ResMAE asset purchase approved, interim approval granted for $500 million loan purchase facility

By Caroline Salls

Pittsburgh, March 6 - ResMAE Mortgage Corp. obtained court approval of an asset purchase agreement with RMC Asset Acquisition LLC that will allow the company to engage in up to $500 million of mortgage loan sale transactions, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

Under the agreement, ResMAE will sell mortgage loan assets to RMC, with a $22.4 million cash purchase price.

In addition, at the first closing, RMC will see that the mortgage loans are sold to its designee in exchange for a cash payment equal to the sum of 98.5% of the face amount of the purchased loans and interest on each of the loans at closing.

According to the order, an affiliate of RMC has entered into a total return swap agreement, under which the affiliate has agreed to assume some of the economic risks of ownership of the purchased mortgage loans.

At the second closing, ResMAE will deliver to RMC certificates representing new equity ownership in ResMAE to be issued to RMC under ResMAE's plan of reorganization.

ResMAE said the agreement will allow it to continue to originate mortgage loans and is essential to the company's ongoing operation and the maintenance of the company as a going concern.

Credit Suisse (USA) Inc. was the stalking horse bidder under a $250 million master repurchase agreement, and ResMAE will pay it a $2.05 million termination fee upon the first closing.

In conjunction with the purchase agreement, ResMAE has obtained a commitment for $500 million in financing from Lehman Brothers Inc., for which the court granted interim approval.

The facility will allow Lehman to buy eligible mortgage loans from ResMAE from the loan closing date through completion of the ResMAE acquisition by RMC.

As a result, the commitment runs from March 5 through the earlier of May 28 or upon closing of the asset sale.

Under the commitment letter, the purchase price for newly originated loans will be 100% of the unpaid principal balance plus a yield spread premium and cost of origination, not to exceed 102.5% of the unpaid principal.

For loans previously originated by ResMAE, the purchase price will be 100% of the court-approved price of the loans.

ResMAE will pay a $1 million commitment fee.

A final hearing on the loan commitment is scheduled for March 22.

ResMAE, a mortgage lender based in Brea, Calif., filed for bankruptcy on Jan. 12. Its Chapter 11 case number is 07-10177.

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