockholders
$ (134,004) $ (92,054) $ (64,608) $ (15,677) $ 46,199 $ 15,910 $ 8,267
Basic (loss) earnings per common share
$ (1.35) $ (0.93) $ (0.65) $ (0.16) $ 0.48 $ 0.17 $ 0.08
Diluted (loss) earnings per common share
$ (1.35) $ (0.93) $ (0.65) $ (0.16) $ 0.47 $ 0.17 $ 0.08
Average number of shares outstanding
98,995 98,638 98,739 98,314 96,764 96,408 103,412
Average number of diluted shares
outstanding
98,995 98,638 98,739 98,314 100,479 101,068 107,751
Balance Sheets Data
Agency MBS
$ 1,609,761 $ 3,105,638 $ 3,510,051 $ 3,548,719 $ 4,278,797 $ 3,925,193 $ 4,892,782
Non-Agency MBS
$ 198,586 $ 686,029 $ 643,610 $ 795,203 $ 760,825 $ 641,246 $ 682,061
Residential mortgage loans held-for-securitization
$ 123,247 $ 129,014 $ 152,922 $ 11,660 $ $ $
Residential mortgage loans held-for-investment
through consolidated securitization trusts
$ 317,887 $ 483,648 $ 458,348 $ 549,016 $ 639,351 $ 744,462 $ 969,172
Total assets
$ 2,438,772 $ 4,581,761 $ 4,938,631 $ 5,039,700 $ 5,765,541 $ 5,395,776 $ 6,636,340
Repurchase agreements
$ 1,464,593 $ 3,255,102 $ 3,657,873 $ 3,811,627 $ 4,365,695 $ 3,911,015 $ 4,915,528
Warehouse line of credit
$ 101,722 $ 112,252 $ 133,811 $ $ $ $
Asset-backed securities issued by securitization
trusts
$ 309,173 $ 474,285 $ 448,987 $ 539,651 $ 629,984 $ 728,683 $ 915,486
Junior subordinated notes
$ 37,380 $ 37,380 $ 37,380 $ 37,380 $ 37,380 $ 37,380 $ 37,380
Total liabilities
$ 2,019,383 $ 4,027,669 $ 4,366,679 $ 4,458,595 $ 5,068,119 $ 4,740,754 $ 5,934,189
Series B Preferred Stock
$ 19,455 $ 19,455 $ 19,455 $ 19,455 $ 19,455 $ 23,924 $ 23,924
Stockholders’ equity (common, Series A, and Series C Preferred)
$ 399,934 $ 534,637 $ 552,497 $ 561,650 $ 677,967 $ 631,098 $ 678,227
Number of common shares outstanding
99,140 98,768 98,849 98,483 98,137 95,718 98,944
Book value per common share
$ 3.04 $ 4.42 $ 4.60 $ 4.71 $ 5.91 $ 5.95 $ 6.25
Selected Unaudited Pro Forma Condensed Combined Financial Information (Page 232)
The following table shows summary unaudited pro forma condensed combined financial information about the condensed combined financial condition and operating results of Ready Capital and Anworth after giving effect to the Merger. The unaudited pro forma condensed combined financial information assumes that the Merger is accounted for as a business combination with Ready Capital as the acquiring entity. The unaudited pro forma condensed combined balance sheet data gives effect to the Merger as if it had occurred on September 30, 2020. The unaudited pro forma condensed combined statements of income data gives effect to the Merger as if it had occurred on January 1, 2019. The summary unaudited pro forma condensed combined financial information listed below has been derived from and should be read in conjunction with (1) the more detailed unaudited pro forma condensed combined financial information, including the notes thereto, appearing elsewhere in this joint proxy statement/prospectus and (2) the historical consolidated financial statements and related notes of both Ready Capital and Anworth, incorporated herein by reference. See “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 232 and “Where You Can Find More Information and Incorporation by Reference” beginning on page 229.
 
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As of and for the Nine Months Ended September 30, 2020
(In thousands, except share data)
Ready Capital
Corporation
(Accounting Acquirer)
Anworth
(Accounting
Acquiree)
Pro Forma
Merger
Adjustments
Pro Forma
Combined
Income Statement Data
Interest income
$ 193,826 $ 68,825 $ $ 262,651
Interest expense
(134,162) 39,541 (173,703)
Provision for loan losses
(34,984) (620) (35,604)
Other non-interest income
251,351 (146,877) 104,474
Other non-interest expense
(253,405) (8,899) 474 (261,830)
Income tax benefit (provision)
(4,116) (4,116)
Net income (loss)
18,510 (127,112) 474 (108,128)
Net income (loss) attributable to common
stockholders
17,959 (134,004) 466 (115,579)
Earnings (loss) per common share – 
basic
$ 0.32 $ (1.35) $ $ (1.64)
Earnings (loss) per common share – 
diluted
$
0.31
$
(1.35)
$
$
(1.64)
Weighted-average shares of common stock
outstanding
53,534,497 98,994,576 16,774,328 70,308,825
Balance Sheet Data
Total assets
$  5,317,510 $  2,438,772 $    (97,397) $  7,658,885
Total liabilities
$ 4,493,340 $ 2,019,383 $ $ 6,512,723
Total stockholders’ equity
$ 805,270 $ 419,389 $ (96,594) $ 1,128,066
Total non-controlling interests
$ 18,900 $ $ (803) $ 18,097
For the Year Ended December 31, 2019
(In thousands, except share data)
Ready Capital
Corporation
(Accounting Acquirer)
Anworth
(Accounting
Acquiree)
Pro Forma
Merger
Adjustments
Pro Forma
Combined
Income Statement Data
Interest income
$ 229,916 $ 154,395 $ $ 384,311
Interest expense
(151,880) 118,756 (270,636)
Provision for loan losses
(3,684) (3,684)
Other non-interest income
174,628 (77,752) 96,876
Other non-interest expense
(184,476) (13,306) 745 (197,037)
Income tax benefit (provision)
10,552 10,552
Net income (loss)
75,056 (55,419) 745 20,382
Net income (loss) attributable to common
stockholders
72,968 (64,608) 731 9,091
Earnings (loss) per common share – 
basic
$ 1.72 $ (0.65) $ $ 0.15
Earnings (loss) per common share – 
diluted
$ 1.72 $ (0.65) $ $ 0.15
Weighted-average shares of common stock
outstanding
42,011,750 98,739,000 16,685,776 58,697,526
 
