Ocwen Financial (OCN) Shares Move to Session Highs Amid Notes Exchange Offer

November 1, 2016 1:53 PM EDT

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Ocwen Financial (NYSE: OCN) shares are trading to session highs Tuesday, up nearly 3 percent on the session.

Earlier this afternoon, Ocwen announced that its subsidiary Ocwen Loan Servicing, LLC (“OLS”) commenced an offer to exchange (the "Exchange Offer") all outstanding 6.625% Senior Notes due 2019 of Ocwen (the “Existing Notes”) held by eligible holders for up to $350 million aggregate principal amount of newly issued 8.375% Senior Secured Second Lien Notes due 2022 of OLS (the “New Second Lien Notes”) upon the terms and subject to the conditions set forth in the offering memorandum dated November 1, 2016 and the related letter of transmittal (collectively, the “Offering Materials”). The CUSIP numbers for the Existing Notes are: 675746 AF8 (Registered), U67503 AA7 (Reg S) and 675746 AE1 (Rule 144A).

The New Second Lien Notes will be jointly and severally guaranteed by Ocwen, Ocwen Mortgage Servicing, Inc., Homeward Residential Holdings, Inc., Homeward Residential, Inc. and Automotive Capital Services, Inc. (all of which are wholly-owned subsidiaries of Ocwen, collectively, the “Subsidiary Guarantors” and together with Ocwen, the “Guarantors”), which are the same entities that guarantee OLS’s senior secured term loan. The New Second Lien Notes and the related guarantees will be unsubordinated obligations of OLS and the Guarantors, respectively, and will be secured (subject in each case to certain exceptions and permitted liens) by a second-priority lien on all of the assets of OLS and the Guarantors that secure the senior secured term loan (the “Collateral”). The lien on the Collateral securing the New Second Lien Notes will be junior to the first priority lien securing the senior secured term loan.

The Exchange Offer will expire at 11:59 p.m., New York City time, on November 30, 2016, unless extended (such date and time, as the same may be extended, the “Expiration Date”). To be eligible to receive the applicable Total Exchange Consideration (as defined below), eligible holders must validly tender their Existing Notes at or prior to 5:00 p.m., New York City time, on November 15, 2016, unless extended (such date and time, as the same may be extended, the “Early Tender Date”). Tenders of Existing Notes may not be withdrawn after 5:00 p.m., New York City time, on November 15, 2016, unless extended (such date and time, as the same may be extended, the “Withdrawal Deadline”).

Upon the terms and subject to the conditions set forth in the Offering Material, eligible holders who validly tender and do not validly withdraw their Existing Notes on or prior to the Early Tender Date, and whose tenders are accepted for exchange, will receive, the Total Exchange Consideration which consists of $950 principal amount of New Second Lien Notes for each $1,000 principal amount of Existing Notes validly tendered prior to the Expiration Date and accepted for exchange (the “Exchange Consideration”), plus an early tender premium equal to $50 principal amount of New Second Lien Notes for each $1,000 principal amount of Existing Notes validly tendered and not validly withdrawn on or prior to the Early Tender Date (the “Early Tender Premium”). Eligible holders validly tendering their Existing Notes after the Early Tender Date and on or prior to the Expiration Date will only be eligible to receive the Exchange Consideration.

The settlement date for the Exchange Offer is expected to be on the third business day following the Expiration Date. Eligible holders of Existing Notes accepted for exchange in the Exchange Offer will also receive a cash payment equal to the accrued and unpaid interest in respect of such Existing Notes from November 15, 2016 (the most recent interest payment date for the Existing Notes prior to the settlement date) to, but not including, the settlement date.

The Exchange Offer is being made only to holders of the Existing Notes who have completed and returned an eligibility form confirming that they are both (x) either (i) “qualified institutional buyers” (“QIBs”) within the meaning of Rule 144A under the Securities Act or (ii) not “U.S. persons” and are outside of the United States within the meaning of Regulation S under the Securities Act, and (y) “accredited investors” within the meaning of Rule 501 under the Securities Act (such holders that meet clauses (x) and (y) are “eligible holders”).

OLS’s obligation to accept Existing Notes in the Exchange Offer is subject to a number of conditions described in the Offering Materials, including but not limited to (i) the valid tender, without withdrawal, of a minimum of $275 million aggregate principal amount of Existing Notes by eligible holders as of the Expiration Date and (ii) the requisite lenders under OLS’s senior secured term loan agreeing to the consummation of the Exchange Offer.

Eligible holders collectively holding approximately $230 million aggregate principal amount of Existing Notes (or approximately 66% of the total amount of Existing Notes outstanding) have agreed that they will tender their Existing Notes in the Exchange Offer.

The Exchange Offer is purely a debt-for-debt exchange offer and none of OLS, Ocwen or any of their subsidiaries will receive any cash proceeds from the transaction.

The complete terms and conditions of the Exchange Offer, as well as the terms of the New Second Lien Notes, are described in the Offering Materials, copies of which may be obtained by contacting D.F. King & Co., Inc., the information agent in connection with the Exchange Offer, at (212) 269-5550 or (800) 431-9645 (toll free), by email to ocn@dfking.com, or at www.dfking.com/ocwen.

The New Second Lien Notes have not been registered with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), or any state or foreign securities laws. The New Second Lien Notes may not be offered or sold in the United States or to any U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

The Exchange Offer is not being made to holders of Existing Notes in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. This press release does not constitute an offer to sell, or a solicitation of any offer to buy, any securities, nor shall there be any sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Eligible holders must make their own decision as to whether to tender their Existing Notes in the Exchange Offer and, if so, the principal amount of Existing Notes to tender.



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