Two, the real estate investment trust that owns Roundpoint Mortgage Servicing, is anticipating legal expenses that some analysts say could lead to asset sales.

The REIT expects a $198.9 million charge for May that includes a $139.8 million fee as a contingency liability and $60 million in related expenses due to the lawsuit with its former external manager, according to a Securities and Exchange Commission filing.

A recent debt raise will help the company manage the cost of summary judgment on certain claims, and Two also may sell off some of its mortgage-backed securities or servicing rights due to the expense’s impact, according to a BTIG report.

“We expect it will initially look to trim its $8.6 billion of agency MBS, versus selling its $3 billion market value of MSRs, which are comparatively less liquid,” Eric Hagen and Jake Katsikis, analysts at BTIG, said in a research note.

A breakdown of the legal costs and Two investors’ response

The company’s stock had fallen slightly below its previous trading range between $10.67 and $11.23 to $10.60 at deadline in line with BTIG’s expectation there would be a “potential downside” for the shares and possibly a dividend cut due to the expense.

The $139.8 million contingency liability amount reflects around three years of management fees while the additional $60 million reflects in prejudgment interest that the company formerly known as Two Harbors Investment Corp. anticipates paying Pine River, according to the BTIG report.

The combined amount was likely larger than many investors anticipated, according to a separate Keefe, Bruyette & Woods equity research note.

“We believe the market expectation was that charge would be capped at the $140 million termination, but the charge came in above that,” Bose George, Frankie Labetti and Alex Bond, analysts at KBW, said in their report.

Some claims in the Pine River lawsuit remain outstanding

Two is not immediately recognizing some other outstanding claims related to the legal dispute “as management does not believe that a loss or expense related to such claims is probable or reasonably estimable,” according to its SEC filing.

Current estimated costs in the lawsuit stem from summary judgment in a federal district court on claims that “the company did not have a basis on which to terminate the management agreement for cause.” The court overruled objections Two raised to the decision.

The complaint Pine River filed against Two in the Southern District of Manhattan also “seeks, among other things, an order enjoining the company from making any use of or disclosing PRCM Advisers’ trade secrets, proprietary, or confidential information.”

In the lawsuit, Pine River asked the court to force Two to pay for its court costs, damages “in an amount to be determined at a hearing and/or trial,” and disgorgement of what the plaintiff alleges were “wrongfully obtained profits.”