Ditech Holding gets $1 billion stalking horse bid from New Residential

By Caroline Salls

Pittsburgh, June 18 – Ditech Holding Corp. and Ditech Financial LLC have entered a stalking horse asset purchase agreement under which New Residential Investment Corp. would purchase substantially all of the forward assets of Ditech Financial.

According to an 8-K filed Tuesday with the Securities and Exchange Commission, the purchase price is currently expected to be roughly $1 billion. New Residential said it expects the purchase price to be funded with a combination of existing financing facilities and cash on hand.

New Residential said in a news release that the final purchase price will be determined at the closing of the transaction based on the tangible book value of the related assets, subject to certain agreed upon adjustments.

Specifically, New Residential has agreed to purchase Ditech Financial’s forward Fannie Mae, Ginnie Mae and non-agency mortgage servicing rights, with a total unpaid principal balance of roughly $63 billion as of March 31; the servicer advance receivables relating to those mortgage servicing rights and other net assets core to the forward origination and servicing businesses.

Additionally, New Residential has agreed to assume some Ditech office spaces and plans to make employment offers to a number of Ditech employees.

Under the agreement, New Residential will not purchase any of the stock or assets related to Ditech Financial’s reverse mortgage business.

If New Residential’s bid is successful, the transaction is expected to close in the second half of 2019, subject to New Residential being identified in Ditech’s bankruptcy proceeding as the winning bidder, the entry of a confirmation order by the U.S. Bankruptcy Court for the Southern District of New York that is acceptable to New Residential, receipt of approvals from governmental and quasi-governmental agencies and other customary closing conditions. The sale of some of the assets are also subject to receipt of third-party consents.

If the stalking horse bid agreement is terminated for specified reasons, including if Ditech accepts a higher or better offer from a competing bidder at the auction, Ditech may be required to reimburse New Residential for its reasonable expenses up to $6 million and pay a termination fee of up to $30 million.

Ditech is a mortgage servicer, asset manager and portfolio owner based in Fort Washington, Pa. The company filed bankruptcy on Feb. 11 under Chapter 11 case number 19-10412.

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