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Onity Group, the parent company of PHH Mortgage Corp. and Liberty Reverse Mortgage, announced this week that it will offer $500 million in senior notes due in 2029. The proceeds from this note sale, along with additional cash from the company, will be used to pay off older debt with higher interest rates.
The deal was first announced on Monday, when Onity estimated the value of the notes would come in at $475 million. Onity will sell its 15% stake in MSR Asset Vehicle LLC (MAV) to Oaktree Capital Management. The proceeds of the sale will be used to redeem all of PHH Mortgage’s outstanding senior notes priced at 7.875% and due in 2026, as well as all of Onity’s senior second-lien notes, priced at 12% to 13.25% and due in 2027.
Two days later, Onity announced final details of the transaction that included a price revision to $500 million and an aggregate principal amount of senior notes at 9.875% due in 2029. “The price to investors will be 99.556% of the principal amount of the notes. The issuance and sale of the notes is expected to close on November 6, 2024, subject to customary closing conditions,” the company explained.
Proceeds will flow through an escrow process, including the MAV sale, and the interest rate will be discounted for company investors.
“Upon satisfaction of the escrow conditions, the escrowed proceeds will be released to PHH Corporation, and at that time PHH Corporation, [Onity and some] subsidiaries of PHH, will enter into a supplement [after] which PHH will become a co-issuer of the notes and Onity and such subsidiaries will become guarantors of the notes,” the company explained.
The news of the note sale follows another recent development in which Onity reached a $55 million deal to acquire the assets of Mortgage Assets Management (MAM).
That deal includes Home Equity Conversion Mortgages (HECMs) and mortgage servicing rights (MSRs) with an estimated $3 billion in unpaid principal balance (UPB) for loans currently being subserviced by PHH. The deal also involves Onity acquiring $20 million in cash and other assets from MAM.
Onity announced the acquisition of HECM assets from MAM earlier this year, despite recording less income during the second quarter of 2024.
“We expect this transaction to be accretive to earnings and cash flows immediately upon closing, while strengthening our position in reverse servicing as a hedge to forward (MSRs), providing incremental asset management opportunities and improving our capital structure,” Onity CEO Glen Messina said in August.
In June, Onity completed its rebranding from its former name of Ocwen Financial Corp. This also brought about a change to the company’s New York Stock Exchange (NYSE) ticker symbol from “OCN” to “ONIT.”
Company leaders previously described the move as an expression of the attitude they want to evoke from their product offerings. Messina added that it is a central element to the entire rebranding initiative.
PHH and Liberty are expected to be folded into the Onity brand before the end of the year, according to previous announcements, and will operate as Onity Mortgage.
