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

HF2 Financial Management Inc.("HF2") (Nasdaq: HTWO), a special purpose acquisition company, announced todaythat it has entered into a definitive agreement to acquire a majority equityinterest in ZAIS Group Parent, LLC ("ZGP"). ZGP is the sole member of ZAISGroup, LLC ("ZAIS", and together with ZGP, the "Company"), a leadinginvestment management firm focused on specialized credit investments withapproximately $5.0 billion of assets under management as of June 30, 2014. Thetransaction will facilitate the public flotation of ZAIS and provide theCompany with significant equity capital to accelerate its strategic growthinitiatives and capitalize on current and future market dislocations. Theinvestment is designed to align the interests of the Company's current owners,management team and key employees with HF2's public stockholders and toprovide incentives for growth over time. The current owners of the Companywill not receive any proceeds at the closing of the transaction and willretain a significant equity stake in the Company going forward. Thetransaction also provides meaningful, long-term equity incentives foremployees which will be directly linked to the growth in public stockholdervalue.In connection with the transaction, HF2 will be renamed ZAIS Group Holdings,Inc. and will apply to continue its public listing on the Nasdaq CapitalMarket under the new ticker symbol "ZAIS." Following the transaction, ZAIS'smanagement team, under the leadership of Christian Zugel, Founder and ChiefInvestment Officer, and Mike Szymanski, President, will lead the combinedorganization.Bruce Cameron, HF2's Chairman and Chief Executive Officer, stated, "Withapproximately $5.0 billion of assets under management, a unique suite ofattractive investment products and several promising avenues for long-termgrowth, we are excited to deliver this transaction to our stockholders. We arepartnering with a talented management team that is committed to the growth ofthe business and whose track record of developing innovative investmentproducts and delivering superior investment results will deliver long-termvalue to both clients and stockholders of ZAIS."Mr. Zugel stated, "Since forming ZAIS in 1997, our team has delivered superiorinvestment results to our clients through multiple market cycles. Thistransaction with HF2 marks an exciting evolution in our business. With thecapital HF2 is delivering to us, we will be able to accelerate severalstrategic growth initiatives, to expand our business and to capitalize on theunique opportunities in today's credit markets for the benefit of our clientsand stockholders."ZAIS Growth StrategyZAIS expects to leverage its strong investment track record and significantexperience in specialized credit investing to drive the long-term growth ofits platform. ZAIS' objective is to optimize the structured credit process inorder to enhance value and deliver superior returns to its clients. ZAIS plansto continue its expansion into origination, securitization and other segmentsof specialized credit. ZAIS has a variety of initiatives to broaden itsplatform including, (i) a residential mortgage conduit business, (ii) acommercial real estate CLO business and (iii) a credit derivatives trading andstructuring business. The Company is well positioned to leverage its existingcapabilities and infrastructure to implement and grow these business lines.Summary of Transaction TermsAt the closing of the transaction, HF2 will invest approximately $175 millionin the Company in exchange for a number of newly issued equity interests inZGP equal to the number of shares of HF2's Class A common stock ("Class AShares") then outstanding. Following the closing and subject to certainlock-ups and restrictions, the current owners of the Company will have theability to convert their retained ownership interests in ZGP into a total of7,000,000 Class A Shares. In addition, following the closing, ZGP will issueup to 1,600,000 equity interests to key employees exchangeable for the samenumber of Class A Shares, subject to certain lock-ups, vesting requirementsand restrictions. HF2's actual cash investment at closing will be equal to100% of HF2's cash on hand, net of transaction expenses. Following the closingand assuming the issuance of 1,600,000 equity interests to key employees, HF2will own approximately 73% of ZAIS, the current owners will retainapproximately 22% of ZAIS and key employees will own the remaining 5%. Theestimated ownership percentages and cash delivered at closing assume no HF2stockholder exercises its right to redeem its Class A Shares for cash at thetime of the completion of the transaction and no other closing adjustments.The transaction is expected to be completed in January 2015, pending HF2stockholder 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 LLPserved as legal counsel to HF2, and McDermott Will & Emery LLP served as legalcounsel to ZAIS.Additional information about the transaction, as well as the Company'soperations and historical financial information is contained in the investorpresentation filed by HF2 today with the Securities and Exchange Commission("SEC"). Interested parties should visit the SEC website at www.sec.gov. Thedescription of the transaction contained herein is only a summary and isqualified in its entirety by reference to the definitive agreement relating tothe transaction, a copy of which was filed by HF2 with the SEC as an exhibitto a Current Report on Form 8-K on September 17, 2014.