Ocwen Financial Corp.
) repurchased 100,000 shares or 61.7% of its outstanding shares
of Series A Perpetual Convertible Preferred Stock from WL Ross
& Co. for approximately $158.7 million. These shares were
converted into common stock before the buyback and were cancelled
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Though the redemption was approved in Aug 2013, it took more than
a month to be executed. The deal got delayed since it was subject
to the bank's credit facility, which was undergoing changes at
In Dec 2012, Ocwen acquired Homeward Residential Holdings, Inc.
from WL Ross. According to the agreement, Ocwen paid WL Ross $604
million in cash and 162,000 shares of the aforementioned
preferred stock worth $162 million.
The preferred stock carried an annual dividend of 3.75%.
Therefore, redemption of these shares relieves Ocwen of the
obligatory dividend burden and releases fund that can be used in
other profitable ventures. However, about 62,000 stocks are yet
to be redeemed.
Along with the share buyback, Ocwen announced changes in its
Senior Secured Term Loan Facility Agreement. As per the
amendment, the company can now repurchase all of its outstanding
preferred stock and of up to $1.5 million worth common stock. The
preferred stock may be converted into common stock before the
Moreover, the modified agreement removed the sealing on the
company's Junior Indebtedness as specified in the prior agreement
and changed the calculation process of the company's loan
collateral value. Further, Ocwen revised the predetermined levels
of corporate leverage ratio, consolidated total debt to
consolidated tangible net worth ratio, and loan-to-value ratio.
Efficient capital deployment through acquisitions and share
buybacks reflects Ocwen's earnings power. After considering
certain non-recurring items, Ocwen's second-quarter 2013 net
income was $76.7 million or 53 cents per share, well above $44.8
million or 32 cents per share in the prior-year quarter.
Currently, Ocwen carries a Zacks Ranks #3 (Hold). Some
better-performing financial institutions include
Nationstar Mortgage Holdings Inc.
Federal National Mortgage Association
Home Loan Servicing Solutions, Ltd.
). While Nationstar Mortgage Holdings carries a Zacks Rank #1
(Strong Buy), both Federal National Mortgage Association and Home
Loan Servicing Solutions have a Zacks Rank #2 (Buy).