New Residential Investment Corp. Bolsters Strong Capital Position and Provides Company Updates
May 20 2020 - 6:30AM
Business Wire
New Residential Investment Corp. (NYSE: NRZ; “New Residential”
or the “Company”) today announced a $600 million capital raise
through entry into a private senior secured loan agreement
structured and led by Canyon Partners, LLC (“Canyon”) with
participation from credit funds managed by affiliates of Fortress
Investment Group LLC (“Fortress”).
“This partnership with Canyon and Fortress provides us with
additional financial flexibility, bolsters our balance sheet and
creates a pool of capital to be opportunistic,” said Michael
Nierenberg, Chairman, Chief Executive Officer and President of New
Residential. “Today’s announcement is a testament to the value of
our overall platform and we believe this capital raise will enable
us to continue executing on our strategy of generating long-term
value for our shareholders.”
Canyon and Fortress will also receive warrants to acquire the
Company’s common stock at specific prices over a three year period.
The senior secured loan agreement and the issuance of the warrants
were unanimously approved by the independent members of the
Company’s board of directors and by the members of the audit
committee of the Company’s board of directors.1
Additional Company Updates
Liquidity Update
- As of May 15, 2020, the Company had approximately $516 million
of cash and cash equivalents on its balance sheet.
- Following the closing of the announced capital raise, the
Company expects to have approximately $1.1 billion of cash and cash
equivalents on its balance sheet.
Book Value Update
- The Company announced that estimated book value per common
share as of May 15, 2020 is unchanged relative to March 31, 2020
reported book value per common share of $10.71.2
Financing Update
- Residential Loan Financing – The Company has preliminary
agreements on term non mark-to-market financing with various
counterparties which are anticipated to close within the next 30
days. Upon closing, approximately 90% of the outstanding
residential loan portfolio will be term non mark-to-market
financed.
- Residential Securities Financing – Continued success in terming
out non-agency exposure, including residential mortgage backed
securities, with limited mark-to-market risk.
- MSR Financing – As part of New Residential’s broader initiative
across the mortgage servicing rights (“MSR”) portfolio, the Company
has a preliminary agreement with its largest bank lender to extend
the existing MSR financing through the end of 2020.
NewRez LLC (“NewRez”) Origination Activity Update
- NewRez originated $2.7 billion UPB in April 2020.
- We are maintaining our FY’20 origination volume guidance of $45
billion UPB.
- NewRez continues to focus its origination activity on Fannie
Mae, Freddie Mac and Ginnie Mae eligible loans across its four
origination channels.
- Gain on sale margins continue to be robust.
Servicing Portfolio and Advance Financing Update
- NewRez is committed to supporting homeowners overcome financial
hardship and helping borrowers stay in their homes by offering all
available relief and protections for which they are eligible under
the CARES Act and other applicable guidelines.
- Forbearance requests have continued to be lower than previously
forecasted.
- Through May 15, 2020, a total of approximately 240,000
borrowers in our portfolio, representing approximately 8.0% of our
aggregate MSR portfolio, have been granted COVID-19
forbearances.
- The rate of borrowers in forbearance making their monthly
payments continues to be higher than modeled, further reducing our
projected advancing obligations.
- The average daily number of COVID-19 forbearance requests in
May 2020 is less than 3,000 per day after peaking at over 21,000 in
a single day in late March 2020.
- We continue to work with Ginnie Mae on an advance financing
facility (principal and interest (“P&I”), taxes and insurance
(“T&I”) and corporate advances).
- Since March 31, 2020, we have increased our committed advance
financing capacity by $1.8 billion, to a total of $5.25
billion.3
Summary of Recent Policy Announcements Impacting Servicer
Advances
- Recent programs announced by the Federal Housing Finance Agency
(“FHFA”), Fannie Mae, Freddie Mac, and Ginnie Mae have been
supportive of the servicing industry and are expected to help
homeowners.
- The announcement from Ginnie Mae on May 14, 2020 provides
issuers with temporary relief from enforcement of Ginnie Mae’s
delinquency thresholds by removing delinquencies occurring on or
after April 2020 when calculating Ginnie Mae delinquency
ratios.
- The announcement from FHFA on May 13, 2020 offering a
streamlined deferral program (starting July 1, 2020) limits New
Residential’s projected advancing obligations on GSE loans by
incentivizing servicers to offer deferrals to homeowners in
COVID-19 forbearances.
- The announcement from the FHFA on April 21, 2020 to limit
servicer P&I advance obligations on Fannie Mae and Freddie Mac
loans to four months significantly reduces New Residential’s
projected advancing obligations for GSE loans in COVID-19
forbearances.