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Unaudited Comparative Per Share Information (Page 182)
The following table sets forth for the year ended December 31, 2019 and as of and for the nine months ended September 30, 2020, selected per share information for Ready Capital Common Stock on a historical and pro forma combined basis and for Anworth Common Stock on a historical and pro forma equivalent basis. The historical information for the year ended December 31, 2019 is derived from audited financial statements. You should read the table below together with the historical consolidated financial statements and related notes thereto of Ready Capital and Anworth contained in Ready Capital’s Annual Report on Form 10-K for the year ended December 31, 2019, Anworth’s Annual Report on Form 10-K for the year ended December 31, 2019, and each of Ready Capital’s and Anworth’s respective Quarterly Reports on Form 10-Q for the quarter ended March 31, 2020, June 30, 2020 and September 30, 2020, all of which are incorporated herein by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information and Incorporation by Reference” beginning on page 229.
The unaudited pro forma combined amounts and the unaudited pro forma combined equivalent amounts were calculated using the methodology as described in the section titled “Unaudited Pro Forma Condensed Combined Financial Statements,” and are subject to all the assumptions, adjustments and limitations described thereunder. The unaudited pro forma data and equivalent per share information give effect to the Merger as if it had been effective on the dates presented in the case of book value data, and as if it occurred on January 1, 2019 in the case of earnings per share and dividends data. The unaudited pro forma condensed combined financial statements are not necessarily indicative of what the actual financial position and operating results would have been had the Merger occurred on such dates, nor do they purport to represent Ready Capital’s future financial position or operating results.
Ready Capital
Corporation Historical
Anworth
Historical
Pro Forma
Combined
Earnings (loss) Per Common Share
Basic: For the nine months ended September 30, 2020
$ 0.32 $ (1.35) $ (1.64)
Diluted: For the nine months ended September 30, 2020
$ 0.31 $ (1.35) $ (1.64)
Basic: For the year ended December 31, 2019
$ 1.72 $ (0.65) $ 0.15
Diluted: For the year ended December 31, 2019
$ 1.72 $ (0.65) $ 0.15
Book Value per Common Share
September 30, 2020
$ 14.86 $ 3.04 $ 14.28
Dividends per share of common stock(1)
For the nine months ended September 30, 2020
$ 0.95 $ 0.15 $ 0.76
For the year ended December 31, 2019
$ 1.60 $ 0.43 $ 1.31
(1)
Pro forma dividends per share of common stock are not presented as the dividend policy for the Combined Company will be determined by the Ready Capital Board following the completion of the Merger.
 
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RISK FACTORS
In addition to other information included elsewhere in this joint proxy statement/prospectus and in the annexes to this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 56, you should carefully consider the following risk factors in deciding whether to vote for the Ready Capital Common Stock Issuance Proposal or the Anworth Merger Proposal. In addition, you should read and consider the risks associated with the businesses of each of Ready Capital and Anworth. These risks can be found in the Annual Report on Form 10-K for the year ended December 31, 2019 and other reports of Anworth and the Annual Report on Form 10-K for the year ended December 31, 2019 and other reports of Ready Capital, which reports are incorporated by reference into this joint proxy statement/prospectus, including particularly the sections therein titled “Risk Factors”. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. Please also see “Where You Can Find More Information and Incorporation by Reference” on page 229.
Risks Related to the Merger
The Merger is subject to a number of conditions which, if not satisfied or waived in a timely manner, would delay the Merger or adversely impact Ready Capital’s and Anworth’s ability to complete the transaction.
The completion of the Merger is subject to the satisfaction or waiver of a number of conditions. In addition, under circumstances specified in the Merger Agreement, Ready Capital or Anworth may terminate the Merger Agreement. In particular, completion of the Merger requires (i) the approval of the Anworth Merger Proposal by the Anworth stockholders and (ii) the approval of the Ready Capital Common Stock Issuance Proposal by Ready Capital stockholders. While it is currently anticipated that the Merger will be completed shortly after the later of the Anworth special meeting to approve the Anworth Merger Proposal and the Ready Capital special meeting to approve the Ready Capital Common Stock Issuance Proposal, there can be no assurance that the conditions to Closing will be satisfied in a timely manner or at all, or that an effect, event, circumstance, occurrence, development or change will not transpire that could delay or prevent these conditions from being satisfied. Accordingly, Ready Capital and Anworth cannot provide any assurances with respect to the timing of the Closing, whether the Merger will be completed at all and when the Anworth stockholders would receive the consideration for the Merger, if at all.
Failure to consummate the Merger as currently contemplated or at all could adversely affect the price of Ready Capital Common Stock or Anworth Common Stock and the future business and financial results of Ready Capital and/or Anworth.
The Merger may be consummated on terms different than those contemplated by the Merger Agreement, or the Merger may not be consummated at all. If the Merger is not completed, or is completed on different terms than as contemplated by the Merger Agreement, Ready Capital and Anworth could be adversely affected and subject to a variety of risks associated with the failure to consummate the Merger, or to consummate the Merger as contemplated by the Merger Agreement, including the following:

the Ready Capital stockholders and the Anworth stockholders may be prevented from realizing the anticipated benefits of the Merger;

the market price of Ready Capital Common Stock or Anworth Common Stock could decline significantly;

reputational harm due to the adverse perception of any failure to successfully consummate the Merger;

Ready Capital and Anworth being required, under certain circumstances, to pay to the other party a termination fee or expense amount;

incurrence of substantial costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and

the attention of Ready Capital’s and Anworth’s management and employees may be diverted from their day-to-day business and operational matters as a result of efforts relating to attempting to consummate the Merger.
 
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Any delay in the consummation of the Merger or any uncertainty about the consummation of the Merger on terms other than those contemplated by the Merger Agreement, or if the Merger is not completed, could materially adversely affect the business, financial results and stock price of Ready Capital and Anworth.
The Merger Agreement contains provisions that could discourage a potential competing acquirer of either Ready Capital or Anworth or could result in any competing acquisition proposal being at a lower price than it might otherwise be.
The Merger Agreement contains provisions that, subject to limited exceptions, restrict the ability of each of Ready Capital and Anworth to solicit, initiate, knowingly encourage or facilitate any Competing Proposal. With respect to any written, bona fide Competing Proposal received by either Ready Capital or Anworth, the other party generally has an opportunity to offer to modify the terms of the Merger Agreement in response to such proposal before the Ready Capital Board or Anworth Board, as the case may be, or committee thereof, may withdraw or modify its recommendation to their respective stockholders in response to such Competing Proposal or, solely in the case of Anworth, terminate the Merger Agreement in connection with a Superior Proposal. In the event that either party’s board of directors withdraws or modifies its recommendation, the other party may terminate the Merger Agreement, in which case the party whose board withdrew or modified its recommendation may be required to pay the other party a termination fee of $15.0 million. In addition, if Anworth terminates the Merger Agreement in connection with a Superior Proposal, it would be required to pay Ready Capital a termination fee of $15.0 million. Similarly, such termination fees less any amount previously paid as expense reimbursement may be payable in certain other circumstances as described in the Merger Agreement. See “The Merger Agreement — Competing Proposals” beginning on page 130, “The Merger Agreement — Termination of the Merger Agreement” beginning on page 138 and “The Merger Agreement — Termination Fees and Expenses” beginning on page 138.
These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Ready Capital or Anworth from considering or proposing a competing acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share cash value than that market value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee or expense amount that may become payable in certain circumstances under the Merger Agreement.
The pendency of the Merger could adversely affect Ready Capital’s and Anworth’s business and operations.
In connection with the pending Merger, some of the parties with whom Ready Capital or Anworth does business may delay or defer decisions, which could negatively impact Ready Capital’s or Anworth’s revenues, earnings, cash flows and expenses, regardless of whether the Merger is completed. In addition, under the Merger Agreement, Ready Capital and Anworth are each subject to certain restrictions on the conduct of its respective business prior to completing the Merger. These restrictions may prevent Ready Capital or Anworth from pursuing certain strategic transactions, acquiring and disposing assets, undertaking certain capital projects, undertaking certain financing transactions and otherwise pursuing other actions that are not in the ordinary course of business, even if such actions could prove beneficial. These restrictions may impede Ready Capital’s or Anworth’s growth which could negatively impact its respective revenue, earnings and cash flows. Additionally, the pendency of the Merger may make it more difficult for Ready Capital or Anworth to effectively retain and incentivize key personnel.
The market value of Ready Capital Common Stock received by Anworth stockholders will fluctuate based on the trading price of Ready Capital Common Stock.
The number of shares of Ready Capital Common Stock to be received by Anworth stockholders will be based on the Exchange Ratio of 0.1688, subject to adjustment as provided in the Merger Agreement. The market value of Ready Capital Common Stock received by Anworth stockholders will fluctuate based on the trading price of Ready Capital Common Stock. Therefore, Ready Capital stockholders cannot be sure of the final market value of the consideration that will be paid to Anworth stockholders upon completion of the Merger, and Anworth stockholders cannot be sure of the final market value of the consideration they will
 
