HF2 Financial Management Inc. to Acquire Majority Equity Interest in Investment Manager ZAIS Group

HF2 Financial Management Inc. ("HF2")

, a special purpose acquisition company, announced today that it has entered into a definitive agreement to acquire a majority equity interest in ZAIS Group Parent, LLC ("ZGP"). ZGP is the sole member of ZAIS Group, LLC ("ZAIS", and together with ZGP, the "Company"), a leading investment management firm focused on specialized credit investments with approximately $5.0 billion of assets under management as of June 30, 2014. The transaction will facilitate the public flotation of ZAIS and provide the Company with significant equity capital to accelerate its strategic growth initiatives and capitalize on current and future market dislocations. The investment is designed to align the interests of the Company's current owners, management team and key employees with HF2's public stockholders and to provide incentives for growth over time. The current owners of the Company will not receive any proceeds at the closing of the transaction and will retain a significant equity stake in the Company going forward. The transaction also provides meaningful, long-term equity incentives for employees which will be directly linked to the growth in public stockholder value. In connection with the transaction, HF2 will be renamed ZAIS Group Holdings, Inc. and will apply to continue its public listing on the Nasdaq Capital Market under the new ticker symbol "ZAIS." Following the transaction, ZAIS's management team, under the leadership of Christian Zugel, Founder and Chief Investment Officer, and Mike Szymanski, President, will lead the combined organization. Bruce Cameron, HF2's Chairman and Chief Executive Officer, stated, "With approximately $5.0 billion of assets under management, a unique suite of attractive investment products and several promising avenues for long-term growth, we are excited to deliver this transaction to our stockholders. We are partnering with a talented management team that is committed to the growth of the business and whose track record of developing innovative investment products and delivering superior investment results will deliver long-term value to both clients and stockholders of ZAIS." Mr. Zugel stated, "Since forming ZAIS in 1997, our team has delivered superior investment results to our clients through multiple market cycles. This transaction with HF2 marks an exciting evolution in our business. With the capital HF2 is delivering to us, we will be able to accelerate several strategic growth initiatives, to expand our business and to capitalize on the unique opportunities in today's credit markets for the benefit of our clients and stockholders." ZAIS Growth Strategy ZAIS expects to leverage its strong investment track record and significant experience in specialized credit investing to drive the long-term growth of its platform. ZAIS' objective is to optimize the structured credit process in order to enhance value and deliver superior returns to its clients. ZAIS plans to continue its expansion into origination, securitization and other segments of specialized credit. ZAIS has a variety of initiatives to broaden its platform including, (i) a residential mortgage conduit business, (ii) a commercial real estate CLO business and (iii) a credit derivatives trading and structuring business. The Company is well positioned to leverage its existing capabilities and infrastructure to implement and grow these business lines. Summary of Transaction Terms At the closing of the transaction, HF2 will invest approximately $175 million in the Company in exchange for a number of newly issued equity interests in ZGP equal to the number of shares of HF2's Class A common stock ("Class A Shares") then outstanding. Following the closing and subject to certain lock-ups and restrictions, the current owners of the Company will have the ability to convert their retained ownership interests in ZGP into a total of 7,000,000 Class A Shares. In addition, following the closing, ZGP will issue up to 1,600,000 equity interests to key employees exchangeable for the same number of Class A Shares, subject to certain lock-ups, vesting requirements and restrictions. HF2's actual cash investment at closing will be equal to 100% of HF2's cash on hand, net of transaction expenses. Following the closing and assuming the issuance of 1,600,000 equity interests to key employees, HF2 will own approximately 73% of ZAIS, the current owners will retain approximately 22% of ZAIS and key employees will own the remaining 5%. The estimated ownership percentages and cash delivered at closing assume no HF2 stockholder exercises its right to redeem its Class A Shares for cash at the time of the completion of the transaction and no other closing adjustments. The transaction is expected to be completed in January 2015, pending HF2 stockholder approval and other customary closing conditions. Berkshire Capital Securities LLC, EarlyBirdCapital, Inc. and Sandler O'Neill & Partners, L.P. served as financial advisors to HF2. Bingham McCutchen LLP served as legal counsel to HF2, and McDermott Will & Emery LLP served as legal counsel to ZAIS. Additional information about the transaction, as well as the Company's operations and historical financial information is contained in the investor presentation filed by HF2 today with the Securities and Exchange Commission ("SEC"). Interested parties should visit the SEC website at www.sec.gov. The description of the transaction contained herein is only a summary and is qualified in its entirety by reference to the definitive agreement relating to the transaction, a copy of which was filed by HF2 with the SEC as an exhibit to a Current Report on Form 8-K on September 17, 2014.