The auction process for the government-controlled Residential Capital Corp. (ResCap) could last for up to five days with the bankruptcy court not approving a winning bidder for almost a month, which could come on Nov. 19, according to a new report from Sterne Agee.
In its research note, Sterne Agee analysts Henry Coffey, Jason Weaver and Calvin Hotrum write that a “hard look at the data” suggests that “none of the major bidders” hold a material advantage. (The official bid date is Oct. 23.)
But the analysts add that Nationstar Mortgage and Ocwen Financial Corp. “bring specific, but not identical, advantages to the table and that the final outcome between these two will be function of each's expected cost of servicing the assets, targeted returns on capital, and the value they each ultimately put on the origination arm…One of these two is the expected winner, but the race is too close to call.”
Publicly traded Nationstar is the "stalking horse" bidder on ResCap with Ocwen Financial, and a unit of Berkshire Hathaway also expressing an interest in ResCap’s $365 billion servicing portfolio.
At least one other servicer (with private equity backing) has been mentioned as a possible bidder.
Nationstar, which went public earlier this year, is controlled by Fortress Investment Group. Although Fortress’ share price has floundered – its stock trades for under $5–Nationstar recently hit a new high of $34.90.
ResCap is controlled by Ally Financial, which threw its mortgage division into Chapter 11 back in May. Ally is majority controlled by the U.S. Treasury.