Altisource Asset Management Corporation Repurchases Preferred Shares in Global Settlement With Luxor Capital

Rhea-AI Summary

Altisource Asset Management Corporation (AAMC) settles litigation with Luxor Capital Group and former director Nathanel Redleaf, resulting in the surrender of 144,212 Preferred Shares by Luxor. A $1,000,000 cash payment and issuance of Promissory Notes totaling $11,000,000 over three different durations were provided to Luxor. Additionally, AAMC will pay 50% of any proceeds from a pending litigation to Luxor, up to a cap of $50,000,000. The settlement increases the Company’s Stockholders’ Equity to over $6,000,000, leading to the rescinding of the New York Stock Exchange’s notice of intent to delist AAMC’s common stock. Chairman and CEO William Erbey expressed satisfaction with the resolution and emphasized the company's commitment to enhancing shareholder value in the future.

Insights

Financial Analyst

The settlement between Altisource Asset Management Corporation (AAMC) and Luxor Capital Group represents a significant financial restructuring for AAMC. The surrender of Preferred Shares by Luxor eliminates potential dilution for existing shareholders, as those shares will no longer be convertible into common stock. The arrangement of Promissory Notes with staggered maturities and the option for interest to be paid in cash or kind provides AAMC with some flexibility in managing its cash flow, although it commits the company to long-term liabilities with substantial interest rates, especially if the PIK option is exercised.

The financial implications of this settlement for AAMC's balance sheet are twofold. Firstly, the extinguishment of rights under the Preferred Shares likely improves the company's equity position, a factor which contributed to the NYSE rescinding its delisting notice. This is a positive indicator for current and potential investors as it reflects a stabilization of the company's stock market standing. Secondly, the commitment to pay 50% of any proceeds from pending litigation introduces an element of contingency that investors need to consider. While there is a payout cap, this could result in substantial outflows if the litigation is successful, potentially affecting future financial stability.

Legal Expert

The mutual release of claims and the agreement to dismiss litigation with prejudice indicate a definitive end to the legal disputes between AAMC and Luxor. This resolution removes the uncertainty that typically surrounds ongoing litigation, which can be a drag on a company's resources and management attention. By eliminating this uncertainty, AAMC may be able to operate more efficiently and with greater focus on its business objectives.

However, the legal settlement also imposes certain covenants on AAMC, such as the restriction on common stock repurchases and dividend issuance while the PIK option is in effect. These covenants may limit AAMC's operational flexibility and could be seen as a trade-off for the legal peace the company has achieved. Stakeholders should be aware of these restrictions as they may impact the company's ability to return value to shareholders through these mechanisms in the near to medium term.

Market Research Analyst

The announcement of the litigation settlement could have varying impacts on market perception and investor sentiment. On one hand, the resolution of legal disputes and the avoidance of delisting are likely to be viewed positively, as they suggest improved governance and reduced risk. On the other hand, the financial commitments made by AAMC, including the sizable future payments and the interest rates on the Promissory Notes, may raise concerns about the company's future debt burden and interest expenses.

Moreover, the market will be monitoring the outcome of AAMC's ongoing litigation with Erbey Holding Corporation. A favorable outcome could result in significant proceeds, of which Luxor is entitled to 50% up to $50 million, potentially providing a substantial influx of capital. However, the cap also limits the benefit to AAMC from any litigation proceeds beyond this amount. Market reaction will likely hinge on the perceived balance between these financial obligations and the potential for enhanced shareholder value as indicated by the company's initiatives.

CHRISTIANSTED, U.S. Virgin Islands--(BUSINESS WIRE)-- Altisource Asset Management Corporation (“AAMC” or the “Company”) (NYSE American: AAMC) announces that it has settled litigation with Luxor Capital Group, LP and related entities (collectively “Luxor”) in respect of the Company’s Series A Convertible Preferred Stock (the “Preferred Shares”), as well as separate litigation with former AAMC director Nathanel Redleaf.

Settlement Highlights

Luxor surrenders all 144,212 of its Preferred Shares, thereby extinguishing all rights under the related Securities Purchase Agreement and Certificate of Designations. The Company provides the following consideration to Luxor:

A $1,000,000 cash payment now, plus Three Promissory Notes in the following amounts and durations:

$2,000,000 due in three years; $3,000,000 due in five years; and $6,000,000 due in eight years

Each Note bears annual interest at either 7.5% on a cash basis or 10% paid-in-kind (“PIK”) basis, at the election of AAMC. The Company shall refrain from making common stock repurchases or issuing dividends at any time the PIK option is in effect and is subject to certain other covenants.

AAMC shall also pay Luxor 50% of any proceeds received in respect of the Company’s damage claims in litigation brought by Erbey Holding Corporation pending in USVI Superior Court with case number SX-2018-CV-146, up to a cumulative payout cap of $50,000,000.

The Parties agree to dismissals of their litigation with prejudice and exchange mutual releases of all claims with no admission by any Party of liability, violation of law or wrongdoing.

As a result of the settlement, which has the effect of increasing the Company’s Stockholders’ Equity to an amount exceeding $6,000,000, the New York Stock Exchange informed the Company that its November 30, 2023 notice of intent to delist the Company’s common stock would be rescinded.

“We are pleased to announce AAMC’s global resolution of these matters relating to Luxor,” said William Erbey, Chairman and CEO of AAMC. “This represents a positive start to 2024 as we continue to focus and work hard on initiatives to enhance shareholder value going forward.”

About AAMC

AAMC is a private credit provider that originates alternative assets to provide liquidity and capital to under-served markets. Additional information is available at www.altisourceamc.com.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections, anticipations, and assumptions with respect to, among other things, the potential results of the damage claims in the litigation brought by Erbey Holding Corporation pending in USVI Superior Court with case number SX-2018-CV- These statements may be identified by words such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “target,” “seek,” “believe,” and other expressions or words of similar meaning. We caution that forward-looking statements are qualified by the existence of certain risks and uncertainties that could cause actual results and events to differ materially from what is contemplated by the forward-looking statements. Factors that could cause our actual results to differ materially from these forward-looking statements may include, without limitation, our ability to develop our businesses, and to make them successful or sustain the performance of any such businesses; and other risks and uncertainties detailed in the “Risk Factors” and other sections described from time to time in the Company’s current and future filings with the Securities and Exchange Commission. The foregoing list of factors should not be construed as exhaustive.

The statements made in this press release are current as of the date of this press release only. The Company undertakes no obligation to publicly update or revise any forward-looking statements or any other information contained herein, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240116605480/en/

Charles Frischer

T: +1-813-474-9047

E: charles.frischer@altisourceamc.com

Source: Altisource Asset Management Corporation

FAQ

What is the ticker symbol for Altisource Asset Management Corporation?

The ticker symbol for Altisource Asset Management Corporation is AAMC.

What was the result of the settlement with Luxor Capital Group?

The settlement resulted in the surrender of 144,212 Preferred Shares by Luxor.

What consideration did AAMC provide to Luxor as part of the settlement?

AAMC provided a $1,000,000 cash payment and issued Promissory Notes totaling $11,000,000 over three different durations to Luxor.

What is the cap for the proceeds that AAMC will pay to Luxor from a pending litigation?

AAMC will pay 50% of any proceeds from a pending litigation to Luxor, up to a cap of $50,000,000.

What was the impact of the settlement on the Company's Stockholders’ Equity?

The settlement increased the Company’s Stockholders’ Equity to over $6,000,000, leading to the rescinding of the New York Stock Exchange’s notice of intent to delist AAMC’s common stock.