HomeSide Lending Inc., the joint venture of BancBoston Mortgage and Barnett Mortgage, is going public.
The company plans to raise as much $106 million to pay down debt, according to a registration statement filed Thursday with the Securities and Exchange Commission.
According to the document, the company will sell 5.9 million shares at $16 to $18 a share. There also is an overallotment option, which would allow for a sale of an additional 885,000 shares.
A HomeSide spokeswoman declined discuss the plan, citing legal restraints during the offering period. Merrill Lynch & Co. and Smith Barney & Co. will underwrite the initial public offering. The shares are expected to be available to the public in early 1997. According to the SEC filing, the company's stock will trade on the New York Stock Exchange under the ticker symbol HLI.
The decision to go public was a move that many industry observers had been expecting ever since the company was formed in March. But HomeSide's chairman and chief executive, Joe Pickett, has repeatedly denied that the company was looking to offer shares to the public in the near future.
HomeSide is the first example of two major banks teaming together to wring more profits from the mortgage industry.
The company will use $77.9 million of the proceeds from the offering to pay back senior secured notes issued earlier this year and another $14.4 million to pay down portions of its bank credit line.
The company's stock sale will mark the first time a major independent mortgage bank has gone public since Resource Bancshares Mortgage Group in 1993. HomeSide is one of the 10 largest mortgage banks in the country. As of Nov. 30, HomeSide had a servicing portfolio of $88.7 billion. Its net income for the first three quarters of its fiscal year was $29.3 million.
Originations for its first three fiscal quarters, through November, were $18.9 billion.
Besides the reduction of debt, the IPO will open the door for HomeSide to make more equity offerings, using the proceeds for expansion. No dividend payments are planned in the near future.
The company stated in the document that it would like to expand its business by bulking up its proprietary technology, improving servicing efficiencies, and expanding its wholesale lending.
The offering also will serve to place a concrete value on the holdings of HomeSide's parents. Bank of Boston Corp. and Barnett Banks Inc. own a third of HomeSide. The other third is owned by two venture capital firms, Thomas H. Lee & Co. and Madison Dearborn Partners.
After the offering, the members of the group will still hold a majority stake. But industry observers say it's just a matter of time before Lee and Madison Dearborn seek to cash out or all or part of their positions, a common route for venture capital firms.
HomeSide also did not rule out bringing in other bank partners as joint owners.