36

 
receive upon completion of the Merger. Neither Ready Capital nor Anworth has the right to terminate the Merger Agreement based on an increase or decrease in the market price of Ready Capital Common Stock.
The Merger and related transactions are subject to Ready Capital stockholder approval and Anworth stockholder approval.
The Merger cannot be completed unless (i) Anworth stockholders approve the Anworth Merger Proposal by the affirmative vote of the holders of at least a majority of all outstanding shares of Anworth Common Stock entitled to vote on such proposal and (ii) Ready Capital stockholders approve the Ready Capital Common Stock Issuance Proposal by the affirmative vote of a majority of the votes cast on such proposal, in each case provided a quorum is present. Pursuant to the guidance of the NYSE, abstentions with regard to the Ready Capital Common Stock Issuance Proposal will have the effect of a vote against such proposal. If required stockholder approval is not obtained from either Anworth stockholders or Ready Capital stockholders, the Merger and related transactions cannot be completed.
The voting power of Ready Capital stockholders and Anworth stockholders will be diluted by the Merger.
The Merger will dilute the ownership position of Ready Capital stockholders and result in Anworth stockholders having an ownership stake in the Combined Company that is smaller than their current stake in Anworth. Ready Capital and Anworth estimate that, immediately following the completion of the Merger, Ready Capital stockholders as of immediately prior to Closing will own in the aggregate approximately 77% of outstanding shares of common stock of the Combined Company and Anworth stockholders as of immediately prior to Closing will own in the aggregate approximately 23% of outstanding shares of common stock of the Combined Company, based on the number of issued and outstanding shares of Ready Capital Common Stock and Anworth Common Stock (excluding Cancelled Shares) as of February 4, 2021, and the Exchange Ratio of 0.1688. Consequently, Ready Capital stockholders and Anworth stockholders, as a general matter, will have less influence over the Combined Company’s management and policies after the effective time of the Merger than they currently exercise over the management and policies of Ready Capital and Anworth, respectively.
If the Merger is not consummated by September 30, 2021, Ready Capital or Anworth may terminate the Merger Agreement.
Either Ready Capital or Anworth may terminate the Merger Agreement under certain circumstances, including if the Merger has not been consummated by September 30, 2021. However, this termination right will not be available to a party if that party failed to fulfill its obligations under the Merger Agreement and that failure was the cause of, or resulted in, the failure to consummate the Merger on or before such date.
The market price of Ready Capital Common Stock may decline as a result of the Merger and the market price of Ready Capital Common Stock after the consummation of the Merger may be affected by factors different from those affecting the price of Ready Capital Common Stock or the price of Anworth Common Stock before the Merger.
The market price of Ready Capital Common Stock may decline as a result of the Merger if the Combined Company does not achieve the perceived benefits of the Merger or the effect of the Merger on the Combined Company’s financial results is not consistent with the expectations of financial or industry analysts.
In addition, upon consummation of the Merger, Ready Capital stockholders and Anworth stockholders will own interests in the Combined Company operating an expanded business with a different mix of assets, risks and liabilities. Ready Capital current stockholders and Anworth’s current stockholders may not wish to continue to invest in the Combined Company, or for other reasons may wish to dispose of some or all of their shares of Ready Capital Common Stock. If, following the effective time of the Merger, a large amount of Ready Capital Common Stock is sold, the price of Ready Capital Common Stock could decline.
Further, the Combined Company’s results of operations, as well as the market price of Ready Capital Common Stock after the Merger may be affected by factors in addition to those currently affecting Ready Capital’s or Anworth’s results of operations and the market prices of Ready Capital Common Stock and Anworth Common Stock, particularly the increase in the Combined Company’s leverage compared to that in
 
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place for Ready Capital and Anworth today, and other differences in assets and capitalization. Accordingly, Ready Capital’s and Anworth’s historical market prices and financial results may not be indicative of these matters for the Combined Company after the Merger.
Shares of Ready Capital Common Stock received by Anworth stockholders as a result of the Merger will have different rights from shares of Anworth Common Stock.
Upon the completion of the Merger, Anworth stockholders will no longer be stockholders of Anworth and will become stockholders of Ready Capital. There will be important differences between the current rights of Anworth stockholders and the rights to which such stockholders will be entitled as stockholders of Ready Capital. See the section entitled “Comparison of Rights of Ready Capital stockholders and Anworth stockholders” beginning on page 212 for a discussion on the different rights associated with the shares of Ready Capital Common Stock.
Directors and executive officers of each of Ready Capital and Anworth may have interests in the Merger that are different from, or in addition to, the interests of Ready Capital and Anworth stockholders, respectively.
Directors and executive officers of Ready Capital and Anworth may have interests in the Merger that are different from, or in addition to, the interests of Ready Capital and Anworth stockholders generally. Following the consummation of the Merger, all seven of the current directors of the Ready Capital Board are expected to continue as directors of the board of directors of the Combined Company and the executive officers of Ready Capital are expected to continue as the executive officers of the Combined Company. One existing independent director of Anworth will join the Ready Capital Board following the Merger. The Combined Company will continue to be managed by the Ready Capital Manager under the terms of the Ready Capital Management Agreement, pursuant to which the Ready Capital Manager receives a management fee payable quarterly. Each of Ready Capital’s executive officers is a principal or managing director of the Ready Capital Manager. In connection with the Merger, the Anworth Management Agreement will be terminated and the Anworth Manager will be paid a termination fee. Two of Anworth’s directors are owners and employees of the Anworth Manager, and will receive a portion of this fee. In addition, directors and executive officers of Anworth will receive continued indemnification and insurance coverage in accordance with the terms of the Merger Agreement. Upon the Closing, an independent director currently on the Anworth Board will be appointed to the Ready Capital Board and receive compensation in accordance with Ready Capital’s independent director compensation program. The interests are described in more detail in the sections entitled “The Merger — Interests of Ready Capital’s Directors and Executive Officers in the Merger” and “The Merger — Interests of Anworth’s Directors and Executive Officers in the Merger” beginning on page 112.
Completion of the Merger may trigger change in control or other provisions in certain agreements to which Anworth is a party.
The completion of the Merger may trigger change in control or other provisions in certain agreements to which Anworth is a party. If Ready Capital and Anworth are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Ready Capital and Anworth are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Anworth.
Several lawsuits have been filed against Ready Capital, Merger Sub, Anworth and/or the Anworth Board challenging the adequacy of public disclosures related to the Merger and an adverse ruling may prevent the Merger from being completed.
Ready Capital, Merger Sub, Anworth and/or the members of Anworth Board were named as defendants in seven lawsuits brought by alleged Anworth stockholders challenging the adequacy of public disclosures related to the Merger and seeking, among other things, injunctive relief to enjoin the defendants from completing the Merger. Additional lawsuits may be filed against Ready Capital, Merger Sub, Anworth and/or their respective directors or officers in connection with the Merger. See “The Merger — Litigation Related to the Merger” on page 117 for more information about the lawsuits that have been filed related to the Merger.
 
