Buy
CS Note
Credit Suisse is out with an Investment note regarding the Ditech asset purchase agreement:
Asset purchase: NRZ has entered into a "stalking-horse" asset purchase agreement to buy the forward mortgage assets from Ditech, including $63 billion of MSRs (just under $600 million asset value), servicer advances ($320 million), and origination-related assets. The purchase price of the assets is expected to be approximately $1 billion; it will be determined at closing based on tangible book value of the assets. Management expects the equity outlay will be $225-250 million, which will be funded by existing financing facilities and cash on hand (~$400 million).
$0.10-$0.15/share accretive: Assuming a typical 8-10% return on MSR assets, we view this acquisition as $0.10$-0.15/share accretive to the current run rate (annual) of earnings. We are not changing our estimates at this point as our estimates had already contemplated the acquisition of additional MSRs in the second half of 2019. We do see additional upside potential from this transaction from increased origination vo
While lower rates will pressure 2Q book value (we estimate down ~3% as of the end of May), today's announcement should reinforce confidence in the earnings power and dividend (12.9% yield). With that increased confidence in the dividend, we continue to see upside to the shares from current levels.