Lenders Still Willing to Work with Ocwen Financial (OCN); Compass Point Affirms at 'Neutral'

Compass Point affirms its Neutral rating and $4 price target on Ocwen Financial Corporation (NYSE: OCN) after the company announced last Friday that it has entered into an amendment to its Senior Secured Term Loan (SSTL), which will become effective on March 28, 2016.

Analyst Fred Small commented, The most significant amendments to the SSTL include: 1) permanently removing covenants related to the tangible net worth coverage ratio, corporate leverage ratio and interest coverage ratio, 2) restricting share repurchase to $20M plus $20M times total SSTL prepayments dividend by $50M, 3) restricting repurchase of the 6.625% senior unsecured notes due 2019 ($350M outstanding at 4Q15), 4) prepay $19M of the term loan through 9/30/16, and 5) pay an amendment fee equal to 1% of the SSTL.

Overall, Small said: The term loan amendment was largely expected, but it should remove any question/overhang about the possibility that the lenders would be unwilling to work with OCN following the company's disclosure that it expected to breach the tangible net worth covenant during FY16.

For an analyst ratings summary and ratings history on Ocwen Financial click here. For more ratings news on Ocwen Financial click here.

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