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One of the conditions to the closing of the Merger is no judgment, injunction, order or decree of any governmental authority of competent jurisdiction prohibiting the consummation of the Merger shall be in effect, and no law shall have been enacted, entered, promulgated or enforced by any governmental authority after the date of the Merger Agreement that, in any case, prohibits, restrains, enjoins or makes illegal the consummation of the Merger and the other transactions contemplated by the Merger Agreement. Consequently, if a settlement or other resolution is not reached in the lawsuits referenced above and the plaintiffs secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting the parties’ ability to complete the Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at all.
If the Merger does not qualify as a reorganization, Anworth stockholders may recognize a taxable gain.
The Merger is intended to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code, and it is a condition to the completion of the Merger that Anworth and Ready Capital each receive an opinion from its respective tax counsel to the effect that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code. However, these legal opinions will not be binding on the IRS or on the courts. If, for any reason, the Merger were to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, then each Anworth stockholder generally would recognize gain or loss, as applicable, equal to the difference between (i) the fair market value of the Per Share Common Merger Consideration or Per Share Preferred Merger Consideration, as applicable, received by the Anworth stockholder in the Merger and (ii) the Anworth stockholder’s adjusted tax basis in its Anworth Common Stock, or Per Share Preferred Merger Consideration, as applicable. Moreover, Anworth would be treated as selling, in a taxable transaction, all of its assets to Ready Capital, with the result that Anworth would generally recognize gain or loss on the deemed transfer of its assets to Ready Capital (and Ready Capital could inherit a significant current tax liability from Anworth if Anworth were to fail to qualify for tax treatment as a REIT). See “Material U.S. Federal Income Tax Consequences — Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 143.
Risks Related to the Combined Company Following the Merger
Following the Merger, the Combined Company may be unable to integrate Ready Capital’s business and Anworth’s business successfully and realize the anticipated synergies and other expected benefits of the Merger on the anticipated timeframe or at all.
The Merger involves the combination of two companies that currently operate as independent public companies. The Combined Company expects to benefit from the elimination of duplicative costs associated with supporting a public company platform and operating the respective businesses, and the resulting economies of scale. The Combined Company will be required to devote significant management attention and resources to the integration of Ready Capital’s and Anworth’s businesses. The potential difficulties the Combined Company may encounter in the integration process include, but are not limited to, the following:

the inability to successfully combine Ready Capital’s and Anworth’s business in a manner that permits the Combined Company to achieve the cost savings anticipated to result from the Merger, which would result in the anticipated benefits of the Merger not being realized in the timeframe currently anticipated or at all;

the complexities of combining two companies with different histories and portfolio assets;

the difficulties or delays in redeploying the capital acquired in connection with the Merger into the target assets of the Combined Company;

potential unknown liabilities and unforeseen increased expenses, delays or conditions associated with the Merger; and

performance shortfalls as a result of the diversion of management’s attention caused by completing the Merger and integrating the companies’ operations.
For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the Combined Company’s management, the disruption of the Combined Company’s ongoing
 
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business or inconsistencies in its operations, services, standards, controls, policies and procedures, any of which could adversely affect the Combined Company’s ability to deliver investment returns to stockholders, to maintain relationships with its key stakeholders and employees, to achieve the anticipated benefits of the Merger, or could otherwise materially and adversely affect its business and financial results.
Following the Merger, the Combined Company may not pay dividends at or above the rate currently paid by Ready Capital or Anworth.
Following the Merger, the Combined Company’s stockholders may not receive dividends at the same rate that they did as Ready Capital stockholders or Anworth stockholders prior to the Merger for various reasons, including the following:

the Combined Company may not have enough cash to pay such dividends due to changes in its cash requirements, capital spending plans, cash flow or financial position, including related to the impact of the COVID-19 pandemic;

decisions on whether, when and in what amounts to make any future dividends will remain at all times entirely at the discretion of the Combined Company’s board of directors, which reserves the right to change its dividend practices at any time and for any reason; and

the amount of dividends that the Combined Company’s subsidiaries may distribute to the Combined Company may be subject to restrictions imposed by state law and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.
The Combined Company’s stockholders will have no contractual or other legal right to dividends that have not been authorized by its board of directors and declared by the Combined Company.
The Combined Company will have a significant amount of indebtedness and may need to incur more in the future.
The Combined Company will have substantial indebtedness following completion of the Merger. In addition, in connection with executing its business strategies following the Merger, the Combined Company expects to evaluate the possibility of investing in additional target assets and making other strategic investments, and it may elect to finance these endeavors by incurring additional indebtedness. The amount of such indebtedness could have material adverse consequences for the Combined Company, including:

hindering its ability to adjust to changing market, industry or economic conditions;

limiting its ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or to fund acquisitions or emerging businesses;

limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses;

making it more vulnerable to economic or industry downturns, including interest rate increases; and

placing it at a competitive disadvantage compared to less leveraged competitors.
Moreover, the Combined Company may be required to raise substantial additional capital to execute its business strategy. The Combined Company’s ability to arrange additional financing will depend on, among other factors, its financial position and performance, as well as prevailing market conditions and other factors beyond its control. If the Combined Company is unable to obtain additional financing, its credit ratings could be further adversely affected, which could further raise its borrowing costs and further limit its future access to capital and its ability to satisfy its obligations under its indebtedness.
The Combined Company is expected to incur substantial expenses related and unrelated to the Merger.
Ready Capital and Anworth have incurred substantial legal, accounting, financial advisory and other costs, and the management teams of Ready Capital and Anworth have devoted considerable time and effort in connection with the Merger. Ready Capital and Anworth may incur significant additional costs in connection with the completion of the Merger or in connection with any delay in completing the Merger or termination of the Merger Agreement, in addition to the other costs already incurred. If the Merger is not completed, Ready
 
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Capital and Anworth will separately bear certain fees and expenses associated with the Merger without realizing the benefits of the Merger. The fees and expenses may be significant and could have an adverse impact on the Combined Company’s results of operations.
Although Ready Capital and Anworth have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond the control of either Ready Capital or Anworth that could affect the total amount or the timing of the integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the transaction and integration expenses associated with the Merger could, particularly in the near term, exceed the savings that the Combined Company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses following the completion of the Merger.
The historical and unaudited pro forma condensed combined financial information included elsewhere in this joint proxy statement/prospectus may not be representative of the Combined Company’s results after the Merger, and accordingly, you have limited financial information on which to evaluate the Combined Company following the Merger.
The unaudited pro forma condensed combined financial information included elsewhere in this joint proxy statement/prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the Merger been completed as of the date indicated, nor is it indicative of the future operating results or financial position of the Combined Company following the Merger. The unaudited pro forma condensed combined financial information does not reflect future events that may occur after the Merger. The unaudited pro forma condensed combined financial information presented elsewhere in this joint proxy statement/prospectus is based in part on certain assumptions regarding the Merger that Ready Capital and Anworth believe are reasonable under the circumstances. Neither Ready Capital nor Anworth can assure you that the assumptions will prove to be accurate over time.
The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and to the businesses of Ready Capital and Anworth, and may have an adverse impact on the performance, financial condition and results of operations of the Combined Company.
The COVID-19 pandemic continues to adversely impact global economic activity and has contributed to significant volatility in financial markets. The restrictions that have been implemented by federal and local governments to mitigate the impact of the pandemic have and continue to adversely impact the U.S. and global economy. The impact on the economy and the various restrictions implemented by governments have created, and expect to continue to create, disruption in real estate financing transactions and the commercial real estate market and adversely impact a number of industries, including many small businesses throughout the United States. The outbreak has triggered a period of economic slowdown and experts are uncertain as to how long these conditions may last.
Although the federal and local governments have taken a number of actions to provide relief to the economy in response to the COVID-19 pandemic, there is no guarantee that such measures will provide sufficient relief to avoid continued adverse effects on the economy and the Combined Company’s business.
Ready Capital and Anworth’s ability to operate, their levels of business activity and the profitability of their respective businesses, as well as the values of, and the cash flows from, the assets they own have been impacted by the effects of COVID-19 and the Combined Company’s ability to operate, profitability and asset value could continue to be impacted by the effects of the COVID-19 pandemic. While Ready Capital and Anworth have implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19 pandemic and such measures may not adequately predict the impact on the Combined Company from such events.
General Tax Risks
The Combined Company may incur adverse tax consequences if it or Anworth has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
Each of Ready Capital and Anworth has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code and intends to continue to do so through the
 
