Onity Group Inc. · NYSE:ONIT
Onity — Ocwen Financial — Debt Investor Presentation (December 2011)
30 slides from Onity's debt investor presentation, Dec 1, 2011
Slide 1: Lenders' Presentation – Public
Lenders’ Presentation – Public December 1, 2011 © 2011 Ocwen Financial Corporation. All rights reserved.
Slide 2: Forward-looking statements and GAAP reconciliation
Forward - looking statements and GAAP reconciliation Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved or whether such performance
Slide 3: Senior Secured Term Loan
‘Senior Secured Term Loan
Slide 4: Presenters
Presenters William C. Erbey Chairman 23 years at Ocwen 38 years of industry experience ■ Ocwen: Chairman of Board since 1996, Chief Executive Officer from 1988 to 2010 and President from 1988 to 1998 ■ 1983 to 1995: Managing General Partner of The Oxford Financial Group, a private investment partner
Slide 5: Transaction terms
Transaction terms Summary Terms and Conditions Borrower: Ocwen Financial Corporation (“Ocwen” or the “Borrower”) Sole Arranger & Bookrunner: Barclays Capital Inc. Administrative Agent: Barclays Bank PLC Facilities: $200 million Incremental Senior Secured Term Loan (the “Incremental Term Loan”) Coupo
Slide 6: Transaction timetable
Transaction timetable Date Event December 1 st ■ Lender Update Call December 8 th ■ Lender Commitments Due December 8 th ■ Loan Documentation Posted to Intralinks for Investor Review December 15 th ■ Comments Due on Loan Documentation February 1 st ■ Close and fund credit facility and close Saxon an
Slide 7: Business Overview
Business Overview Senor Seco Te Loan . oO
Slide 8: Who we are and what we do
Who we are and what we do ■ Leading provider of residential and commercial mortgage loan servicing and special servicing ♦ Publicly-traded (NYSE: OCN) pure play mortgage servicer with $1.6 billion in market capitalization ♦ 20+ years of innovation in loss mitigation ♦ #1 in servicing quality in thir
Slide 9: Summary of investment highlights
Summary of investment highlights 1 Ocwen has a strong pipeline of attractive growth opportunities, however growth is not required to repay debt 2 Highly scalable platform with operating cost 70% below the industry 3 Superior servicing and loss mitigation practices effective at driving down delinquen
Slide 10: Growing demand for high-touch servicers in $11 trillion industry
1 Growing demand for high-touch servicers in $11 trillion industry ■ $10.5 trillion in residential mortgages outstanding as of December 31, 2010 (1) ♦ $1.4 trillion of delinquent loans ■ Top four banks service 54% of total loans, but focused on prime “low touch” loans ♦ We believe “high touch” servi
Slide 11: We have a strong pipeline of attractive growth opportunities
1 We have a strong pipeline of attractive growth opportunities Ocwen began purchasing non-performing loans in 1992 and has serviced subprime loans since 1996 Growth opportunities ■ On October 19, 2011, we signed a definitive agreement to acquire Saxon and certain MSRs owned by Morgan Stanley and its
Slide 12: Why is Ocwen well positioned to benefit from these opportunities?
1 Why is Ocwen well positioned to benefit from these opportunities? ■ Ocwen excels at servicing highly delinquent portfolios ■ Ocwen has ♦ A 70% cost advantage in servicing non-performing loans (1) ♦ A proven ability to reduce delinquencies and advances ♦ Best in class 90+ day to current roll rates
Slide 13: Existing business more than sufficient to pay off all debt
1 Existing business more than sufficient to pay off all debt Without acquiring any new MSRs, Ocwen expects to generate $2.1 billion in cash flow over the remaining life of the term loan ■ Primary sources of Ocwen’s cash flow include: ♦ Net income from operations ♦ Reduction in advances, net of reduc
Slide 14: Highly scalable platform with lowest operating costs
2 Highly scalable platform with lowest operating costs ■ Can quickly scale its servicing platform to efficiently board acquired portfolios with only modest additions to infrastructure ■ Lowest operating cost relative to the subprime mortgage servicing industry (1) ■ Achieves its competitive position
Slide 15: Effective at driving down delinquencies and advances
3 Effective at driving down delinquencies and advances Delinquency Percentage (90 day + non-performing) by Portfolio … with differing levels of advances as a % of UPB (1) 1. Based on UPB where Ocwen is required to make servicer advances as of 9/30/2011. 2. Legacy Saxon performance based on previousl
Slide 16: Revenue exceeds contractual rate soon after boarding
