WEST PALM BEACH, FL—Onity Group Inc., a Florida-based mortgage banker and loan correspondent, has announced an agreement to acquire substantial assets from Mortgage Assets Management, LLC (MAM) and investment funds managed by Waterfall Asset Management, LLC. The deal, which took place on Wednesday, is valued at an estimated net asset value of approximately $55 million.
The assets acquired include Home Equity Conversion Mortgage reverse mortgage loans and mortgage servicing rights, with an expected unpaid principal balance of around $3.0 billion. Additionally, Onity will gain approximately $20 million in cash and other related assets. All assets currently subserviced by Onity's subsidiary, PHH Mortgage Corporation, will be included in the transaction.
As part of the acquisition, Onity will issue shares of a new series of non-convertible, perpetual preferred stock, Series B Preferred Stock, to Waterfall with an aggregate liquidation preference of roughly $52.7 million, subject to adjustments.
The preferred stock will accrue dividends at an initial rate of 7.875% per annum, increasing annually to a maximum of 15%. Onity has the option to redeem the preferred stock after September 15, 2028, and must offer a repurchase in the event of a change of control.
The completion of the acquisition is expected in the fourth quarter of 2024, pending the execution of ancillary documents and customary closing conditions, including necessary approvals from Ginnie Mae. However, the company notes that there can be no certainty regarding the timing or the completion of the acquisition.
Onity's move to acquire MAM's assets marks a significant expansion of its mortgage servicing portfolio. The transaction is based on information from a recent SEC filing by Onity Group Inc. and is subject to the conditions outlined therein. Investors and interested parties are advised to consult Onity's SEC filings for a deeper understanding of the company's operations and the potential implications of the acquisition.
In other recent news, Onity Group has made significant strides in its capital restructuring efforts. The company has announced plans to redeem at least $150 million of its 13.25% 2027 notes and has already repaid $23.5 million of its 7.875% PHH notes. B.Riley has maintained a Buy rating for the company, reflecting the firm's confidence in these restructuring moves.
Onity Group also plans to reduce its leverage further by refinancing the remaining 7.875% notes through a debt offering. The company has confirmed its intent to purchase $55 million worth of mortgage assets from Waterfall Asset Management, which will generate $46 million in cash.
In addition to these developments, Onity Group has sold its 15% stake in MSR Asset Vehicle LLC (MAV) to Oaktree Capital Management, L.P. for an estimated $49 million. This sale is expected to conclude in the fourth quarter of 2024, with Onity remaining as the exclusive subservicer for the MAV portfolio.
Finally, an upcoming acquisition of assets from Mortgage Assets Management, LLC, valued at approximately $55 million, is also in the pipeline. This acquisition is expected to immediately enhance earnings and cash flow. These recent developments are part of Onity Group's ongoing strategy to improve its financial health.
InvestingPro Insights
As Onity Group Inc. moves forward with its significant acquisition of MAM's assets, investors may find additional context from InvestingPro's real-time data and tips valuable. Despite the company's recent strong performance, with a 19.32% price return over the last three months, Onity's financials present a mixed picture. The company's market capitalization stands at $238.41 million, with a price-to-book ratio of 0.54, suggesting the stock might be undervalued relative to its assets.
InvestingPro Tips highlight that Onity is expected to be profitable this year, which aligns with the company's strategic expansion through the MAM asset acquisition. However, the stock is trading at a high earnings multiple, with a P/E ratio of 147.58, indicating investors are pricing in significant future growth expectations.
For those seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide deeper insights into Onity's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.