Mortgage Company Acquisition Bails Out Troubled Lender
Citadel Investment Group has agreed to buy ResMae Mortgage Corp. for about $180 million, beating out Credit Suisse Group in a last-minute auction for the financially troubled mortgage lender.
Citadel offered about $20 million for ResMae’s lending business and 98.5 cents on the dollar for the company’s $160 million existing mortgage loan portfolio, said Ron Greenspan, a financial adviser for ResMae’s creditors.
U.S. Bankruptcy Judge Kevin Carey in Wilmington, Del., said he will sign an order approving the sale.
“Citadel stepped up and gave us a firm bid,” said Greenspan, the senior managing director in FTI Consulting’s Los Angeles office. Credit Suisse, the second-largest bank in Switzerland, had offered 98 cents on the dollar for the company’s bad credit home loan holdings and laced its bid with conditions.
Citadel, run by Ken Griffin and oversees about $13 billion in assets, last week challenged Credit Suisse’s $19.1 million bid for ResMae’s mortgage lending unit, triggering an auction that began March 2.
In an interview last year, Citadel said it would start staking a claim in U.S. mortgage markets.
“If you look at the last five years, there has been an enormous increase in the securitization” of mortgages on the secondary market, Griffin said at the time. “There is a real need for firms that understand how to manage risks in those portfolios.”
ResMae, based in Brea, Calif., filed for bankruptcy protection on February 13 and won Carey’s permission to sell itself to Credit Suisse, bypassing a court-supervised auction normally required under Chapter 11 rules.
Credit Suisse declined to comment.
ResMae was the third lender specializing in subprime, or bad credit home loans, to seek bankruptcy protection since the end of December and is one of more than 20 that have shut down, scaled back or been sold since last year.
As default rates rise en masse on the bad credit mortgages issued from 2001-2005, more and more lenders are forced to shut their doors.
Meanwhile, a survey released Monday by a magazine published by Hedge Fund Intelligence said JPMorgan Chase & Co. overtook Goldman Sachs Group Inc. to become the largest U.S. hedge-fund manager.
Hedge-fund assets at JPMorgan soared 74 percent last year, to $34 billion, according to Absolute Return magazine. Goldman’s hedge-fund assets rose 48 percent, to $32.5 billion.
The firms, along with Bridgewater Associates Inc., are the only U.S. hedge-fund managers with more than $30 billion of assets, and combined they hold 7 percent of the industry’s $1.4 trillion in client funds globally.
SOURCE: Chicago Tribune