It appears that other bidders – besides the known suspects – will make a run at Residential Capital Corp. on Tuesday and Wednesday when the firm is auctioned off by a federal bankruptcy trustee.
The sale should generate money that will be utilized to pay back Ally and other buyers such as those who purchased MBS backed by faulty ResCap mortgages.
According to a new report from Sterne Agee, the Blackstone Group is teaming up with the IBM-owned Seterus, and Walter Investment Management Corp. is partnering with Ocwen Financial.
Also, sources told ASR sister publication National Mortgage News that Vericrest Financial had expressed some type of partner interest in the $365 billion servicer, though it appears to have backed away from the deal. A spokeswoman for Vericrest did not return a telephone call about the matter.
Other known bidders include Nationstar Mortgage, and Berkshire Hathaway, Warren Buffett’s company. (Some of Sterne’s information is based on other published reports.)
Sterne Agee analysts noted that bidders can buy all of ResCap’s MSRs “or just or just the GNMA portfolio, estimated at $41.6 billion, or the whole platform less the GNMA business.”
It added: “The other assets, which include the origination platform, are being acquired essentially at book.”
Anyone trying to buy the whole of ResCap will have to outbid Nationstar by its break-up fee of $24 million plus an incremental $5 million more. (Nationstar is the stalking horse bid.)
Sterne believes Walters is “focused just on $50 billion in agency servicing, but with its extra cash in hand, it should be well positioned to look at more than just this.”
Although the bid for ResCap was underway on Tuesday the process could last as long as five days with follow up hearings running into November at least.
As for what ResCap might fetch Sterne said that the MSRs (its chief assets) likely won’t sell for more than its book value of $1.018 billion. “A $1.2 billion MSR bid would take expected levels of return on capital (adjusted EBITDA/capital invested in MSRs and servicing) down to below 11%, too low in our view. A $1.3 billion bid would eliminate, at least in 2014, the EPS contribution from the servicing asset. One risk is that bidders may overpay for the servicing to capture the gains associated with refinancing the portfolio run-off and from capturing any available [Home Affordable Refinance Program] mods.”
