ResCap mortgage loan biz fetches $3B - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)
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ResCap mortgage loan biz fetches $3B

by Roger Dent  |  Published October 24, 2012 at 4:09 PM
Ocwen Financial Corp. and Walter Investment Management Corp. have won the auction of Residential Capital LLC's mortgage loan origination business with a $3 billion offer.

Ocwen and Walter beat out stalking-horse bidder Nationstar Mortgage LLC during a two-day auction on Tuesday, Oct. 23, and Wednesday, according to ResCap spokeswoman Susan Fitzpatrick.

Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan will consider the sale on Nov. 19, said Fitzpatrick.

Ocwen and Walter are loan servicers based in West Palm Beach, Fla., and Tampa, Fla., respectively.

Nationstar, majority-owned by Fortress Investment Group LLC, opened the bidding for ResCap's mortgage loan origination business on Tuesday with a $2.45 billion offer. The mortgage servicer is entitled to a $24 million breakup fee because it lost the auction as the stalking horse.

"Price matters. Obviously we are disappointed in the outcome of the auction, but in the end our judgment was that the price of the assets would not represent a compelling investment opportunity for us," Nationstar CEO Jay Bray said in a Wednesday statement. "Currently, there are many sizeable opportunities in this sector and we are intensely focused on capitalizing on transactions that both grow our franchise and deliver attractive returns to our shareholders."

Calls to Nationstar and Ocwen weren't immediately returned Wednesday.

ResCap will now commence the auction of its loan portfolio on Thursday, said Fitzpatrick.

Warren Buffett's Berkshire Hathaway Inc. is the loan portfolio auction's stalking-horse bidder with a $1.44 billion offer. Omaha-based Berkshire would be entitled to a $10 million breakup fee should it lose the auction.

Berkshire Hathaway had previously expressed interest in also being the stalking-horse bidder for the mortgage loan origination business, but ResCap declined the offer.

ResCap originally proposed parent company Ally Financial Inc. start the auction for its loan portfolio with a bid valued at $1.4 billion. At the time, the debtor opposed Berkshire's offer to step in as the lead bidder, saying the conglomerate declined to get involved in sale discussions before ResCap filed for bankruptcy.

ResCap then accepted Berkshire Hathaway's lead bid in June.

ResCap filed for bankruptcy on May 14 with the terms of a prenegotiated reorganization plan supported by holders of 37% of ResCap's junior secured notes. Those noteholders agreed to a settlement that would reduce the estate's interest obligations by $350 million.

In court papers, ResCap listed $15.68 billion in assets and $15.28 billion in liabilities as of March 31.

Larren M. Nashelsky, Gary S. Lee and Lorenzo Marinuzzi of Morrison & Foerster LLP are debtor counsel.

Richard M. Cieri, Ray C. Schrock and Stephen E. Hessler of Kirkland & Ellis LLP represent Ally Financial.

Kenneth H. Eckstein, Philip Bentley, Douglas H. Mannal and Joshua K. Brody of Kramer Levin Naftalis & Frankel LLP are counsel to the official committee of unsecured creditors.

Tags: Ally Financial Inc. | Berkshire Hathaway Inc. | Jay Bray | Judge Martin Glenn | Kirkland & Ellis LLP | Kramer Levin Naftalis & Frankel LLP | Morrison & Foerster LLP | mortgage loan | Nationstar Mortgage LLC | Ocwen Financial Corp. | Residential Capital LLC | stalking-horse | Walter Investment Management Corp. | Warren Buffett

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