Walter Investment to launch $810 million credit facility on Thursday

By Sara Rosenberg

New York, May 16 - Walter Investment Management Corp. has scheduled a bank meeting for Thursday afternoon to launch its proposed $810 million senior secured credit facility, according to a market source.

Credit Suisse Securities (USA) LLC and RBS Securities Inc. are the joint bookrunners and lead arrangers on the deal, with Credit Suisse the administrative agent. Bank of America Merrill Lynch is a bookrunner and a co-documentation agent, and Morgan Stanley Senior Funding Inc. is as a co-documentation agent.

The facility consists of a $45 million five-year revolver, a $500 million five-year first-lien term loan and a $265 million 51/2-year second-lien term loan.

Price talk on the revolver and first-lien term loan is Libor plus 525 basis points and talk on the second-lien term loan is Libor plus 900 bps, with all tranches having a 1.5% Libor floor and being offered at an original issue discount of 99.

The first-lien term loan includes 101 soft call protection for one year, while the second-lien term loan has call protection of 103 in year one, 102 in year two and 101 in year three.

Amortization on the first-lien term loan is 10% per annum.

Financial covenants under the credit agreement include total debt to EBITDA and minimum interest coverage.

Proceeds will be used to help fund the acquisition of GTCS Holdings LLC (Green Tree), a St. Paul, Minn.-based fee-based business services company, which provides high-touch, third-party servicing of credit-sensitive consumer loans, in a transaction valued at $1.065 billion.

In addition to the new credit facility, funds for the acquisition will come from cash on hand and the issuance of 1.8 million shares of common stock to the seller.

Leverage through the first-lien is 2.22 times and through the second-lien is 3.36 times.

The companies' combined 2010 revenues were over $560 million, and revenue growth is targeted at 10% in 2011 and beyond. Combined 2010 adjusted EBITDA was $236 million and long-term EBITDA growth is targeted to match or exceed revenue growth.

Closing on the transaction is expected in the third quarter, subject to customary conditions, including receipt of governmental approvals and third-party consents.

Walter Investment is a Tampa, Fla.-based asset manager, mortgage servicer and mortgage portfolio owner specializing in less-than-prime, non-conforming and other credit-challenged mortgage assets. As a result of this transaction, the company will no longer qualify as a real estate investment trust.

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