Angel Oak Mortgage REIT's 9.75% Notes: A Bulletproof Yield Play in a Rising Rate World

Investors seeking steady income in a high-rate environment need look no further than Angel Oak Mortgage REIT’s (AOMR) new 9.75% Senior Notes due 2030. This offering isn’t just a high-yield bond—it’s a strategic masterstroke to capitalize on mortgage market inefficiencies, backed by a 4.97 current ratio, 30% revenue growth, and a partnership with Brookfield Asset Management. Let me break down why this is a must-own security for income hunters.

The Yield: 9.75% in a World of Scarcity

At a time when the 10-year Treasury yields around 4.5%, a 9.75% yield on a senior unsecured note is a rare opportunity. These notes are fully guaranteed by Angel Oak’s operating partnership, offering stability even as rates climb. The semi-annual interest payments—first due in September 2025—lock in income that’s three times the S&P 500’s dividend yield, making this a no-brainer for retirees or income-focused portfolios.

The Play: Non-QM Loans—The Sweet Spot in Mortgage Credit

The magic here isn’t just the yield—it’s where the money goes. Proceeds will fund non-qualified mortgage (non-QM) loans, a niche segment of residential mortgages that banks avoid due to stricter underwriting. These loans target borrowers with strong credit (average score: 751) but unconventional income streams, like gig workers or small business owners. Angel Oak’s proprietary lending platform has already deployed $259 million in Q1 2025, with loans carrying a 7.67% average coupon—a 300 basis point cushion over the notes’ yield.

This structure creates a virtuous cycle: the notes fund loans with higher yields, generating excess cash to cover interest and dividends. And with $690 million in undrawn credit lines, the company can scale this strategy without over-leveraging.

The Safety: Liquidity That’s Off the Charts

Angel Oak’s 4.97 current ratio (current assets / short-term liabilities) is a firewall against volatility. To put that in perspective: most REITs consider a ratio above 1.0 healthy. AOMR’s liquidity isn’t just strong—it’s bulletproof, thanks to:
- A $2.5 billion asset portfolio, with $439 million in whole loans at fair value.
- A 1.3x recourse debt-to-equity ratio after recent securitizations, down from 2.3x in Q1.
- A $24.7 million cash injection from its April 2025 securitization, which also reduced debt by $242 million.

This liquidity isn’t just a buffer—it’s fuel for growth. The company’s 30% year-over-year revenue surge to $32.9 million proves it’s executing flawlessly.

The Catalyst: Brookfield’s Muscle

Angel Oak’s partnership with Brookfield Asset Management isn’t just a buzzword—it’s a game-changer. Brookfield’s $570 billion real estate portfolio gives AOMR access to scale, capital, and deal flow in non-QM lending. Think of it as a Trojan Horse into sectors like multifamily housing or commercial mortgages, where demand is soaring.

The Risk? Minimal, Given the Math

Skeptics will cite interest rate risk, but here’s why it’s overblown:
- Duration management: The notes mature in 2030, but the non-QM loans they fund have shorter terms (typically 5-7 years), creating reinvestment opportunities as rates stabilize.
- Prepayment protection: Non-QM borrowers are less likely to refinance in a high-rate environment, locking in those 7.67% coupons.
- Diversification: AOMR’s loan portfolio has a 70% LTV average, with borrowers spread across 35 states—no concentration in volatile markets.

The Bottom Line: Buy Now, Lock In Later

This isn’t just a bond—it’s a strategic call option on mortgage credit. With $40 million of notes priced on May 14 and an oversubscription option of $6 million, this is a limited-time opportunity.

Action Plan:
1. Buy the notes (AOMD) on the NYSE before their June 1, 2030, maturity—aiming for a 9.75% yield to maturity.
2. Hold for income: The quarterly interest payments (starting in September) are a cash machine in a low-yield world.
3. Ride the Brookfield lever: As partnerships bear fruit, expect dividend growth (already $0.32/share in Q1) and rising book value ($10.70/share, up 5% QoQ).

This isn’t speculation—it’s math-driven income. In a market where safety and yield are scarce, Angel Oak’s notes are a no-brainer. Don’t let this one slip away.