Item 1.01
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Entry into a Material Definitive Agreement.
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Restructuring Support Agreements
On October 20, 2017, Walter Investment Management Corp. (the Company) entered into (i) an Amended and Restated
Restructuring Support Agreement (as amended, the Term Loan RSA) with lenders (collectively, the Consenting Term Lenders) holding, as of October 20, 2017, more than 48% of the loans and commitments outstanding (the
Term Loans) under that certain Amended and Restated Credit Agreement, dated as of December 19, 2013, by and among the Company, as the borrower, Credit Suisse AG, as administrative agent, and the lenders party thereto (the
Credit Agreement), that are subject to the existing Restructuring Support Agreement, dated as of July 31, 2017 (as amended), and (ii) a Restructuring Support Agreement (the Senior Noteholder RSA, and together with
the Term Loan RSA, the RSAs) with senior unsecured noteholders (the Consenting Senior Noteholders, and together with the Consenting Term Lenders, the Consenting Creditors) holding, as of October 20, 2017,
more than 50% of the 7.875% senior unsecured notes (the Senior Notes) outstanding due 2021 under that certain Indenture, dated as of December 17, 2013 (as amended, restated, amended and restated, supplemented or otherwise modified
from time to time, the Indenture), by and among the Company, the guarantors party thereto, and Wilmington Savings Fund Society, FSB, a national banking association as successor trustee. The RSAs will become effective once holders of more
than 66
2/3
% in the aggregate of Senior Notes and Terms Loans become party to the applicable RSA (the Support Effective Date). The parties may terminate the RSAs if the Support
Effective Date does not occur on or before October 25, 2017. Capitalized terms used herein but not defined shall have the meaning set forth in the RSAs or the Term Sheet (defined below), as applicable.
As set forth in each RSA (including in the Prepackaged Plan Restructuring Term Sheet attached to each RSA (the Term Sheet)), the
Consenting Creditors and the Company have agreed to the principal terms of a financial restructuring (the Restructuring) of the Company, which will be implemented through a prepackaged plan of reorganization (the Prepackaged
Plan) under chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) and will restructure the indebtedness comprising the Companys Term Loan Claims, Senior Notes Claims and Convertible Notes Claims, as well as
the Companys Existing Equity Interests. Pursuant to the Prepackaged Plan, it is intended that only the Company will file for reorganization under the Bankruptcy Code. The Companys operating entities, including Ditech Financial LLC and
Reverse Mortgage Solutions, Inc., are expected to remain out of chapter 11 and continue their operations in the ordinary course through the consummation of the Restructuring, which is expected to occur not later than January 31, 2017.
The RSAs obligate the Company and the Consenting Creditors to, among other things, use commercially reasonable efforts to support and not
interfere with consummation of the Restructuring, and as to the Consenting Creditors, vote to accept the Prepackaged Plan subject to the receipt of solicitation materials in accordance with section 1125(g) and 1126 of the Bankruptcy Code. The RSAs
may be terminated upon the occurrence of certain events, including, among other requirements, the failure to meet specified milestones relating to the filing, confirmation and consummation of the Prepackaged Plan, the occurrence of a Material
Adverse Effect and in the event of certain breaches by the parties under the RSAs. Pursuant to the RSAs, the Company is required to commence solicitation on the Prepackaged Plan by November 6, 2017 and commence the Chapter 11 Case on or before
November 30, 2017. Although the Company intends to pursue the Restructuring in accordance with the terms set forth in the RSAs and the Term Sheet, there can be no assurance that the Company will be successful in completing a restructuring or any
other similar transaction on the terms set forth in the RSAs and the Term Sheet, on different terms, or at all.
Proposed Prepackaged Chapter 11 Plan of Reorganization
As described in the RSAs and in the Term Sheet, under the contemplated Prepackaged Plan, which will be subject to approval of the Bankruptcy
Court, it is anticipated that, among other things, on the effective date of the Prepackaged Plan (the Effective Date):
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The Company will be a guarantor of certain new warehouse refinancing agreements to be entered into by Ditech Financial LLC and Reverse Mortgage Solutions Inc., as borrowers, to provide for the refinancing of existing
warehouse lines of Ditech Financial LLC and Reverse Mortgage Solutions Inc., on material terms and conditions acceptable to the Requisite Creditors.
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Holders of Term Loan Claims will become bound by the Amended and Restated Credit Facility Agreement and receive, in full and final satisfaction of their Allowed Term Loan Claims on the Effective Date, their pro rata
share of (i) term loans under the Amended and Restated Credit Facility Agreement (such term loans to be in an aggregate principal amount equal to the term loans then outstanding under the Credit Agreement as of the Effective Date), and (ii) any
accrued and unpaid interest under the Credit Agreement as of the Effective Date.
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Each holder of a Revolving Loan Claim will receive (i) payment in full of its Claim and termination of all letters of credit issued under the Revolving Loan Facility (which will be refinanced), (ii) its pro rata
share of an amended and restated revolving loan facility (if each Revolving Lender consents to enter into such facility), or (iii) other consideration satisfactory to such holder.
