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Altisource public stock offering will pay off roughly $20M in debt

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Shares in Hubzu operator touched a new 52-week low Friday after the company released details of its plan to pay off a portion of its nearly $200 million in debt.

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Shares in Hubzu operator Altisource touched a new 52-week low Friday after the company released details of a plan to pay off a portion of its nearly $200 million in debt by issuing up to 4.6 million shares to the public.

Altisource first announced the public stock offering after markets closed Thursday, without disclosing details of the size of the offering. In an announcement and regulatory filing Friday, the company said it expects to net $18.2 million in the initial sale of 4 million shares to several underwriters represented by Guggenheim Securities LLC.

The underwriters, who will pay $4.70 a share, also have the rights to purchase up to 600,000 additional shares of Altisource common stock, which will be offered to the public at $5 a share. That would generate another $2.82 million in proceeds before expenses.

Altisource said it intends to use the net proceeds of the offering, which is expected to close Feb. 14, “for repayment of certain indebtedness and working capital, including potentially using the entirety of the net proceeds for repayment of indebtedness.”

Altisource shares touch new 52-week low

Source: Yahoo Finance

Shares in Altisource, which had traded for as much as $17.67 and as little as $5.52 in the past year, touched a new low of $4.26 after markets opened Friday, before rebounding to close at $5.53.

Altisource also announced a plan to restructure most of the company’s debt by extending the maturity date of the company’s term loans to April 2025, with an option for another extension to April 2026, if it’s able to pay off at least $30 million in debt over the next year.

The amendment of the company’s term loans, along with a $15 revolving credit agreement, is expected to close on Feb. 14, concurrent with the public stock offering.

Using the proceeds of the stock offering will reduce the company’s interest expense and could also reduce the payment-in-kind interest rate and number of warrants granted to the term loan lenders, Altisource said.

“We believe using equity proceeds to repay the term loans strengthens the company’s balance sheet,” Altisource said.

In releasing preliminary fourth-quarter results, Altisource said it racked up a $53.4 million 2022 net loss, ending the year with $51 million in cash and $196.2 million in debt.

Much of Altisource’s revenue comes from helping loan servicers and institutional investors manage, buy and sell distressed properties.

In addition to operating Hubzu — an auction platform for residential short sales, foreclosures sales and real-estate owned (REO) sales — Altisource’s Equator distressed loan and REO management platform, Equator, helps loan servicers streamline their processes while meeting regulatory requirements. Altisource’s REALHome Services and Solutions Inc. subsidiary is a national real estate brokerage that helps institutional investors list, sell and buy properties.

Foreclosure moratoriums that protected homeowners during the COVID-19 pandemic led foreclosure starts — the main revenue driver for Altisource’s servicer and real estate segment — to drop 90 percent, the company said.

While delinquencies are ticking up and more homes are starting to enter the foreclosure pipeline, foreclosure starts are still down 30 percent from pre-pandemic levels, according to the latest data from Black Knight.

“In today’s environment … it typically takes approximately two years to convert foreclosure starts to foreclosure sales and six months to market and sell any resulting REO,” Altisource said in releasing preliminary fourth-quarter results.

Altisource also provides mortgage origination solutions to independent mortgage bankers, banks and credit unions through its Lenders One Mortgage Cooperative. Other Altisource business units include valuation services provider Springhouse, closing and title provider Premium Title, vendor management platform Vendorly and mortgage fulfillment service Trelix.

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