New Residential Investment and Home Loan Servicing Solutions (HLSS) announced the mutual termination of a merger agreement originally announced on February 22 and instead announced the two firms have entered into a purchase agreement.
New Residential acquired all of HLSS' assets as part of the asset purchase agreement – and also assumed substantially all of HLSS' liabilities.
“Despite our efforts to pursue the merger as initially planned, certain circumstances prompted HLSS to pursue an asset purchase agreement with New Residential,” said John Van Vlack, CEO of HLSS. “We believe this alternative transaction structure made the most sense for us as it allowed HLSS to file its financial results without a going concern qualification and provide the greatest certainty on funding new servicing advances. This transaction will also enable our shareholders to maximize value for their shares.”
New Residential paid $17.08 per HLSS share on 71 million HLSS shares for a total equity purchase price of approximately $1.2 billion. The total purchase price was $1.4 billion when accounting for adjustments for cash and repayment of HLSS debt. The adjusted purchase price consists of approximately $1 billion in cash and 28.2 million newly issued shares of New Residential.
“When it became evident that HLSS was unable to satisfy the merger conditions as originally expected, we worked collaboratively with HLSS management to structure this Asset Purchase to meet our mutual goals,” said Michael Nierenberg, CEO of New Residential.
Each company's Board of Directors approved the asset purchase; the transaction was not subject to shareholder approval.
In a separate transaction, New Residential paved the way for a long-term partnership with Ocwen Financial Corporation by agreeing to a multi-year extension of its servicing contracts with Ocwen.
“We are very pleased to have established a new partnership with New Residential,” said Michael Bourque, CEO of Ocwen. “Our entry into a relationship with New Residential, which includes an extension of our servicing contracts, will not only help to secure the financing of Ocwen’s servicing business but also provide additional stability to the mortgage servicing industry. We look forward to a growing and productive relationship with our new financing partner.”
Ocwen has announced the sale of two Agency mortgage servicing rights portfolios to Dallas-based servicer Nationstar Mortgage in the last two months. The two transactions feature about 223,000 Agency loans totaling $34.8 billion in unpaid principal balance.
“We are extremely pleased to complete this milestone transaction; and we are excited for the opportunity to expand and strengthen our partnerships with both Nationstar Mortgage and Ocwen, the two largest non-bank servicers in the United States,” Nierenberg said. “The extension in servicing contracts with Ocwen will further solidify their position as one of New Residential’s preferred servicers and help promote a mutually beneficial partnership between the two companies. Looking ahead, we remain confident in our ability to generate strong returns for our shareholders and excel as one of the leading capital providers in the mortgage servicing business.”