Newcastle to Buy Excess MSRs, Spin-Off Residential Assets; to Sell 40M Shares in Public Offering
Newcastle Investment Corp. (NYSE: NCT) (“Newcastle” or the “Company”) announced today that it has agreed to acquire an interest in Excess Mortgage Servicing Rights (“Excess MSRs”). The total unpaid principal balance (“UPB”) of the underlying loans was approximately $215 billion as of November 30, 2012. In a separate transaction on January 4, 2013, Newcastle acquired an interest in the Excess MSRs on a $13 billion Ginnie Mae pool. These transactions are expected to bring Newcastle's total investment in Excess MSRs to approximately $610 million and the UPB of the underlying loans to over $310 billion. Newcastle intends to spin off these and certain other residential assets, as described below.
Excess MSR Acquisitions
Newcastle has agreed to acquire Excess MSRs on approximately $215 billion UPB from Nationstar Mortgage Holdings Inc. (“Nationstar”), in conjunction with Nationstar's purchase of MSRs from Bank of America. Newcastle has committed to invest approximately $340 million to acquire a one-third interest in the Excess MSRs. The majority of the investment is expected to close in the first quarter of 2013, subject to regulatory and third-party approvals. Nationstar will service the loans and will retain a one-third interest in the Excess MSRs; a Fortress Fund will acquire the remaining one-third interest. The loans comprise four pools, of which 47% are expected to be loans that are owned, insured or guaranteed by Agency/Government entities and 53% are expected to be non-conforming loans in private label securitizations.
Separately, Newcastle invested $27 million for a one-third interest in the Excess MSRs on a $13 billion UPB Ginnie Mae loan pool from Nationstar. As in the transaction described above, Nationstar is the servicer and owns a one-third interest. The Fortress Fund acquired the remaining one-third interest.
Spin-Off of Residential Assets
Newcastle also announced that its Board of Directors has unanimously approved a plan to spin off all of its Excess MSRs and certain other residential assets. Newcastle intends to effect the spin-off in the first quarter of 2013 by distributing shares of its subsidiary, New Residential Investment Corp. (“New Residential”). New Residential will be a publicly traded real estate investment trust that primarily targets opportunistic investments in Excess MSRs, RMBS, servicing advances, non-performing loans and other real estate related investments. New Residential will be externally managed by an affiliate of Fortress Investment Group LLC pursuant to a new management agreement with terms that are substantially similar to the terms of Newcastle's management agreement.
Separately, the company is planning to make a public offering of 40,000,000 shares of its common stock. In connection with the offering, the Company intends to grant the underwriters an option for 30 days to purchase up to an additional 6,000,000 shares of common stock.
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