WEST PALM BEACH, Fla. - Onity Group Inc. (NYSE: ONIT), a prominent mortgage servicer and originator, has taken significant steps in its capital restructuring strategy by initiating a series of transactions. The company announced on Monday the sale of its 15% stake in MSR Asset Vehicle LLC (MAV) to Oaktree Capital Management, L.P. for an expected $49 million in cash, contingent on regulatory approval and other conditions, including a debt refinancing to address outstanding PHH Mortgage Corporation notes.
The MAV sale, expected to finalize in the fourth quarter of 2024, also maintains Onity as the exclusive subservicer for the MAV portfolio, which has an unpaid principal balance of $52 billion as of August 31, 2024. The agreement includes a five-year term for servicing the existing portfolio and most new MSRs acquired by MAV.
In addition to the MAV transaction, Onity intends to redeem at least $150 million of its senior secured notes, leveraging proceeds from the MAV sale and other transactions at a redemption price equal to par plus accrued interest. Oaktree will waive the make-whole premium due on these notes if redeemed before March 4, 2026.
Onity also disclosed the anticipated acquisition of assets from Mortgage Assets Management, LLC with a net value of roughly $55 million, which is expected to be immediately accretive to earnings and cash flow. This acquisition, set to be completed in the fourth quarter of 2024, is subject to regulatory approvals.
Furthermore, the company completed a securitization transaction on September 13, 2024, which provided $46.1 million in liquidity. On the same day as the announcement, Onity sold a portfolio of Fannie Mae and Freddie Mac MSRs, which is expected to reduce the company's MSR debt by $73.4 million and generate $26.5 million in cash to be used for corporate debt repayment.
As part of its debt reduction strategy, Onity's PHH Mortgage Corporation purchased and canceled $23.5 million of its notes at a discount on September 18, 2024.
Glen A. Messina, the CEO of Onity Group, expressed confidence in the transactions, emphasizing their role in reducing high-cost corporate debt and improving future income and cash flow.
This news is based on a press release statement from Onity Group Inc. and further details can be found in the company's SEC filings.
InvestingPro Insights
Onity Group Inc.'s recent capital restructuring moves align with several key financial metrics and trends highlighted by InvestingPro. The company's efforts to reduce high-cost corporate debt and improve future income and cash flow are particularly noteworthy when considering its current financial position.
According to InvestingPro data, Onity's market capitalization stands at $266.5 million, with a price-to-book ratio of 0.6 as of the last twelve months ending Q2 2024. This relatively low P/B ratio suggests that the stock might be undervalued relative to its book value, which could be seen as positive in light of the company's strategic moves to improve its financial position.
InvestingPro Tips indicate that Onity's net income is expected to grow this year, and analysts predict the company will be profitable. This aligns with the company's statement that the anticipated asset acquisition from Mortgage Assets Management, LLC is expected to be immediately accretive to earnings and cash flow.
The company's recent stock performance has been strong, with InvestingPro data showing a 41.66% price total return over the last three months and a 25.77% return over the last six months. This positive momentum could be partly attributed to investor optimism regarding the company's restructuring efforts.
It's worth noting that Onity does not pay a dividend to shareholders, which is consistent with a company focusing on reinvestment and debt reduction strategies. The stock's recent performance and the company's strategic moves suggest that management is prioritizing long-term financial health over short-term shareholder returns.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Onity Group Inc., providing a deeper understanding of the company's financial health and market position.
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