LDI

Business Context and Reporting Period

loanDepot, Inc. (LDI) filed a Form 8-K on June 24, 2024, reporting the settlement of an exchange offer by its subsidiary, LD Holdings Group LLC. The transaction involved exchanging existing 6.500% Senior Notes due 2025 for newly issued 8.750% Senior Secured Notes due 2027.

Key Financial Metrics

• New Debt Issuance: $340,646,000 aggregate principal amount of 8.750% Senior Secured Notes due 2027.
• Interest Rate: 8.750% per annum, payable semi-annually in arrears starting November 1, 2024.
• Maturity Date: November 1, 2027.
• Collateral: The New Notes are secured by a first priority security interest in:
  • A securities account for risk retention securities from mello Credit Strategies LLC.
  • Unencumbered non-agency mortgage servicing rights with a fair value up to $60.0 million.
  • A securities account holding $100.6 million of the Issuer's 6.125% Senior Notes due 2028.
• Guarantees: Fully and unconditionally guaranteed on a senior unsecured basis by certain wholly-owned restricted subsidiaries. Additionally, mello Credit Strategies LLC provided a guarantee for the 2028 Notes.

Material Changes

The primary material change is the refinancing of the 6.500% Senior Notes due 2025 (Old Notes) with the new 8.750% Senior Secured Notes due 2027 (New Notes). This transaction extends the maturity of the debt by approximately two years but increases the coupon rate by 225 basis points. The new debt structure introduces significant collateral requirements and restrictive covenants not present in the prior unsecured notes.

Guidance, Outlook, and Risks

Redemption Terms:

• Pre-November 1, 2025: Redeemable at 100% of principal plus a "make-whole" premium and accrued interest. Alternatively, up to 40% of the principal may be redeemed using net proceeds from equity offerings at 108.75% of principal.
• Post-November 1, 2025: Redeemable at prices set forth in the Indenture.

If a change of control occurs, the Issuer must offer to repurchase the New Notes at 101% of the principal amount plus accrued interest.

The Indenture imposes strict limitations on the Issuer and its subsidiaries regarding:

• Incurring additional indebtedness or guarantees.
• Creating liens or using assets as security.
• Declaring dividends, redeeming stock, or making distributions.
• Mergers, consolidations, or asset sales.
• Transactions with affiliates.

The filing includes standard forward-looking statement disclaimers, noting that actual results may differ due to risks outlined in the confidential Offering Memorandum and the Company's 2023 Form 10-K. The filing does not provide specific revenue, profit, or cash flow figures for the reporting period.

Investor Verification Checklist

• Verify the exact amount of Old Notes successfully exchanged versus those remaining outstanding.
• Review the full text of the Indenture (Exhibit 4.1) to understand specific covenant thresholds and exceptions.
• Assess the impact of the increased interest rate (8.750%) on future interest expense and cash flow requirements.
• Confirm the status and valuation of the collateral assets, specifically the $60.0 million in mortgage servicing rights and the $100.6 million in 2028 Notes.
• Monitor compliance with the new restrictions on dividends and additional indebtedness.