California-based loanDepot has concluded the transaction to extend $497.7 million in senior notes due in the fourth quarter of 2025, resulting in new debt with a higher interest rate and a shorter maturity period than usually seen in the market for similar companies.
A loanDepot subsidiary, LD Holdings Group LLC, will exchange its outstanding senior notes due in 2025, paying 6.5%, for senior secured notes due in 2027, paying 8.75%, according to an 8-K filing sent Thursday to the Securities and Exchange Commission (SEC).
Investors representing 96% of the old notes tendered and accepted the transaction.
loanDepot estimates that the new notes will cost the company $525.6 million. This includes $340.6 million in principal for new notes guaranteed by, among other things, $60 million in nonagency mortgage servicing rights (MSR) and a securities account holding of $100.6 million in aggregate principal of 2028 senior notes held by Artemis Management LLC.
The company is also paying $185 million in cash — the exact cap in cash consideration for the transaction. At the end of March, the company reported a cash balance of $604 million.
Analysts see the extension as a way for loanDepot, under pressure amid a shrinking mortgage origination landscape, to buy time in its effort to return to profitability.
“Moving forward, we have de-levered our balance sheet and significantly extended our debt maturity profile,” loanDepot president and CEO Frank Martell said in a statement.
The company has invested in a Vision 2025 program, bringing investments to platforms, products and people, Martell added. Earlier this week, loanDepot announced the promotion of Viviana Abarca, who has worked for the firm for the past 11 years, to managing director of mortgage lending operations.
Martell said the debt extension alongside the Vision 2025 strategic plan positions the company for “accelerating growth and returning to profitability as the market returns to a healthier state.”
From January to March, loanDepot recorded a non-GAAP adjusted net loss of $38 million, compared to a $26.6 million loss in the previous quarter and a $59 million loss in first-quarter 2023. The Q1 2024 loss was tied in part to a cyberattack. The company has implemented a $120 million supplemental productivity program to return to profitability.
loanDepot set the settlement date for the exchange offer to June 24, when about $19.7 million in aggregate principal of old notes will remain outstanding.