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Each holder of a Senior Notes Claim will receive its pro rata share of (a) New Second Lien Notes (described below), (b) Mandatorily Convertible Preferred Stock (described below), and (c) if the Class of
Convertible Notes Claims does not vote to accept the Prepacked Plan, 100% of the New Common Stock issued, subject to dilution by shares of New Common Stock issuable on conversion of the Mandatorily Convertible Preferred Stock and shares of New
Common Stock issued or issuable pursuant to the Management Incentive Plan and shares of New Common Stock issued after the Effective Date. The Senior Notes will be cancelled without further action by or order of the Bankruptcy Court.
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The Company will issue to holders of Senior Notes Claims:
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$250 million aggregate principal amount of secured second lien notes having the terms described on Exhibit 2 to the Term Sheet; and
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$100 million face amount of Mandatorily Convertible Preferred Stock having the terms described on Exhibit 3 to the Term Sheet, convertible into 73% of the total number of issued and outstanding shares of New Common
Stock as of the Effective Date subject to dilution by shares of New Common Stock issued or issuable pursuant to the Management Incentive Plan and by shares of New Common Stock issued after the Effective Date, including shares of New Common Stock
issuable pursuant to the Warrants (if issued).
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Solely to the extent that the Class of Convertible Notes Claims votes to accept the Prepackaged Plan:
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Each holder of a Convertible Notes Claim will receive its pro rata share of (i) New Common Stock representing, in the aggregate, 50% of the New Common Stock issued, subject to dilution by shares of New Common Stock
issuable upon conversion of the Mandatorily Convertible Preferred Stock, shares of New Common Stock issued or issuable pursuant to the Management Incentive Plan and shares of New Common Stock issued after the Effective Date, including pursuant to
the Warrants, and (ii) 50% of the Warrants. The Convertible Notes will be cancelled without further action by or order of the Bankruptcy Court;
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Each holder of an Existing Equity Interest will receive its pro rata share of (i) New Common Stock representing, in the aggregate, 50% of the New Common Stock issued, subject to dilution by shares of New Common
Stock issuable upon conversion of the Mandatorily Convertible Preferred Stock, shares of New Common Stock issued or issuable pursuant to the Management Incentive Plan and shares of New Common Stock issued after the Effective Date, including pursuant
to the Warrants, and (ii) 50% of the Warrants. All Interests will be cancelled without further action by or order of the Bankruptcy Court; and
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The Company will issue to the holders of Convertible Notes Claims and Existing Equity Interests, 10 year warrants in two (2) separate tranches, on the terms described on Exhibit 4 to the Term Sheet.
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If the Class of Convertible Notes Claims does not vote to accept the Prepackaged Plan, then holders of Convertible Notes Claims and holders of Existing Equity Interests will not receive or retain any property under
the Prepackaged Plan on account of such Claims or Interests.
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Unless a holder of a General Unsecured Claim agrees to different treatment, (i) the Company or Reorganized Company, as applicable, will continue to pay or treat such General Unsecured Claim in the ordinary course
of business or (ii) such holder will receive such other treatment so as to render such General Unsecured Claim Unimpaired, in each case subject to all defenses or disputes the Company may assert as to the validity or amount of such Claims.
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All priority tax claims, other priority claims, and other secured claims, other than those claims otherwise referenced herein, will be unimpaired under the Prepackaged Plan and/or paid in full in the ordinary course of
business.
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The board of directors of the Reorganized Company will consist of nine (9) members, with six (6) directors nominated by holders of the Mandatorily Convertible Preferred Stock, and three (3) directors
nominated by the Company (on behalf of the holders of New Common Stock).
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The Reorganized Company will enter into a post-Restructuring Management Incentive Plan, under which 10% of the New Common Stock (after taking into account the shares to be issued under the Management Incentive Plan)
will be reserved for issuance as awards under the Management Incentive Plan.
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The Prepackaged Plan will include releases for the Company and the Consenting Creditors. In addition, the Prepackaged Plan will provide for releases of the Companys subsidiaries with respect to their guarantees
under the Credit Agreement and the Indenture, without the need for the Companys subsidiary guarantors to file for chapter 11.
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The foregoing description of the Term Loan RSA, Senior Notes RSA and the Term Sheet does not
purport to be complete and is qualified in its entirety by reference to the full text of each RSAs, a copy of which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form
8-K
and incorporated in
this Item 1.01 by reference.
Any new securities to be issued pursuant to the Restructuring have not been registered under the Securities
Act of 1933, as amended (the Securities Act), or any state securities laws. Therefore, the new securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements
of the Securities Act and any applicable state securities laws. This Current Report on Form
8-K
does not constitute an offer to sell or buy, nor the solicitation of an offer to sell or buy, any securities
referred to herein, nor is this Current Report on Form
8-K
a solicitation of consents to or votes to accept any chapter 11 plan. Any solicitation or offer will only be made pursuant to a disclosure statement
and only to such persons and in such jurisdictions as is permitted under applicable law.