Reverse mortgage industry leader Finance of America (FOA) announced this week that it has restructured its unsecured debt into new, secured debt that will come due beyond the original 2025 maturity date. This is according to an announcement and an 8-K filing with the Securities and Exchange Commission (SEC) that was reviewed by HousingWire’s Reverse Mortgage Daily (RMD).
The company and the noteholders agreed to “an exchange of any and all of the outstanding 2025 unsecured notes” into two new secured tranches. The first is for up to $200 million in aggregate principal of senior secured first-lien notes due in 2026 (with an option to extend it to 2027 if the company elects to do so), while the second is for up to $150 million in aggregate principal of exchangeable senior first-lien notes due in 2029.
By securing the debt and prioritizing it for noteholders, FOA staves off an impending 2025 maturity event on $350 million worth of debt and can have more immediate financial breathing room. FOA added that more than 90% of the parties to the 2025 unsecured debt agreement agreed with the restructuring.
As part of the restructuring deal, FOA has agreed to “pay and reimburse the reasonable and documented consenting noteholders’ counsel fees and expenses in connection with the transactions,” as well as to use “commercially reasonable efforts to obtain any regulatory and/or third party approvals necessary to consummate the transactions,” the filing read.
FOA is optimistic about the ultimate results the move will have, according to its announcement.
“The announcement marks another significant step to improve the company’s capital structure and achieve sustainable growth and profitability,” the company explained.
This is the latest move undertaken by FOA to improve the financial posture of the company.
Last week, FOA announced that it received shareholder approval, upon recommendation of its board, to perform a reverse stock split at a 10-to-1 ratio in a move designed to boost the company’s stock price, another source of recent pressure.
“Our Board has determined that it is advisable and in the best interests of the company and our stockholders to reduce the number of shares of Class A Common Stock outstanding with the primary intent of increasing the per share trading price of our Class A Common Stock in order to meet the NYSE’s price criteria for continued listing on that exchange,” the company said in its corresponding 8-K filing with the SEC.
FOA is hopeful the move will make a material difference, according to the filing. In December 2023, the company received a notice from the New York Stock Exchange (NYSE) that it was out of compliance with the exchange’s continued listing standard, which requires the share price to remain above $1 in a given 30-day trading period. NYSE issued a second notice to that effect in February 2024.
At the end of trading on Wednesday, the share price stood at $0.55.
FOA implemented a round of layoffs at the beginning of this month that impacted multiple layers of the organization, but the extent of these layoffs remains unclear. The chief retail sales officer also voluntarily stepped down from the company around the same time, according to executive leaders.
According to Home Equity Conversion Mortgage (HECM) endorsement data compiled by Reverse Market Insight (RMI), FOA was the No. 1 lender in the country with 7,784 endorsements in the 12-month period ending on May 31, 2024.
Editor’s note: This story was updated with information about FOA’s option to extend the $200 million secured note to 2027 if it elects to do so.
