Nationstar Loses in Auction for ResCap Assets (10/24/12)
By Andrew R. Johnson
Nationstar Mortgage Holdings Inc. (NSM) said Wednesday it did not top Ocwen Financial Corp. (OCN) in a bidding war for the mortgage-servicing assets of lender Residential Capital, which is in bankruptcy proceedings.
The assets went to auction Tuesday as part of the bankruptcy proceedings for ResCap, a subsidiary of government-owned auto lender Ally Financial Inc. ResCap filed for Chapter 11 bankruptcy in May as billions of dollars of bond payments loomed and litigation over soured mortgage securities mounted.
Nationstar's shares were down 15% at $29.65 in recent trading.
Nationstar and Ocwen were the only two bidders competing for ResCap's mortgage-servicing and -origination platform, which includes the rights to service 2.4 million mortgages that account for $374 billion in unpaid balances. The companies have been scooping up in recent months the mortgage-servicing assets of large banks that are exiting the business because of new regulations and capital requirements.
Bidding on the assets extended into Wednesday, as both companies sought to top each other's offers.
"Price matters," said Nationstar Chief Executive Jay Bray in a statement. "Obviously we are disappointed in the outcome of the auction, but in the end our judgment was that the price of the assets would not represent a compelling investment opportunity for us."
Nationstar did not disclose what its final bid was and the companies didn't disclose the size of the winning bid.
The Wall Street Journal--citing people attending the auction--reported late Tuesday that Nationstar had submitted a $2.67 billion, bid which topped a bid of $2.65 billion by Ocwen.
Nationstar, majority-owned by private-equity firm Fortress Investment Group LLC (FIG), was designated as the stalking horse bidder for ResCap's assets earlier this year by the U.S. Bankruptcy Court. The designation entitles the company to a breakup fee.
ResCap would have doubled the assets of Nationstar, putting it on equal footing with Ocwen. For Ocwen, already the biggest player, a win would make the company more than three times as big as Nationstar.
Ally, which isn't part of the bankruptcy proceedings, hopes to sever itself from ResCap's bond and litigation matters so it can focus on repaying a U.S. government bailout that topped $17 billion.
-Christian Berthelsen and Melodie Warner contributed to this article.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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