Business Context and Reporting Period
This Form 8-K, dated June 17, 2019, reports a material definitive agreement entered into by New Residential Investment Corp. (NRZ). The filing details a "stalking-horse" Asset Purchase Agreement (APA) with Ditech Holding Corporation and Ditech Financial LLC, who are debtors-in-possession under Chapter 11 bankruptcy proceedings.
Key Financial Metrics and Transaction Terms
- Expected Purchase Price: Approximately $1 billion, subject to adjustment at closing based on asset and liability valuations.
- Funding Source: A combination of existing financing facilities and cash on hand.
- Deposit Funds: $70 million deposited into escrow, to be credited against the purchase price upon closing.
- Termination Fee: Up to $30 million payable by Sellers if the APA is terminated under specific circumstances (e.g., acceptance of a higher bid).
- Expense Reimbursement: Up to $6 million for reasonable expenses if the APA is terminated for certain reasons.
Material Changes and Transaction Structure
The Company has agreed to acquire "Acquired Assets" and assume "Assumed Liabilities" from the Sellers. The transaction is subject to a Bankruptcy Court-supervised process, including potential auctions for competing bids. The APA includes customary representations, warranties, and covenants regarding business conduct and the procurement of necessary governmental and third-party consents.
Guidance, Risks, and Contingencies
Closing Conditions: The transaction is contingent upon receipt of governmental approvals, execution of related agreements (including servicing rights and transition services), and Bankruptcy Court approval.
Termination Rights: The APA may be terminated if closing does not occur by December 31, 2019 (unless extended), if a court prohibits the closing, or upon material uncured breaches. The Company retains the right to terminate if the Bankruptcy Court's Confirmation Order does not contain acceptable Sale Provisions.
Risks: Forward-looking statements highlight risks including financing difficulties, integration challenges, regulatory delays, unanticipated liabilities, and the potential failure to retain employees or customers. The filing explicitly disclaims any obligation to update these statements.
Investor Verification Checklist
- Verify the final purchase price and asset/liability composition at the time of closing.
- Monitor the Bankruptcy Court process for competing bids and the final approval of the sale.
- Confirm the status of required governmental and third-party consents.
- Review the full text of the APA (to be filed as an exhibit) for detailed indemnification and escrow terms.
- Assess the impact of the $70 million deposit on the Company's immediate liquidity.