3 Revenue exceeds contractual rate soon after boarding due to recapture of deferred servicing fees and to ancillary income Revenue in bps – Legacy Saxon Servicing, HomEq & Litton Portfolios Note: Saxon servicing portfolio was boarded in May 2010, HomEq portfolio in September 2010, and Litton portfol
Slide 17: Acquisitions provide attractive returns, which increase over time
4 Acquisitions provide attractive returns, which increase over time ■ Margins expand as revenue per UPB grows without concomitant increase in expense ■ Portfolio becomes less capital intensive as delinquencies and advances decline ■ Pre-tax return on capital increases Underwritten capital / UPB Unde
Slide 18: Substantial cash flow generation
5 Substantial cash flow generation ■ Without any new UPB, the existing portfolio including Litton, Saxon and JPM, is expected to generate $2.1 billion in cash flow over the remaining life of the term loan ■ Cash provided by operating activities was $804 million in the first nine months of 2011 ■ Acc
Slide 19: Low risk balance sheet
6 Low risk balance sheet $1.3 billion of equity supported by high quality assets Highly rated assets ($ in millions) Pro Forma % of 9/30/11 Total Total Assets (1) $7,138 100% Investment Grade Quality Assets Advances $6,138 86% Cash 52 1% Cash reserve accounts 148 2% Deferred Tax Assets 139 2% Total
Slide 20: Strong collateral protection
7 Strong collateral protection Investment grade quality assets significantly exceed total debt, and they largely consist of advances that are self-liquidating with duration matched funding Selected collateral is 2.7x the term loan (1) ■ Collateral is valued at >=BBB level as follows: ♦ Advances – 88
Slide 21: Transaction Overview
Transaction Overview Remon 8 ta 2
Slide 22: Acquisitions overview
Acquisitions overview Saxon Transaction Overview ■ On October 19, 2011, Ocwen entered into a purchase agreement with SCI Services, Inc., Saxon Capital Holdings, LLC and Morgan Stanley Mortgage Capital Holdings, LLC to acquire Saxon ■ The acquired portfolio had $26.8 billion in UPB as of June 30, 201
Slide 23: Transaction sources and uses
Transaction sources and uses Sources ($ in millions) New Advance Facility / Increase in Existing Capacity $1,725 Incremental Term Loan 200 Equity Raise, net Proceeds (1) 355 Cash and Available Advance Facility Draw (2) 177 Total Sources $2,457 Uses Saxon Acquisition (3) $1,451 JPM Acquisition (3) 95
Slide 24: Pro forma capitalization
Pro forma capitalization ($ in millions) Actual Pro Forma 9/30/11 Adjustments 9/30/11 Cash (1) $152 ($100) $52 Match Funded Liabilities $3,080 $1,802 (2) $4,882 Secured Borrowings and Other Debt 50 - 50 Total Non-recourse Debt (3) $3,130 $1,802 $4,932 Existing Senior Secured Term Loan 561 - 561 Incr
Slide 25: "Run-Rate" 9/30/11 Adjusted EBITDA
“Run-Rate” 9/30/11 Adjusted EBITDA (1) 1. Adjusted EBITDA equals pre-tax income plus corporate interest expense plus depreciation and amortization plus other non-cash charges reducing net income and any restructuring charges relating to acquisitions less interest income on cash. Adjusted EBITDA is a
Slide 26: Pro forma credit statistics
Pro forma credit statistics Corporate Debt / Adjusted EBITDA (1) Total Debt / Total Equity 1. Adjusted EBITDA equals pre-tax income plus corporate interest expense plus depreciation and amortization plus other non-cash charges reducing net income and any restructuring charges relating to acquisition
Slide 27: Summary of investment highlights
Summary of investment highlights 1 Ocwen has a strong pipeline of attractive growth opportunities, however growth is not required to repay debt 2 Highly scalable platform with operating cost 70% below the industry 3 Superior servicing and loss mitigation practices effective at driving down delinquen
Slide 28: Senior Secured Term Loan
‘Senior Secured Term Loan Laat caed 7 le)
Slide 29: Pro forma collateral coverage
Pro forma collateral coverage ■ Ocwen currently has $2,031 million of collateral giving rise to a 2.7x collateral coverage ratio ■ Taking a more conservative view on the collateral, total "investment grade quality" collateral is $1,073 million, which still exceeds the term loan ■ The investment grad
Slide 30: Historical financials
Historical financials Quarterly Revenue Adjusted EBITDA Annual Revenue Adjusted EBITDA Note: All figures exclude Altisource. 1. "Run-rate" Adjusted EBITDA assuming steady state performance for Saxon and JPM acquisitions on Ocwen's servicing platform.
Ocwen Financial — Debt Investor Presentation (December 2011) on 6ix