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time of the closing of the Merger and, in the case of Ready Capital, after the Merger. Neither Ready Capital nor Anworth has requested or plans to request a ruling from the Internal Revenue Service, or the IRS, that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable regulations of the U.S. Department of the Treasury, which are referred to as Treasury regulations, that have been promulgated under the Code is greater in the case of a REIT that holds its assets through a partnership (which, consistent with the past practices of Ready Capital, the Combined Company will do after the Merger). The determination of various factual matters and circumstances not entirely within the control of Ready Capital and Anworth may affect its ability to qualify as a REIT. In order to qualify as a REIT, each of Ready Capital and Anworth must satisfy a number of requirements, including requirements regarding the ownership of its shares and the composition of its gross income and assets. Also, a REIT must distribute to stockholders annually dividends equal to at least 90% of its net taxable income, excluding any capital gains.
If either Ready Capital or Anworth has failed or fails to qualify as a REIT and the Merger is completed, the Combined Company may inherit significant tax liabilities and could fail to qualify as a REIT. If this were the case, the Combined Company would face serious tax consequences that could substantially reduce its cash available for distribution to its stockholders because:

the Combined Company could be precluded, pursuant to rules governing “successor REITs”, from qualifying as a REIT until the fifth taxable year following the year for which the REIT qualification originally terminated, and, in such circumstances, the Combined Company would be treated as a regular corporation taxable under subchapter C of the Code in the interim;

the Combined Company, as the successor by merger to Ready Capital and Anworth, would generally inherit any corporate income excise and other tax liabilities of Ready Capital and Anworth, including penalties and interest;

the Combined Company would be subject to tax on the built-in gain on each asset of Ready Capital or Anworth, as applicable, existing at the time of the Merger or at the time such company first qualified as a REIT; and

the Combined Company could be required to pay a special distribution and/or employ applicable deficiency dividend procedures (including penalties and interest payments to the IRS) to eliminate any earnings and profits accumulated by Ready Capital or Anworth, as applicable, for taxable periods during which it did not qualify as a REIT.
As a result of these factors, any failure by Ready Capital and Anworth to qualify as a REIT for any taxable year before the Merger or that includes the Merger could impair the Combined Company’s ability after the Merger to expand its business and raise capital, and could materially adversely affect the value of the Combined Company’s stock.
The contribution of the interest in Merger Sub to the Ready Capital Operating Partnership could fail to qualify as a transaction in which neither gain nor loss is recognized.
Immediately following the Merger, Ready Capital will contribute its interest in Merger Sub to the Ready Capital Operating Partnership in exchange for additional interests in the Ready Capital Operating Partnership. It is intended that no gain or loss will be recognized on this contribution for U.S. federal income tax purposes under Section 721 of the Code. Section 721(a) of the Code provides that a transferor will not recognize gain or loss upon the contribution of property to a partnership in exchange for an interest in such partnership. However, Section 721(b) of the Code provides that gain (but not loss) is recognized on property transfers to a partnership classified as an “investment company” which result in “diversification” of the transferors’ interests. This exception is designed to prevent tax-deferred diversification of a concentrated investment portfolio of securities. For purposes of the Section 721(b) rules, the Ready Capital Operating Partnership would likely be considered an investment company. However, Treasury Regulations applicable to Section 721(b) provide that a contribution to an investment company will not be treated as resulting in diversification as a result of a transfer of assets that, taken in the aggregate, constitute an insignificant portion of the total assets transferred. Ready Capital is expected to hold approximately 98.4% of the Ready Capital Operating Partnership immediately following the contribution, and as a result the contribution is expected to effectively achieve
 
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diversification with respect to less than 1.6% of the assets transferred. As a result, it is expected that this contribution to the Ready Capital Operating Partnership will not result in recognition of gain or loss for U.S. federal income tax purposes. Notwithstanding the foregoing, if the IRS were to successfully assert that Section 721(b) applied to the contribution, the Combined Company could recognize gain on the transfer, which could adversely impact the Combined Company’s qualification as a REIT.
Investment in the Combined Company’s stock has various tax risks.
This summary of certain tax risks is limited to the U.S. federal income tax risks addressed below. Additional risks or issues may exist that are not addressed in this joint proxy statement and that could affect the U.S. federal income tax treatment of the Combined Company, the Ready Capital Operating Partnership or the Combined Company’s stockholders.
The Combined Company’s failure to qualify as a REIT would subject it to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to the Combined Company’s stockholders.
The Combined Company intends to continue to be organized, and to operate in a manner that will allow it to qualify as a REIT for U.S. federal income tax purposes. The Combined Company does not intend to request a ruling from the IRS that the Combined Company qualifies as a REIT. The U.S. federal income tax laws governing REITs are complex, and judicial and administrative interpretations of the U.S. federal income tax laws governing REIT qualification are limited. The complexity of these provisions and of applicable Treasury Regulations is greater in the case of a REIT that, like the Combined Company, holds its assets through a partnership. To qualify as a REIT, the Combined Company must meet, on an ongoing basis, various tests regarding the nature of its assets and its income, the ownership of its outstanding shares, and the amount of its distributions. The Combined Company’s ability to satisfy the asset tests depends on its analysis of the characterization and fair market values of its assets, some of which are not susceptible to a precise determination, and for which the Combined Company may not obtain independent appraisals. Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for the Combined Company to qualify as a REIT. In addition, the Combined Company’s ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which the Combined Company has no control or only limited influence, including in cases where the Combined Company owns an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes. Furthermore, the Combined Company holds certain assets through its ownership interest in Ready Capital Subsidiary REIT I, LLC, which Ready Capital refers to as Ready Capital’s subsidiary REIT. The Combined Company’s ability to qualify as a REIT is dependent in part on the REIT qualification of Ready Capital’s subsidiary REIT, which is required to separately satisfy each of the REIT requirements in order to qualify as a REIT. Thus, while the Combined Company intends to operate so that it will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in the Combined Company’s circumstances, no assurance can be given that the Combined Company will so qualify for any particular year. These considerations also might restrict the types of assets that the Combined Company can acquire in the future.
If the Combined Company fails to qualify as a REIT in any taxable year, and does not qualify for certain statutory relief provisions, the Combined Company would be required to pay U.S. federal income tax on its taxable income, and distributions to its stockholders would not be deductible by the Combined Company in determining its taxable income. In such a case, the Combined Company might need to borrow money or sell assets in order to pay the Combined Company’s taxes. The Combined Company’s payment of income tax would decrease the amount of its income available for distribution to its stockholders. Furthermore, if the Combined Company fails to maintain its qualification as a REIT, the Combined Company no longer would be required to distribute substantially all of its net taxable income to its stockholders. In addition, unless the Combined Company were eligible for certain statutory relief provisions, the Combined Company could not re-elect to qualify as a REIT until the fifth calendar year following the year in which it failed to qualify.
On October 31, 2016, Ready Capital’s predecessor entity merged with and into a subsidiary of ZAIS Financial, with ZAIS Financial surviving the merger (the “ZAIS Merger”) and changing its name to Sutherland Asset Management Corporation, and subsequently changing its name again to Ready Capital
 
