Ocwen Financial (OCN) in Atlanta has retired approximately $159 million of debt held by a private-equity backer.
The mortgage servicer has retired 100,000 of the 162,000 preferred shares held by the private-equity firm WL Ross, it announced Tuesday. The shares were converted to common stock and immediately repurchased, Ocwen said.
In addition, Ocwen amended its bank credit facility to allow it to repurchase the rest of the preferred stock and to buy back up to $1.5 billion in common stock. The amendments would also eliminate a cap on Ocwen's debt and change how Ocwen's collateral is calculated.
"As we have said publicly, we believe that our cash-generating capability and debt capacity are sufficient to fund substantial growth and return earnings to our shareholders in the form of stock repurchases," Bill Erbey, Ocwen's executive chairman, said in a news release. "We view the amendment ... and the opportunity to make this repurchase from WL Ross & Co. as consistent with our long-term plans."
Ocwen issued $162 million of preferred stock to WL Ross as part of its purchase of Homeward Residential Holdings from WL Ross, which was completed in December, according to Ocwen's latest annual report. The agreement permitted the preferred shares to be converted to common stock at the two companies' agreement.
Ocwen has been buying up mortgage servicing rights from banks and other institutions that are seeking to trim their exposure to the servicing business or leave it entirely. In addition to Homeward, this year Ocwen has bought a portion of Ally Financial's servicing portfolio and a reverse-mortgage company from Genworth Financial.