News that Warren Buffett's Berkshire Hathaway would purchase manufactured housing lender Oakwood Homes for $373 million left the market optimistic that the issuer - when combined with previously acquired Clayton Homes - would provide stability to the lagging sector. But the news did not persuade players that outstanding transactions would miraculously remedy themselves.
"With Oakwood and Clayton merged into one large entity there is potential that a MH sector turnaround may be afoot," said Credit Suisse First Boston researcher Rod Dubitsky. "But the die is already cast for most [outstanding] deals; however, there are some important potential benefits."
Dubitsky added that there were likely synergies to be had with the Oakwood-Clayton combination and the triple-A rating of Berkshire Hathaway is a boost. The benefits are more likely to come in the form of increased liquidity in the secondary market, improved servicing processes and increased availability of repo financing for Oakwood, which may result in improved recoveries.
While it was unclear in the wake of the announcement which unit would take the lead role in the restructured servicing operations, Clayton Homes has long been considered the leading MH servicer, with effective repossession agreements with its dealer units.
As for spread levels post-announcement, there were no reported trades, with buysiders blaming the holiday-shortened week for a market-wide slowdown as of Tuesday afternoon. "There is no picture on Oakwood right now. But that's not surprising given the holiday week," one distressed-ABS trader said.
Since 1994, when both Oakwood and Clayton Homes lending unit Vanderbilt Mortgage began securitizing, the pair have issued 59 transactions combined, totaling $15.8 billion (original balance), according to Bloomberg. Oakwood priced 30 offerings, for a total of $7.11 billion, with Vanderbilt Mortgage completing 29 deals totaling $8.75 billion.
Oakwood filed for Chapter 11 bankruptcy protection in November 2002, and shortly thereafter received a $415 million debtor-in-possession facility from Berkshire. Clayton Homes, meanwhile was bought for $1.7 billion via a hostile takeover launched in mid-June, after being recommended to Buffett as an attractive target by 40 University of Tennessee students.