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Corporation. In addition, Ready Capital acquired Owens Realty Mortgage, Inc. (“ORM”) on March 29, 2019. If, prior to the ZAIS Merger, Ready Capital’s predecessor (“Pre-Merger Sutherland”) failed to qualify as a REIT, or if prior to Ready Capital’s acquisition of ORM, ORM failed to qualify as a REIT, Ready Capital could fail to qualify as a REIT as a result. Even if Ready Capital retained its REIT qualification, if Pre-Merger Sutherland failed to qualify as a REIT for any taxable year prior to the ZAIS Merger, or if ORM failed to qualify as a REIT prior to Ready Capital’s acquisition of ORM, Ready Capital would face serious tax consequences that could substantially reduce the cash available for distribution to Ready Capital stockholders because (i) Ready Capital, as successor to Pre-Merger Sutherland in the ZAIS Merger and as successor to ORM in the ORM acquisition, generally inherited any corporate income, excise and other tax liabilities of Pre-Merger Sutherland and ORM, respectively, including penalties and interest; (ii) Ready Capital would be subject to tax on the built-in gain on each asset of Pre-Merger Sutherland existing at the time of the ZAIS Merger or each asset of ORM at the time of the acquisition of ORM, as applicable; and (iii) Ready Capital could be required to employ applicable deficiency dividend procedures (which would include the payment of penalties and interest to the IRS) to eliminate any earnings and profits accumulated by Pre-Merger Sutherland or ORM for taxable periods that the relevant entity did not qualify as a REIT. As a result, any failure by Pre-Merger Sutherland or ORM to qualify as a REIT could impair the Combined Company’s ability to expand Ready Capital’s business and raise capital and could materially adversely affect the value of the Combined Company’s stock.
The percentage of the Combined Company’s assets represented by TRSs and the amount of the Combined Company’s income that it can receive in the form of TRS dividends and interest are subject to statutory limitations that could jeopardize the Combined Company’s REIT qualification and could limit its ability to acquire or force it to liquidate otherwise attractive investments.
A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. In order to treat a subsidiary of the REIT as a TRS, both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. In order to qualify as a REIT, no more than 20% of the value of Ready Capital’s gross assets at the end of each calendar quarter may consist of securities of one or more TRSs. A significant portion of Ready Capital’s activities are conducted through TRSs, and Ready Capital expects that such TRSs will from time to time hold significant assets.
Ready Capital has elected, together with certain of its subsidiaries, for each such entity to be treated as a TRS, and Ready Capital may make TRS elections with respect to certain other entities it may form in the future. While the Combined Company intends to manage its affairs so as to satisfy the TRS limitation, there can be no assurance that it will be able to do so in all market circumstances.
In order to satisfy the TRS limitation, Ready Capital has been required to and may in the future be required to acquire assets that it otherwise would not acquire, liquidate or restructure assets that are held through its TRSs, or otherwise engage in transactions that Ready Capital would not otherwise undertake absent the requirements for REIT qualifications. Each of these actions could reduce the distributions available to the Combined Company’s stockholders. In addition, Ready Capital and its subsidiary REIT have made loans to their TRSs that have met the requirements to be treated as qualifying investments of new capital, which is generally treated as a real estate asset under the Code. Because such loans have been treated as real estate assets for purposes of the REIT requirements, Ready Capital has not treated these loans as TRS securities for purposes of the TRS asset limitation, which is consistent with private letter rulings by the IRS. However, no assurance can be provided that the IRS will not successfully assert that such loans should be treated as securities of Ready Capital’s TRSs or its subsidiary REIT’s TRSs, which could adversely impact Ready Capital’s qualification as a REIT. In addition, Ready Capital’s TRSs have obtained financing in transactions in which Ready Capital and its other subsidiaries have provided guaranties and similar credit support. Although Ready Capital believes that these financings are properly treated as financings of its TRSs for U.S. federal income tax purposes, no assurance can be provided that the IRS would not assert that such financings should be treated as issued by other entities in Ready Capital’s structure, which could impact Ready Capital’s compliance with the TRS limitation and the other REIT requirements. Moreover, no assurance can be provided that the Combined Company will be able to successfully manage its asset composition in a manner that causes it to satisfy the TRS limitation each quarter, and Ready Capital’s failure to satisfy this limitation could result in its failure to qualify as a REIT.
 
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Any distributions the Combined Company receives from a TRS are classified as dividend income to the extent of the earnings and profits of the distributing corporation. Any of the Combined Company’s TRSs may from time to time need to make such distributions in order to keep the value of the Combined Company’s TRSs below 20% of its total assets. However, TRS dividends will generally not constitute qualifying income for purposes of one of the tests the Combined Company must satisfy to qualify as a REIT, namely, that at least 75% of its gross income must in each taxable year generally be from real estate assets. While the Combined Company will continue to monitor its compliance with both this income test and the limitation on the percentage of its assets represented by securities of Ready Capital’s TRSs, and intends to conduct its affairs so as to comply with both, the two may at times be in conflict with one another. As an example, it is possible that the Combined Company may wish to distribute a dividend from a TRS in order to reduce the value of its TRSs below the required threshold of its assets, but be unable to do so without violating the requirement that 75% of the Combined Company’s gross income in the taxable year be derived from real estate assets. Although there are other measures the Combined Company can take in such circumstances in order to remain in compliance, there can be no assurance that the Combined Company will be able to comply with both of these tests in all market conditions.
Complying with REIT requirements may force the Combined Company to liquidate or forego otherwise attractive investments, which could reduce returns on the Combined Company’s assets and adversely affect returns to the Combined Company’s stockholders.
To qualify as a REIT, the Combined Company must generally ensure that at least 75% of its gross income for each taxable year, excluding certain amounts, is derived from certain real property-related sources, and at least 95% of its gross income for each taxable year, excluding certain amounts, is derived from certain real property-related sources and passive income such as dividends and interest. In addition, the Combined Company generally must ensure that at the end of each calendar quarter at least 75% of the value of its total assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and RMBS. The remainder of the Combined Company’s investment in securities (other than government securities and qualifying real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of the Combined Company’s assets (other than government securities and qualifying real estate assets) can consist of the securities of any one issuer, no more than 20% of the value of the Combined Company’s total assets can be represented by stock and securities of one or more TRSs and no more than 25% of the value of the Combined Company’s assets may consist of “nonqualified publicly offered REIT debt instruments.” If the Combined Company fails to comply with these requirements at the end of any calendar quarter, the Combined Company must correct the failure within 30 days after the end of such calendar quarter or qualify for certain statutory relief provisions to avoid losing its REIT qualification and suffering adverse tax consequences. As a result, the Combined Company may be required to liquidate from its portfolio otherwise attractive investments. These actions could have the effect of reducing the Combined Company’s income and amounts available for distribution to its stockholders. In addition, if the Combined Company is compelled to liquidate its investments to repay obligations to its lenders, the Combined Company may be unable to comply with these requirements, ultimately jeopardizing its qualification as a REIT. The REIT requirements described above may also restrict the Combined Company’s ability to sell REIT-qualifying assets, including asset sales made in connection with a disposition of certain segments of the Combined Company’s business or in connection with a liquidation of the Combined Company, without adversely impacting the Combined Company’s qualifications as a REIT. Furthermore, the Combined Company may be required to make distributions to stockholders at disadvantageous times or when it does not have funds readily available for distribution, and may be unable to pursue investments that would be otherwise advantageous to the Combined Company in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT. In addition, certain of the assets that the Combined Company holds or intends to hold, including unsecured loans, loans secured by both real property and personal property where the fair market value of the personal property exceeds 15% of the total fair market value of all of the property securing the loan, and interests in ABS secured by assets other than real property or mortgages on real property or on interests in real property, are not qualified and will not be qualified real estate assets for purposes of the REIT asset tests. Accordingly, the Combined Company’s ability to invest in such assets will be limited, and its investment in such assets could cause it to fail to qualify as a REIT if its holdings in such assets do not satisfy such limitations.
 
