Veteran Pine River Investment Team with Proven Track Record Well
Positioned to Capitalize on Unprecedented Dislocation in RMBS
Market NEW YORK, June 11 /PRNewswire-FirstCall/ -- Capitol
Acquisition Corp. ("Capitol") (NYSE Amex: CLA), a public investment
vehicle, Pine River Capital Management L.P., a multi-strategy asset
management firm with over $800 million in assets under management,
and Two Harbors Investment Corp. ("Two Harbors"), a newly organized
real estate investment trust (REIT), announced today that they have
signed an agreement and plan of merger pursuant to which Capitol
will be acquired by Two Harbors. Two Harbors intends to focus on
residential mortgage backed securities and will be externally
managed by PRCM Advisers LLC ("PRCM"), a subsidiary of Pine River
Capital Management L.P. ("Pine River"). The transaction is expected
to be completed by the end of the third quarter of 2009, pending
approval by Capitol's stockholders and warrant holders and subject
to certain closing conditions, including the amendment of Capitol's
charter to remove certain provisions customarily contained in the
charters of special purpose acquisition companies, in order to
permit the merger. "We believe Two Harbors represents a compelling
opportunity for investors to capitalize on historically
unprecedented values in the $11 trillion U.S. mortgage market,"
said Mark Ein, Chairman and Chief Executive Officer of Capitol who
will become Vice Chairman of Two Harbors upon completion of the
transaction. "We are excited to partner with Pine River and their
veteran team with a proven track record of investing in residential
mortgage backed securities. We believe that Two Harbors, as a newly
formed REIT, created at or near book value with no legacy assets,
will be well positioned to generate attractive risk-adjusted
returns," added Mr. Ein. Two Harbors intends to pursue a relative
value strategy targeting all subsets of the RMBS market. This
strategy seeks to capture inefficiencies created by the current
dislocations in non-Agency and Agency securities, and longer-term
opportunities in residential mortgage assets. Under the terms of
the merger agreement, the common stock of Capitol issued through
Capitol's November 2007 initial public offering will convert on a
share-for-share basis into 100% of the common stock of Two Harbors.
Capitol's founders will retire 100% of their pre-IPO founders'
shares. As a condition of the transaction, Capitol's warrant
holders will be asked to amend the strike price of their warrants
to $11.00 per share in exchange for extending the warrant
expiration by one year to November 7, 2013. "We are delighted to
partner with the Capitol team to create an efficient public vehicle
for investors to access the RMBS market," said Brian Taylor,
Founder and Chief Executive Officer of Pine River who will serve as
Chairman of Two Harbors upon completion of the transaction.
"Together with Capitol's team of accomplished investors and
executives, we look forward to offering Pine River's expertise in
portfolio management and mortgage backed securities to a new group
of investors," added Mr. Taylor. RMBS Investment Veterans Named
Co-CIOs Two Harbors' investment team will be led by Co-Chief
Investment Officers Steve Kuhn and Bill Roth. Mr. Kuhn joined Pine
River from Goldman Sachs Asset Management in January 2008. He has
over 16 years of experience investing in and trading mortgage
backed, asset backed and related securities at Goldman Sachs,
Citadel and Cargill. Mr. Roth will join Pine River effective June
16, 2009 after having worked at Citigroup Global Markets Inc. since
1981, most recently as a Managing Director in the firm's
proprietary trading group managing mortgage backed and asset backed
securities portfolios. High Quality Infrastructure and Oversight
Two Harbors will be externally-managed by PRCM, a wholly-owned
subsidiary of Pine River. Pine River is a leading independent
global alternative investment advisor with over $800 million in
assets under management, 54 employees, 19 investment professionals
and six partners, with an average of 18 years experience in the
alternative investment management industry. Pine River has
regulatory registrations in five nations and operates from offices
in New York, London, Hong Kong, San Francisco and Minnesota. Under
a management agreement between PRCM and Two Harbors, PRCM will earn
an annual management fee of 1.5% of shareholders' equity, but will
not charge any additional performance fees. The management of Two
Harbors will be led by Chief Executive Officer Tom Siering, who
joined Pine River as a Partner in 2006 from EBF & Associates
where he was head of the Value Investment Group. Jeff Stolt, a Pine
River Partner and Chief Financial Officer, will serve as Two
Harbors' Chief Financial Officer. The Board will be led by Messrs.
Taylor and Ein. Prior to Founding Pine River in 2002, Mr. Taylor
was Partner and head of the convertible arbitrage group at EBF
& Associates, a Minnesota based private investment firm. Mr.
