Walter Investment Management Corp., which has suffered through several rough years, is taking a drastic measure as it fights to survive.
The nonbank announced late this week that it is filing for Chapter 11 bankruptcy as part of a prepackaged restructuring plan that aims to eliminate $800 million in debt and place the company on firmer footing going forward.
“The actions taken today are intended to reduce the company’s debt, strengthen its balance sheet and better enable Walter to focus on its business, including the growth of its origination and servicing businesses, new technology, innovation, and other areas that are critical to the company’s success,” Walter said in a statement. “The company remains strongly committed to serving its customers by enabling their dreams of homeownership and caring for them throughout their homeownership lifecycle.”
Walter’s last few years have been beset by massive quarterly losses and a seemingly revolving door among the company’s most senior executives.
Last year, the company posted a total net loss for the year to $529.2 million, or $14.71 per share, compared to a net loss of $263.2 million, or $7.00 per share, for 2015.
And this year’s results haven’t been much better. Through the first three quarters of 2017, Walter posted a total net loss of $213.86 million.
Then there are the changes at the top of the company.
Renzi took the reins at Walter Investment in September 2016. Earlier in 2016, Walter announced that Denmar Dixon resigned as CEO and vice chairman of the company after serving in the role for only eight months.
Dixon took on the role of CEO in October 2015 after Mark O’Brien, the company's former chairman and CEO, announced his retirement.
After Dixon left, Walter Investment chose George Awad to fill in as executive chairman and interim CEO while the company’s board searched for a permanent CEO.
Then the company chose Renzi, who most recently served as the chief operating officer, managing director and head of operations for Citigroup's North America retail bank, commercial bank and CitiMortgage, as its permanent CEO back in August 2016.
The company’s prominent subsidiaries, namely Ditech Financial, also saw executive changes as part of Renzi’s effort to create a “more streamlined and simple organization.”
One of those changes was the departure of David Schneider, who served as executive vice president and chief operating officer of Walter Investment and as president of Ditech Financial, which originates and services mortgages.
Schneider left the company in October 2016 as part of the company’s restructuring efforts.
According to Walter, the operations of Ditech and the company’s reverse mortgage division, Reverse Mortgage Solutions, will not be affected by the parent company’s bankruptcy proceedings.
Walter said that as part of the prepackaged bankruptcy plan, it signed agreements with lenders to provide Ditech and RMS with up to $1.9 billion in available warehouse financing that is expected to convert into exit financing in the same amount.
The new financing and cash generated from the company’s ongoing operations will be used to support the business (including Ditech and RMS) during the reorganization process, the company said.
Earlier this year, as the company positioned itself to file for Chapter 11, Renzi said that the company plans to exit bankruptcy quickly and be better positioned to succeed in the future.
“We are making significant progress transforming our business, and the financial restructuring contemplated by the agreements we have reached with our lenders and noteholders are a key part of our plans,” Renzi said in October.
“Through these agreements, we expect to quickly restructure our debt while ensuring that business will continue as normal. The support of our lenders demonstrates their confidence in our business, and we believe that we are on the right track to emerge from this process better positioned for continued growth and success,” Renzi continued.
“The fundamentals of our core business remain solid and we expect demand for our quality products, services and single source convenience to continue to grow. As we move forward we will continue to focus on serving our customers by enabling their dreams of homeownership and caring for them throughout their homeownership lifecycle,” Renzi added. “We appreciate the continued support of our business counterparties and lenders, and we thank our employees for their continued hard work and dedication. We look forward to completing this financial restructuring so we can continue to execute on our strategic initiatives as we seek to create a brighter future for our company and our customers.”
The company said late Thursday that it expects the financial restructuring process to be completed in the first quarter of 2018.
For more on the restructuring process, click here.