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Distributions from the Combined Company or gain on the sale of its common stock may be treated as unrelated business taxable income, or UBTI, to U.S. tax-exempt holders of common stock.
If (i) all or a portion of the Combined Company’s assets are subject to the rules relating to taxable mortgage pools, (ii) a tax-exempt U.S. person has incurred debt to purchase or hold the Combined Company’s stock, (iii) the Combined Company purchases real estate mortgage investment conduit (“REMIC”), residual interests that generate “excess inclusion income,” or (iv) the Combined Company is a “pension held REIT,” then a portion of the distributions with respect to its common stock and, in the case of a U.S. person described in (ii), gains realized on the sale of such common stock by such U.S. person, may be subject to U.S. federal income tax as UBTI under the Code. The Combined Company has engaged in certain securitization transactions that are treated as taxable mortgage pools for U.S. federal income tax purposes. Although the Combined Company believes that such transactions are structured in a manner so that they should not cause any portion of the distributions in the Combined Company’s shares to be treated as excess inclusion income, no assurance can be provided that the IRS would not assert a contrary position.
The REIT distribution requirements could adversely affect the Combined Company’s ability to execute its business plan and may require it to incur debt, sell assets or take other actions to make such distributions.
To qualify as a REIT, the Combined Company must distribute to its stockholders each calendar year dividends equal to at least 90% of its REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. To the extent that the Combined Company satisfies the 90% distribution requirement, but distributes less than 100% of its taxable income, the Combined Company will be subject to U.S. federal corporate income tax on its undistributed income. In addition, the Combined Company will incur a 4% nondeductible excise tax on the amount, if any, by which the Combined Company’s distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. The Combined Company’s current policy is to pay distributions which will allow the Combined Company to satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income tax on its undistributed income.
The Combined Company’s taxable income may substantially exceed its net income as determined based on U.S. GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur. For example, it is likely that the Combined Company will acquire assets, including MBS requiring it to accrue original issue discount (“OID”) or recognize market discount income, that generate taxable income in excess of economic income or in advance of the corresponding cash flow from the assets. Under the 2017 tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”), the Combined Company generally will be required to recognize certain amounts in income no later than the time such amounts are reflected on its financial statements. The application of this rule may require the accrual of income with respect to the Combined Company loans earlier than would be the case under the otherwise applicable tax rules. Although the precise application of this rule is not entirely clear, proposed Treasury Regulations, which are not yet in effect but upon which taxpayers may rely, generally would exclude, among other items, OID and market discount income from the applicability of this rule. Also, in certain circumstances the Combined Company’s ability to deduct interest expenses for U.S. federal income tax purposes may be limited. The Combined Company may also acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury Regulations, the modified debt may be considered to have been reissued to the Combined Company at a gain in a debt-for-debt exchange with the borrower, with gain recognized by Ready Capital to the extent that the principal amount of the modified debt exceeds the Combined Company’s cost of purchasing it prior to modification. Finally, the Combined Company may be required under the terms of the indebtedness that it incurs to use cash received from interest payments to make principal payments on that indebtedness, with the effect that the Combined Company will recognize income but will not have a corresponding amount of cash available for distribution to its stockholders.
As a result of the foregoing, the Combined Company may generate less cash flow than taxable income in a particular year and find it difficult or impossible to meet the REIT distribution requirements in certain circumstances. In such circumstances, the Combined Company may be required to (i) sell assets in adverse market conditions, (ii) borrow on unfavorable terms, (iii) distribute amounts that would otherwise be used for future investment or used to repay debt, or (iv) make a taxable distribution of shares of common stock as part
 
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of a distribution in which stockholders may elect to receive shares of common stock or (subject to a limit measured as a percentage of the total distribution) cash, in order to comply with the REIT distribution requirements. Thus, compliance with the REIT distribution requirements may hinder the Combined Company’s ability to grow, which could adversely affect the value of its common stock.
The Combined Company may be required to report taxable income with respect to certain of the Combined Company’s investments in excess of the economic income the Combined Company ultimately realizes from them.
The Combined Company may acquire mortgage loans, RMBS or other debt instruments in the secondary market for less than their face amount. The discount at which such securities are acquired may reflect doubts about their ultimate collectability rather than current market interest rates. The amount of such discount will nevertheless generally be treated as “market discount” for U.S. federal income tax purposes. Market discount generally accrues on the basis of the constant yield to maturity of the debt instrument based generally on the assumption that all future payments on the debt instrument will be made. Accrued market discount is reported as income when, and to the extent that, any payment of principal of the debt instrument is made. In particular, payments on mortgage loans are ordinarily made monthly, and consequently accrued market discount may have to be included in income each month as if the debt instrument were assured of ultimately being collected in full. If the Combined Company collects less on a debt instrument than the Combined Company’s purchase price plus the market discount the Combined Company had previously reported as income, the Combined Company may not be able to benefit from any offsetting loss deduction in a subsequent taxable year. In addition, the Combined Company may acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under applicable Treasury regulations, the modified debt may be considered to have been reissued to the Combined Company at a gain in a debt-for-debt exchange with the borrower. In that event, the Combined Company may be required to recognize taxable gain to the extent the principal amount of the modified debt exceeds the Combined Company’s adjusted tax basis in the unmodified debt, even if the value of the debt or the payment expectations have not changed.
Similarly, some of the RMBS that the Combined Company purchases will likely have been issued with OID. The Combined Company will generally be required to report such OID based on a constant yield method and income will accrue based on the assumption that all future projected payments due on such MBS will be made. If such MBS turn out not to be fully collectible, an offsetting loss deduction will become available only in the later year in which uncollectability is provable. Finally, in the event that any mortgage loans, RMBS or other debt instruments acquired by the Combined Company are delinquent as to mandatory principal and interest payments, or in the event a borrower with respect to a particular debt instrument acquired by the Combined Company encounters financial difficulty rendering it unable to pay stated interest as due, the Combined Company may nonetheless be required to continue to recognize the unpaid interest as taxable income as it accrues, despite doubt as to its ultimate collectability. Similarly, the Combined Company may be required to accrue interest income with respect to subordinate RMBS at their stated rate regardless of whether corresponding cash payments are received or are ultimately collectible. In each case, while the Combined Company would in general ultimately have an offsetting loss deduction available to it when such interest was determined to be uncollectable, the loss would likely be treated as a capital loss, and the utility of that loss would therefore depend on the Combined Company’s having capital gain in that later year or thereafter.
The Combined Company may hold excess mortgage servicing rights (“MSRs”), which means the portion of an MSR that exceeds the arm’s-length fee for services performed by the mortgage servicer. Based on IRS guidance concerning the classification of MSRs, the Combined Company intends to treat any excess MSRs the Combined Company acquires as ownership interests in the interest payments made on the underlying mortgage loans, akin to an “interest only” strip. Under this treatment, for purposes of determining the amount and timing of taxable income, each excess MSR is treated as a bond that was issued with OID on the date the Combined Company acquired such excess MSR. In general, the Combined Company will be required to accrue OID based on the constant yield to maturity of each excess MSR, and to treat such OID as taxable income in accordance with the applicable U.S. federal income tax rules. The constant yield of an excess MSR will be determined, and the Combined Company will be taxed, based on a prepayment assumption regarding future payments due on the mortgage loans underlying the excess MSR. If the mortgage loans underlying an excess MSR prepay at a rate different than that under the prepayment assumption, the Combined Company’s recognition of OID will be either increased or decreased depending on the circumstances. Thus, in a particular
 