Ein has a long track record of building successful growth
businesses. Prior to founding and serving as CEO of Capitol, he
established Venturehouse Group, LLC, a technology holding company
that spawned and grew several notable portfolio companies. Mr. Ein
was also a Principal with The Carlyle Group and worked at Brentwood
Associates and in the CMBS business at Goldman Sachs. They will be
joined by Mr. Siering and four independent directors to be named
later. Credit Suisse Securities (USA) LLC is serving as financial
advisor to Pine River. Clifford Chance US LLP is advising Pine
River and Graubard Miller and Latham & Watkins LLP are advising
Capitol. Other Merger Agreement Terms Upon completion of the
merger, the approximately $260 million currently held in trust by
Capitol, less expenses and any amounts released to Capitol's common
stockholders electing their right to conversion or used by Capitol
to purchase shares in forward sales or other transactions, will be
used by Two Harbors for the purposes of investing in residential
mortgage backed securities. The merger is conditioned upon a
minimum amount of proceeds remaining after expenses and completion
of such conversions or forward sales. Under a sub-management
agreement between PRCM, Pine River and CLA Founders LLC, an
affiliate of the founders of Capitol, CLA Founders LLC will receive
a portion of the management fees paid to PRCM in exchange for
providing services in support of PRCM's performance under its
management agreement with Two Harbors. Conference Call Information
Capitol and Pine River will host a conference call at 11:30am
Eastern Time today (June 11, 2009) to discuss the proposed merger
of Two Harbors and Capitol. The call will be open to the public and
can be accessed by dialing 877-941-2332 (callers within the U.S.)
or 480-629-9726 (callers outside the U.S.). The number should be
dialed at least 10 minutes prior to the start of the call. The
passcode for the call will be 4094795. The slides complementary to
the presentation will be available prior to the call on the web
site of the SEC at http://www.sec.gov/ as part of Capitol's 8-K
filing today and on the Investor Relations page of Capitol's
website, http://www.capitolacquisition.com/. Capitol Acquisition
Corp. Capitol Acquisition Corp. is a Washington D.C. special
purpose acquisition company formed for the purpose of acquiring
through a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one
or more operating businesses or assets. Its efforts in identifying
a prospective target business are not limited to a particular
industry. Founded by Mark D. Ein, Capitol has an experienced team
of Directors and Advisors with complementary backgrounds and a
history of success as investors, entrepreneurs, executives and
advisors. Capitol priced its initial public offering ("IPO") of
26,249,000 units on November 8, 2007, including the underwriters'
over-allotment option, generating $258.9 million in net proceeds.
As of March 31, 2009, Capitol held approximately $259.1 million in
a trust account maintained by an independent trustee, which will be
released upon the consummation of the business combination.
Additional information is available at
http://www.capitolacquisition.com/. Two Harbors Investment Corp.
Two Harbors is a newly-formed REIT focused on investing in,
financing and managing residential mortgage backed securities. Two
Harbors was formed solely to complete the business combination with
Capitol and has no material assets or liabilities. Two Harbors will
be externally managed and advised by PRCM Advisers, a wholly-owned
subsidiary of Pine River. Pine River Capital Management L.P. Pine
River is a leading independent global alternative asset management
firm, registered as an investment adviser under the Investment
Advisers Act of 1940. Founded in 2002, with offices in Hong Kong,
London, New York, and San Francisco, and headquartered in
Minnetonka, Minnesota, Pine River manages approximately $800
million in assets across five hedge fund strategies. The firm's six
partners have worked together an average of 14 years and have an
average of 18 years investment experience. The firm maintains
registrations with the SEC and NFA in the United States, the FSA in
the United Kingdom, the SFC in Hong Kong, the SEBI in India, and
the TSEC in Taiwan. Forward-Looking Statements This press release
includes "forward-looking statements" within the meaning of the
safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. Two Harbors' actual results may
differ from its expectations, estimates and projections and,
consequently, you should not rely on these forward-looking
statements as predictions of future events. Words such as "expect,"
"estimate," "project," "budget," "forecast," "anticipate,"
"intend," "plan," "may," "will," "could," "should," "believes,"
"predicts," "potential," "continue," and similar expressions are
intended to identify such forward-looking statements. These
forward-looking statements include, without limitation, Capitol's
and Two Harbors' expectations with respect to future performance,
anticipated financial impacts of the merger and related
transactions; approval of the merger and related transactions by
shareholders; the satisfaction of the closing conditions to the
merger and related transactions; and the timing of the completion
of the merger and related transactions. These forward-looking
statements involve significant risks and uncertainties that could
cause the actual results to differ materially from the expected
results. Most of these factors are outside our control and
difficult to predict. Factors that may cause such differences
include, but are not limited to, the possibility that the expected
growth will not be realized, or will not be realized within the
expected time period, due to, among other things, (1) the REIT
environment; (2) changes in the commercial finance and the real
estate markets; (3) general economic conditions; (4) legislative
and regulatory changes (including changes to laws governing the
taxation of REITs). Other factors include the possibility that the
merger does not close, including due to the failure to receive
required stockholder approvals, or the failure of other closing
conditions. Capitol and Two Harbors caution that the foregoing list
of factors is not exclusive. Additional information concerning
these and other risk factors is contained in Capitol's most recent
filings with the Securities and Exchange Commission ("SEC"). All
subsequent written and oral forward-looking statements concerning
Capitol and Two Harbors, the merger, the related transactions or
other matters and attributable to Capitol and Two Harbors or any
person acting on their behalf are expressly qualified in their
entirety by the cautionary statements above. Capitol and Two
Harbors caution readers not to place undue reliance upon any
forward-looking statements, which speak only as of the date made.
