UWM Holdings Corp (NYSE:UWMC), a mortgage banking firm with a market capitalization of $9.57 billion, has entered into a material definitive agreement to issue $800 million in senior unsecured notes, as per a recent SEC filing. These 6.625% notes, due February 1, 2030, were priced at par and will pay interest semi-annually starting August 1, 2025.
According to InvestingPro data, the company is currently experiencing rapid cash burn, though its liquid assets exceed short-term obligations with a healthy current ratio of 1.73.
The company's subsidiary, UWM Holdings, LLC, and guarantor United Wholesale Mortgage, LLC, together with U.S. Bank Trust Company as trustee, formalized the agreement on December 10, 2024. The notes are senior unsecured obligations of UWM Holdings LLC and are guaranteed by United Wholesale Mortgage. This new issuance adds to the company's existing total debt of $12.2 billion, with a debt-to-equity ratio of 102.21.
UWM Holdings LLC has outlined terms for early redemption of the notes. Starting February 1, 2027, the company can redeem the notes at decreasing premiums until they can be redeemed at par from February 1, 2029, until maturity. Additionally, up to 40% of the principal amount can be redeemed before February 1, 2027, using proceeds from equity offerings at a price above par. An "Applicable Premium" will apply for redemptions before this date.
The notes are on par with UWM Holdings LLC’s existing and future senior unsecured debt, and they are senior to any future subordinated debt. However, they are effectively subordinated to any secured debt to the extent of the collateral's value. The same ranking applies to the guarantee provided by United Wholesale Mortgage.
In case of a change of control, note holders have the right to demand UWM Holdings LLC to repurchase their notes at 101% of the principal amount plus accrued interest. The indenture also includes customary covenants limiting UWM Holdings LLC’s ability to incur additional debt, merge, sell assets, make certain payments, transact with affiliates, and enter into sale and leaseback transactions.
This financial move, reflected in the Form 8-K filed on December 16, 2024, aims to provide UWM Holdings with capital for its operations. The indenture's full details are included in the exhibits attached to the SEC filing, indicating the company's commitment to transparency for investors and regulators. Despite the debt concerns, the company maintains a significant 6.64% dividend yield.
For deeper insights into UWMC's financial health and access to comprehensive analysis, including 10+ additional ProTips and detailed metrics, visit InvestingPro.
In other recent news, UWM Holdings Corporation reported its highest quarterly output in three years during its third-quarter 2024 earnings conference call. The company's total production reached a record $39.5 billion, with a significant increase in purchase market share and a robust gain margin. Despite a decline in the fair value of mortgage servicing rights, UWM ended the quarter with strong liquidity and a positive net income.
In the investment banking sector, KBW expressed a preference for mortgage insurers over title insurers and originators due to the current interest rate environment. The firm maintained an Outperform rating on Essent Group Ltd (NYSE:ESNT)., Radian Group Inc (NYSE:RDN)., and Arch Capital Group (NASDAQ:ACGL) Ltd., while downgrading MGIC Investment (NYSE:MTG) Corp. and Rocket Companies Inc. based on valuation concerns.
These are recent developments that provide insight into the performance and outlook of these companies. While KBW's analysis is mainly for understanding, it subtly reveals the firm's stance on various players in the market. Investors should note that these updates do not offer a comprehensive view of the companies but provide a snapshot of their recent performance and future expectations as stated by analysts.
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