Ocwen Redeems Preferred Stock - Analyst Blog
September 26 2013 - 7:00PM
Zacks
On Tuesday, Ocwen Financial Corp. (OCN)
repurchased 100,000 shares or 61.7% of its outstanding shares of
Series A Perpetual Convertible Preferred Stock from WL Ross &
Co. for approximately $158.7 million. These shares were converted
into common stock before the buyback and were cancelled soon
after.
Though the redemption was approved in Aug 2013, it took more than a
month to be executed. The deal got delayed since it was subject to
the bank’s credit facility, which was undergoing changes at the
time.
In Dec 2012, Ocwen acquired Homeward Residential Holdings, Inc.
from WL Ross. According to the agreement, Ocwen paid WL Ross $604
million in cash and 162,000 shares of the aforementioned preferred
stock worth $162 million.
The preferred stock carried an annual dividend of 3.75%. Therefore,
redemption of these shares relieves Ocwen of the obligatory
dividend burden and releases fund that can be used in other
profitable ventures. However, about 62,000 stocks are yet to be
redeemed.
Along with the share buyback, Ocwen announced changes in its Senior
Secured Term Loan Facility Agreement. As per the amendment, the
company can now repurchase all of its outstanding preferred stock
and of up to $1.5 million worth common stock. The preferred stock
may be converted into common stock before the buyback.
Moreover, the modified agreement removed the sealing on the
company’s Junior Indebtedness as specified in the prior agreement
and changed the calculation process of the company’s loan
collateral value. Further, Ocwen revised the predetermined levels
of corporate leverage ratio, consolidated total debt to
consolidated tangible net worth ratio, and loan-to-value ratio.
Efficient capital deployment through acquisitions and share
buybacks reflects Ocwen’s earnings power. After considering certain
non-recurring items, Ocwen’s second-quarter 2013 net income was
$76.7 million or 53 cents per share, well above $44.8 million or 32
cents per share in the prior-year quarter.
Currently, Ocwen carries a Zacks Ranks #3 (Hold). Some
better-performing financial institutions include Nationstar
Mortgage Holdings Inc. (NSM), Federal National
Mortgage Association (FNMA) and Home Loan
Servicing Solutions, Ltd. (HLSS). While Nationstar
Mortgage Holdings carries a Zacks Rank #1 (Strong Buy), both
Federal National Mortgage Association and Home Loan Servicing
Solutions have a Zacks Rank #2 (Buy).
FANNIE MAE (FNMA): Get Free Report
HOME LOAN SERVC (HLSS): Free Stock Analysis Report
NATIONSTAR MTGE (NSM): Free Stock Analysis Report
OCWEN FINL CORP (OCN): Free Stock Analysis Report
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