Capitol and Two Harbors do not undertake or accept any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statement to reflect any change in their
expectations or any change in events, conditions or circumstances
on which any such statement is based. Additional Information
Capitol intends to file a proxy statement, and Two Harbors intends
to file a registration statement, with the SEC, in each case, that
will contain a preliminary proxy statement/prospectus in connection
with the proposed transaction and to mail a definitive proxy
statement/prospectus and other relevant documents to Capitol
stockholders and warrant holders. As part of the proposed
transaction, Capitol's officers, directors and affiliates will be
providing certain services to PRCM after the transaction and will
receive a percentage of the management fees to be paid by Two
Harbors. Stockholders and warrant holders of Capitol and other
interested persons are advised to read, when available, the
preliminary proxy statement/prospectus, and amendments thereto, and
definitive proxy statement and prospectus in connection with
solicitation of proxies for the special meetings of Capitol's
stockholders and Capitol's warrant holders to be held to approve
the transaction because these proxy statements/prospectuses will
contain important information about Capitol, Two Harbors and the
proposed transactions. Such Persons can also read Capitol's final
prospectus from its initial public offering dated November 8, 2007,
its annual report on form 10-K for the fiscal year ended December
31, 2008, which was filed with the SEC on March 16, 2009 ("Annual
Report") and other reports as filed with the SEC, for a description
of the security holdings of Capitol's officers and directors and
their affiliates and their other respective interests in the
successful consummation of the proposed transaction. The definitive
proxy statement/prospectus will be mailed to stockholders and
warrant holders as of a record date to be established for voting on
the merger. Stockholders and warrant holders will also be able to
obtain a copy of the preliminary and definitive proxy
statements/prospectuses, without charge, once available, at the
SEC's Internet site at http://www.sec.gov/ or by directing a
request to: Capitol Acquisition Corp., 509 7th Street, NW,
Washington, DC 20004, telephone (202) 654-7060. Participation in
Solicitation Capitol, Two Harbors, PRCM and their respective
directors, executive officers, affiliates and other persons may be
deemed to be participants in the solicitation of proxies for the
special meetings of Capitol's stockholders and Capitol's warrant
holders to approve the proposed transaction. A list of the names of
those directors and officers and descriptions of their interests in
Capitol is contained in Capitol's Annual Report. Capitol's
stockholders may also obtain additional information about the
interests of its directors and officers in the transactions by
reading the preliminary proxy statement/prospectus and other
relevant materials to be filed by Capitol and Two Harbors with the
SEC when they become available. Information regarding Two Harbors'
directors and executive officers and other potential participants
will be contained in Capitol's preliminary proxy
statement/prospectus and other relevant materials to be filed by
Capitol and Two Harbors with the SEC when they become available.
Disclaimer This press release is not a proxy statement or
solicitation of a proxy, consent or authorization with respect to
any securities or in respect of the proposed transaction and shall
not constitute an offer to sell or a solicitation of an offer to
buy the securities of Capitol or Two Harbors, nor shall there be
any sale of any such securities in any state or jurisdiction in
which such offer, solicitation, or sale would be unlawful prior to
registration or qualification under the securities laws of such
state or jurisdiction. DATASOURCE: Capitol Acquisition Corp.
CONTACT: Media: Chuck Dohrenwend or Pen Pendleton, The Abernathy
MacGregor Group, +1-212-371-5999; Investors: Andrew Garcia, Vice
President, Business Development, Two Harbors Investment Corp.,
+1-612-238-3307, or Mark Ein, Chief Executive Officer, Capitol
Acquisition Corp., +1-202-654-7001 Web Site:
http://www.capitolacquisition.com/
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