Ocwen Financial (OCN) Announces Agreement With Oaktree for Additional $250 Million Investment
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Ocwen Financial Corporation (NYSE: OCN) (“Ocwen” or the “Company”), a leading non-bank mortgage servicer and originator, today announced it has executed an agreement with special purpose entities owned by funds and accounts managed by Oaktree Capital Management, L.P. (“Oaktree”) for a debt investment in the Company that would generate $250 million in proceeds, and provided preliminary information regarding its fourth quarter 2020 results. A presentation with additional detail regarding today’s announcement will be available on the Ocwen Financial Corporation website at www.ocwen.com (through a link on the Shareholder Relations page) prior to the Company's preliminary fourth quarter 2020 earnings conference call scheduled for Wednesday, February 10, 2021 at 8:30 am ET.
The announcement of the anticipated debt investment from Oaktree marks the completion of a thorough and rigorous strategic review process that began in May 2020. The Company intends to utilize $100 million of the proceeds to pay down and support the refinancing of its existing corporate debt. The remaining proceeds of $150 million are expected to be utilized to support continued growth in servicing and to further diversify the Company’s originations channel, including through potential acquisitions. The transaction is subject to the refinancing of Ocwen’s existing corporate debt and certain other closing conditions. Barclays and Credit Suisse acted as Placement Agents to Ocwen in connection with Oaktree’s investment. For additional details, please see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 9, 2021.
This investment is in addition to the strategic relationship announced with Oaktree in December 2020 to launch an MSR asset vehicle to acquire Fannie Mae and Freddie Mac MSRs. The combined agreements with Oaktree are expected to provide up to $463 million of capital to accelerate growth and reduce capital structure risk.
Glen A. Messina, President and CEO of Ocwen, said, “We initiated the strategic review process in May 2020 to evaluate all options to maximize value for our shareholders. The strategic review was fulsome, robust and included potential sale and merger transactions. We ultimately determined that the investment from Oaktree is the best long-term value creation option for our shareholders. The alliance with Oaktree provides meaningful growth capital while supporting our corporate debt refinancing. We believe it enables a level of growth, EPS accretion, and potential value creation that we could not achieve on a stand-alone basis. We look forward to a long-term alliance with Oaktree, a well-respected, large-scale investor experienced in the mortgage sector.”
Preliminary Fourth Quarter Results
The Company reported a net loss of $7.2 million and a pre-tax loss of $0.8 million for the three months ended December 31, 2020, compared to net income of $34.8 million and pre-tax income of $37.2 million for the three months ended December 31, 2019. The Company’s profitability in the quarter was significantly impacted by certain legacy legal matters as further detailed below. Adjusted pre-tax income was $15.2 million for the quarter compared to a $13.6 million adjusted pre-tax loss excluding NRZ lump-sum amortization in the prior year period; fifth consecutive quarter of positive adjusted pre-tax income (see “Note Regarding Non-GAAP Financial Measures” below).
Mr. Messina commented, “We have successfully transformed Ocwen into a balanced and diversified mortgage originator and servicer that is well-positioned for profitable growth. The actions taken to maintain our cost leadership position and execute on a multi-channel growth strategy are driving improved profitability, record originations growth and continued strong operating performance in our servicing business. Looking ahead, we are focused on sustainable long-term profitability by accelerating our growth trajectory, strengthening recapture performance, improving our cost leadership position, maintaining high-quality operational execution and expanding servicing revenue opportunities.”
The Company reported the following preliminary results for the fourth quarter 2020 (see “Note Regarding Non-GAAP Financial Measures” and “Note Regarding Financial Performance Estimates” below):
- Fourth quarter annualized pre-tax loss improved by $242 million compared to the combined annualized pre-tax loss of Ocwen and PHH Corporation for the second quarter 2018; fourth quarter annualized adjusted pre-tax earnings run rate excluding amortization of NRZ lump-sum payments improved by $383 million compared to the combined annualized adjusted pre-tax earnings run rate of Ocwen and PHH Corporation for the second quarter 2018.
- Notable items for the quarter include, among others, $13 million of additional accrual related to the Company’s efforts to resolve the legacy CFPB matter, $4 million of other legal accruals and $1 million of other net favorable items.
- Added approximately $30 billion of servicing and subservicing UPB in the quarter, up 4X from prior year.
- Adequate liquidity at December 31, 2020 with approximately $285 million of unrestricted cash; approximately $190 million in MSR investments in the quarter.
Webcast and Conference Call
Ocwen will hold a conference call on Wednesday, February 10, 2021 at 8:30 a.m. (ET) to review the Company’s preliminary fourth quarter 2020 operating results and to provide a business update. A live audio webcast and slide presentation for the call will be available by visiting the Shareholder Relations page at www.ocwen.com. Participants can access the conference call by dialing (877) 407-0792 or (201) 689-8263 approximately 10 minutes prior to the call. A replay of the conference call will be available via the website approximately two hours after the conclusion of the call and will remain available for approximately 30 days. The Company expects to release final fourth quarter and full-year 2020 results in mid-February.
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Create E-mail Alert Related CategoriesCorporate News, Guidance, Management Comments
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