Mr. Cooper Group Inc. Announces Pricing of Offering of $750 Million of Senior Notes

Rhea-AI Summary

Mr. Cooper Group Inc. (NASDAQ: COOP) has announced the pricing of a $750 million senior notes offering through its subsidiary, Nationstar Mortgage Holdings Inc. The notes, due in 2029, will bear an interest rate of 6.500% per annum, payable semi-annually. The offering is expected to close around August 1, 2024, with proceeds intended to repay a portion of Mr. Cooper's MSR facilities. The notes will be guaranteed by Mr. Cooper and Nationstar's wholly-owned domestic subsidiaries. The offering is to qualified institutional buyers in the U.S. and international investors under specific exemptions, as the notes have not been registered under the Securities Act.

Positive

• Successful pricing of $750 million senior notes offering
• 6.500% interest rate secured for the notes
• Proceeds to be used for repaying existing debt, potentially improving financial structure

Negative

• Increase in long-term debt obligations
• Additional interest expenses may impact future profitability

Insights

Financial Analyst

Mr. Cooper Group's announcement of a $750 million senior notes offering is a significant financial move that warrants attention. The 6.500% interest rate on these notes, maturing in 2029, is particularly noteworthy in the current economic climate. This rate suggests a balance between attracting investors and managing long-term debt costs.

The company's intention to use the proceeds to repay a portion of its MSR (Mortgage Servicing Rights) facilities is a strategic decision. This refinancing could potentially improve Mr. Cooper's debt structure and reduce its overall interest expenses, depending on the terms of the existing MSR facilities. However, investors should be cautious about the increased long-term debt load.

The joint and several guarantees from Mr. Cooper and its subsidiaries add a layer of security for noteholders, potentially making the offering more attractive to qualified institutional buyers. This structure also indicates the integrated nature of Mr. Cooper's business operations.

From an investor's perspective, this move could signal confidence in the company's long-term financial stability and growth prospects. However, it's important to monitor how this additional debt impacts Mr. Cooper's balance sheet and debt-to-equity ratio in the coming quarters.

Legal Expert

The legal structure of Mr. Cooper Group's notes offering is meticulously designed to comply with securities regulations while maximizing flexibility. The reliance on exemptions from registration requirements under Rule 144A and Regulation S of the Securities Act is a common practice for such offerings, allowing for a more streamlined issuance process.

However, this approach limits the potential investor base to qualified institutional buyers in the U.S. and certain non-U.S. persons, excluding retail investors. This restriction is a double-edged sword: it simplifies the offering process but may impact liquidity in the secondary market.

The explicit disclaimer regarding the non-registration of the notes and the limitation on their resale is a important legal protection for the company. It shifts the responsibility of ensuring compliance with applicable securities laws to potential purchasers and subsequent transferees.

Investors should be aware that the lack of registration could affect the notes' transferability and liquidity. Moreover, the company's careful wording about the expected closing date and use of proceeds provides legal flexibility in case of unforeseen circumstances.

From a governance perspective, the guarantee structure involving Mr. Cooper and its subsidiaries suggests a complex corporate structure that investors should scrutinize for potential risks and obligations.

Market Research Analyst

Mr. Cooper Group's $750 million senior notes offering provides valuable insights into the current state of the mortgage servicing industry and broader financial markets. The 6.500% interest rate is particularly telling, as it reflects both the company's credit profile and investor appetite for yield in the current economic environment.

This offering comes at a time when the mortgage industry is navigating challenges such as rising interest rates and shifting housing market dynamics. Mr. Cooper's ability to secure this significant funding suggests investor confidence in its business model and market position. However, it also indicates the company's need for substantial capital, possibly to navigate the evolving market landscape or fund growth initiatives.

The decision to target qualified institutional buyers rather than retail investors aligns with current market trends, where sophisticated investors are sought for large debt offerings. This approach may result in a more stable investor base but could limit secondary market liquidity.

Investors should consider how this offering compares to similar recent issuances in the financial services sector. The 6.500% rate and 2029 maturity provide a benchmark for assessing risk premiums in the mortgage servicing industry.

Looking ahead, this offering could influence Mr. Cooper's competitive positioning and financial flexibility. It may enable the company to optimize its capital structure, potentially leading to improved profitability or increased capacity for strategic initiatives. However, the additional debt also increases financial leverage, which could become a concern if market conditions deteriorate.

DALLAS--(BUSINESS WIRE)-- Mr. Cooper Group Inc. (NASDAQ: COOP) (“Mr. Cooper”) announced the pricing of an offering by Nationstar Mortgage Holdings Inc., a direct wholly-owned subsidiary of Mr. Cooper (“Nationstar”), of $750,000,000 6.500% Senior Notes due 2029 (the “Notes”). The Notes will bear interest at 6.500% per annum and will mature on August 1, 2029. Interest on the Notes will be payable semi-annually on February 1 and August 1 of each year, beginning on February 1, 2025.

The offering is expected to close on or around August 1, 2024, subject to customary closing conditions. It is expected that the net proceeds of the offering will be used to repay a portion of the amounts outstanding under Mr. Cooper’s MSR facilities.

The Notes will be guaranteed on a joint and several basis by Mr. Cooper and wholly-owned domestic subsidiaries of Nationstar (other than certain excluded subsidiaries).

The offering of the Notes was made in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in the United States only to investors who are “qualified institutional buyers,” as that term is defined in Rule 144A under the Securities Act, or outside the United States pursuant to Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements.

This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of any of the Notes in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Forward-Looking Statements

This press release may include information that could constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in Mr. Cooper’s Securities and Exchange Commission filings. Past results of Mr. Cooper are not necessarily indicative of future results. Mr. Cooper does not undertake any obligation to update any forward-looking statement.

About Mr. Cooper Group

Mr. Cooper Group Inc. (NASDAQ: COOP) provides customer-centric servicing, origination and transaction-based services related principally to single-family residences throughout the United States with operations under its primary brands: Mr. Cooper® and Xome®. Mr. Cooper is the largest home loan servicer in the country focused on delivering a variety of servicing and lending products, services and technologies.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240729441839/en/

Investor Contact:

Kenneth Posner, SVP Strategic Planning and Investor Relations

(469) 426-3633

Shareholders@mrcooper.com

Media Contact:

Christen Reyenga, VP Corporate Communications

MediaRelations@mrcooper.com

Source: Mr. Cooper Group Inc.

FAQ

What is the size and interest rate of Mr. Cooper Group's (COOP) new senior notes offering?

Mr. Cooper Group (COOP) has priced a $750 million senior notes offering with an interest rate of 6.500% per annum.

When will Mr. Cooper Group's (COOP) newly issued senior notes mature?

The senior notes issued by Mr. Cooper Group (COOP) will mature on August 1, 2029.

How will Mr. Cooper Group (COOP) use the proceeds from the senior notes offering?

Mr. Cooper Group (COOP) intends to use the net proceeds from the senior notes offering to repay a portion of the amounts outstanding under its MSR facilities.

When is the expected closing date for Mr. Cooper Group's (COOP) senior notes offering?

The senior notes offering by Mr. Cooper Group (COOP) is expected to close on or around August 1, 2024, subject to customary closing conditions.