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taxable year, the Combined Company may be required to accrue an amount of income in respect of an excess MSR that exceeds the amount of cash collected in respect of that excess MSR. Furthermore, it is possible that, over the life of the investment in an excess MSR, the total amount the Combined Company pays for, and accrues with respect to, the excess MSR may exceed the total amount the Combined Company collects on such excess MSR. No assurance can be given that the Combined Company will be entitled to a deduction for such excess, meaning that the Combined Company may be required to recognize phantom income over the life of an excess MSR.
The interest apportionment rules may affect the Combined Company’s ability to comply with the REIT asset and gross income tests.
The interest apportionment rules under Treasury Regulation Section 1.856-5(c) provide that, if a mortgage is secured by both real property and other property, a REIT is required to apportion its annual interest income to the real property security based on a fraction, the numerator of which is the value of the real property securing the loan, determined when the REIT commits to acquire the loan, and the denominator of which is the highest “principal amount” of the loan during the year. If a mortgage is secured by both real property and personal property and the value of the personal property does not exceed 15% of the aggregate value of the property securing the mortgage, the mortgage is treated as secured solely by real property for this purpose. IRS Revenue Procedure 2014-51 interprets the “principal amount” of the loan to be the face amount of the loan, despite the Code’s requirement that taxpayers treat any market discount, which is the difference between the purchase price of the loan and its face amount, for all purposes (other than certain withholding and information reporting purposes) as interest rather than principal.
To the extent the face amount of any loan that the Combined Company holds that is secured by both real property and other property exceeds the value of the real property securing such loan, the interest apportionment rules described above may apply to certain of the Combined Company’s loan assets unless the loan is secured solely by real property and personal property and the value of the personal property does not exceed 15% of the value of the property securing the loan. Thus, depending upon the value of the real property securing the Combined Company’s mortgage loans and their face amount, and the other sources of the Combined Company’s gross income generally, the Combined Company may fail to meet the 75% gross income test. In addition, although the Combined Company will endeavor to accurately determine the values of the real property securing its loans at the time it acquires or commits to acquire such loans, such values may not be susceptible to a precise determination and will be determined based on the information available to the Combined Company at such time. If the IRS were to successfully challenge the Combined Company’s valuations of such assets and such revaluations resulted in a higher portion of the Combined Company’s interest income being apportioned to property other than real property, the Combined Company could fail to meet the 75% gross income test. If the Combined Company does not meet this test, it could potentially lose its REIT qualification or be required to pay a penalty tax to the IRS. Furthermore, prior to 2016, the apportionment rules described above applied to any debt instrument that was secured by real and personal property if the principal amount of the loan exceeded the value of the real property securing the loan. As a result, prior to 2016, these apportionment rules applied to mortgage loans held by Ready Capital, its predecessors and Anworth, even if the personal property securing the loan did not exceed 15% of the total property securing the loan. Ready Capital, its predecessor and Anworth have held significant mortgage loans secured by both real property and personal property. If the IRS were to successfully challenge the application of these rules to either Ready Capital, its predecessor, or Anworth, such company could fail to meet the 75% gross income test and potentially lose its REIT qualification or be required to pay a penalty tax to the IRS.
In addition, the Code provides that a regular or a residual interest in a REMIC is generally treated as a real estate asset for the purposes of the REIT asset tests, and any amount includible in the Combined Company’s gross income with respect to such an interest is generally treated as interest on an obligation secured by a mortgage on real property for the purposes of the REIT gross income tests. If, however, less than 95% of the assets of a REMIC in which the Combined Company holds an interest consist of real estate assets (determined as if the Combined Company held such assets), the Combined Company will be treated as holding its proportionate share of the assets of the REMIC for the purpose of the REIT asset tests and receiving directly its proportionate share of the income of the REMIC for the purpose of determining the amount of income from the REMIC that is treated as interest on an obligation secured by a mortgage on real property. In connection with the expanded Home Affordable Refinance Program (“HARP”), a federal program which
 
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helps borrowers seeking to refinance their mortgages who may not otherwise qualify for refinancing, either because the value of their homes have declined or because they cannot obtain mortgage insurance, the IRS issued guidance providing that, among other things, if a REIT holds a regular interest in an “eligible REMIC,” or a residual interest in an “eligible REMIC” that informs the REIT that at least 80% of the REMIC’s assets constitute real estate assets, then (i) the REIT may treat 80% of the value of the interest in the REMIC as a real estate asset for the purpose of the REIT asset tests and (ii) the REIT may treat 80% of the gross income received with respect to the interest in the REMIC as interest on an obligation secured by a mortgage on real property for the purpose of the 75% gross income test. For this purpose, a REMIC is an “eligible REMIC” if (i) the REMIC has received a guarantee from Fannie Mae or Freddie Mac that will allow the REMIC to make any principal and interest payments on its regular and residual interests and (ii) all of the REMIC’s mortgages and pass-through certificates are secured by interests in single-family dwellings. If the Combined Company were to acquire an interest in an eligible REMIC less than 95% of the assets of which constitute real estate assets, the IRS guidance described above may generally allow the Combined Company to treat 80% of its interest in such a REMIC as a qualifying real estate asset for the purpose of the REIT asset tests and 80% of the gross income derived from the interest as qualifying income for the purpose of the 75% gross income test. Although the portion of the income from such a REMIC interest that does not qualify for the 75% gross income test would likely be qualifying income for the purpose of the 95% gross income test, the remaining 20% of the REMIC interest generally would not qualify as a real estate asset, which could adversely affect the Combined Company’s ability to satisfy the REIT asset tests. Accordingly, owning such a REMIC interest could adversely affect the Combined Company’s ability to qualify as a REIT.
The Combined Company’s ownership of and relationship with any TRS which the Combined Company may form or acquire will be limited, and a failure to comply with the limits would jeopardize the Combined Company’s REIT qualification and the Combined Company’s transactions with its TRSs may result in the application of a 100% excise tax if such transactions are not conducted on arm’s-length terms.