- The announcement from Ginnie Mae on April 10, 2020 establishing
the Pass-Through Assistance Program (“PTAP”) provides Ginnie Mae
issuers with a 100% LTV financing solution of last resort for
Ginnie Mae P&I advances.
Moelis & Company and Citigroup Inc. served as strategic
advisors to New Residential. Skadden, Arps, Slate, Meagher &
Flom LLP served as legal counsel to New Residential. Sullivan &
Cromwell LLP served as legal counsel to Canyon.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including, but not
limited to, the expected use of proceeds of such capital raise, the
ability to continue executing on our long-term strategy and support
the growth of our portfolio, the Company’s expected cash and cash
equivalents following the closing of the transaction, statements
relating to the Company’s estimated book value as of May 15, 2020,
ability to reduce our short-term or mark-to-market financing
exposure, ability to settle the various financings, our FY’20
origination volume guidance and facilities described above, limits
on New Residential’s projected advancing obligations, ability to
create long term shareholder value and preserve the Company’s
estimated book value. These statements are based on management’s
current expectations and beliefs and are subject to a number of
trends and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements,
many of which are beyond our control, including the ongoing impact
of the COVID-19 crisis. The Company can give no assurance that its
expectations will be attained. Accordingly, you should not place
undue reliance on any forward-looking statements contained in this
press release.
For a discussion of some of the risks and important factors that
could affect such forward-looking statements, see the sections
entitled “Risk Factors” in the Company’s most recent annual report
on Form 10-K and quarterly report on Form 10-Q, as well as the
sections entitled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” from the Company’s
most recently filed annual and quarterly reports. In addition, new
risks and uncertainties emerge from time to time, including risks
related to the COVID-19 crisis, risks related to the extreme
volatility and turmoil that currently riles the financial markets
and risks related to changes in the value of our assets that could
result in an increase in the amount of our obligations and cause us
to take additional actions to generate additional liquidity, and it
is not possible for the Company to predict or assess the impact of
every factor that may cause its actual results to differ from those
contained in any forward-looking statements. Such forward-looking
statements speak only as of the date of this press release. The
Company expressly disclaims any obligation to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in the Company’s expectations with
regard thereto or change in events, conditions or circumstances on
which any statement is based.
The securities of the Company to be sold in the transactions
described above have not been and will not be registered under the
Securities Act of 1933, as amended, or any state securities laws
and may not be offered or sold in the United States absent
registration with the U.S. Securities and Exchange Commission or an
applicable exemption from such registration requirements.
This press release does not constitute an offer to sell or the
solicitation of an offer to buy the securities of the Company, nor
will there be any sale of the securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
the registration or qualification under the securities laws of such
jurisdiction.
ABOUT NEW RESIDENTIAL
New Residential is a leading provider of capital and services to
the mortgage and financial services industry. The Company’s mission
is to generate attractive risk-adjusted returns in all interest
rate environments through a portfolio of investments and operating
businesses. New Residential has built a diversified,
hard-to-replicate portfolio with high-quality investment strategies
that have generated returns across different interest rate
environments over time. New Residential’s portfolio is composed of
mortgage servicing related assets (including investments in
operating entities consisting of servicing, origination, and
affiliated businesses), residential securities (and associated
called rights) and loans, and consumer loans. New Residential’s
investments in operating entities include its mortgage origination
and servicing subsidiary, NewRez, and its special servicing
division, Shellpoint Mortgage Servicing, as well as investments in
affiliated businesses that provide services that are complementary
to the origination and servicing businesses and other portfolios of
mortgage related assets. Since inception in 2013, New Residential
has a proven track record of performance, growing and protecting
the value of its assets while generating attractive risk-adjusted
returns and delivering approximately $3.3 billion in dividends to
shareholders. New Residential is organized and conducts its
operations to qualify as a real estate investment trust (“REIT”)
for federal income tax purposes. New Residential is managed by an
affiliate of Fortress Investment Group LLC, a global investment
management firm, and headquartered in New York City.
1 For additional information, please refer to the Company’s
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 20, 2020.
2 The estimated book value is based primarily on management’s
estimates of its assets as of May 15, 2020 and not on third party
valuations. While the Company believes that such estimates are
based on reasonable assumptions and information available to it as
of May 15, 2020, actual results may vary, and such variations may
be material. Furthermore, the extreme volatility and turmoil that
currently riles the financial markets makes estimates of asset
values even less reliable than usual.
3 $625 million of $1.8 billion additional capacity has been
agreed to in principle but is subject to definitive documentation.
There can be no assurance that we will complete such definitive
documentation or close such financing.
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version on businesswire.com: https://www.businesswire.com/news/home/20200520005369/en/
Investor Relations Kaitlyn Mauritz 212-479-3150
IR@NewResi.com
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