When private mortgage insurer Radian Group announced its second-quarter earnings, the company said that it planned to restructure its services business, which is conducted through its principal subsidiary Clayton, and Clayton’s subsidiaries: Green River Capital, Red Bell Real Estate and ValuAmerica.
Clayton provides loan due diligence, surveillance, REO management, consulting, valuation, title and settlement services to the mortgage industry.
At the time, the company did not provide any details on the changes but said that the move is necessary to “reposition this business for sustained profitability.”
On Wednesday, Radian revealed just how significant those structural changes are going to be, including the elimination of the position of president of its services business – meaning that Jeff Tennyson is out as president of Clayton.
This is how the company describes the elimination of Tennyson’s position:
As part of the restructuring plan, Radian has eliminated the position of president of the Services business. As a result, Jeff Tennyson will step down from the role effective immediately. Through November 11, 2017, Tennyson will assist with the Services segment management transition.
Tennyson took over as president of Clayton in March 2016, following the departure of Joe D’Urso. Tennyson joined Clayton in February 2015, initially serving as chief operating officer.
Tennyson joined Clayton from B2R Finance, where he was chief operating officer. Earlier in his career, he served as the chairman and CEO of Strategic Lending Group and chairman and CEO of EquiFirst Corporation.
Tennyson’s time as president of Clayton started out strong, earning him a spot among HousingWire Magazine’s HW Vanguard Award winners in 2016, an award reserved for C-level industry professionals and business unit leaders who are leaders in their respective fields within housing and mortgage finance.
But the performance of Clayton, and thereby Radian’s services business, has suffered recently, which brought on this move and others.
According to Radian, the moves are in response to the “recent underperformance below expectations” for its services segment.
In a release, the company says that the moves are designed to “reposition the segment for sustained profitability by focusing on the core products and services that Radian believes have higher growth potential, produce more predictable and recurring fee-based revenues, and better align with customer needs.”
In addition to Tennyson’s imminent departure, the company said that its restructuring plan will lead the company to take pretax charges of approximately $12 million in the third quarter of 2017, including approximately $5 million in cash.
Additionally, the company expects to take pretax charges of approximately $8 million, including approximately $7 million in cash, over the next year.
According to Radian, the total charges of approximately $20 million are expected to consist of “approximately $8 million in asset impairments, approximately $7 million in employee severance and benefit costs, approximately $3 million in facility and lease termination costs, and approximately $2 million in contract termination and other restructuring costs.”
In a related filing with the Securities and Exchange Commission, Radian said that it committed to the restructuring plan on Sept. 5, 2017, but chose not to disclose the details of the plan until now to allow for “communications with affected employees.”
In a statement, Radian Chief Executive Officer Rick Thornberry acknowledged the “difficult decisions” that led to these moves, but Thornberry said that the company views them as the right decisions.
“We are committed to transforming Radian into an even more cohesive and profitable company. Our actions demonstrate strategies that are designed to establish a solid foundation for broader reach and growth,” Thornberry said.
“The restructuring of our services business has required us to make difficult decisions related to our team, and we do not take these decisions lightly,” Thornberry continued.
“I am personally thankful for the contributions of Jeff Tennyson, and all who helped build and shape our companies,” Thornberry added. “As we look to the future, we expect our restructuring plan to re-position our services business for profitability and make our entire company stronger.”
Additionally, Radian said that it recently entered into a three-year, $225 million unsecured revolving credit facility with a panel of banks led by Royal Bank of Canada and U.S. Bank.
In its release, Radian said that the money “may be used for working capital and general corporate purposes, including, without limitation, capital contributions to Radian’s insurance and reinsurance subsidiaries as well as growth initiatives.”