After reports in October that Walter Investment Management Corp (NYSE:WAC) was working on a plan to help with its debt, the Walter Investment Management bankruptcy has finally landed. The mortgage banking firm has long been struggling with billions of dollars in debt, with the Walter Investment Management Chapter 11 protection seen as one of the few options remaining to the company. Much of the Walter Investment Management debt has been accumulating over the last few years, with some calling it a carryover from the recession of the late 2000s.
While the details of the Walter Investment Management restructuring were released recently, the company’s decline into bankruptcy could be seen in its flagging quarterly reports and layoffs made at some of its subsidiaries. For years now, the company has been the victim of declining revenue and poor financials, which ultimately resulted in the Walter Investment Management bankruptcy.
“The actions taken today are intended to reduce the company’s debt, strengthen its balance sheet and better enable Walter to focus on its business, including the growth of its origination and servicing businesses, new technology, innovation, and other areas that are critical to the company’s success,” Walter Investment Management wrote in a statement. “The company remains strongly committed to serving its customers by enabling their dreams of homeownership and caring for them throughout their homeownership lifecycle.”
The company has been trying to find ways to account for a considerable decline in revenue; in 2016 the company’s revenue fell to $995.0 million from $1.3 billion a year earlier.
WAC stock peaked in 2013, with a nearly $50.00-per-share stock value, but has since declined to its nadir of $0.33. The company is down over 33% a few short days after announcing its bankruptcy filing.
The company had initially planned to find success by buying mortgage cast-offs from big banks at severely reduced costs, but what followed instead was the Walter Investment Management bankruptcy.
Walter Investment Management Filed Bankruptcy to Cut Down Debt by $800mn
The restructuring will last until the first quarter of 2018 and is looking to slash the company’s debt by $800.0 million. It currently holds about $2.1 billion in total debt.
When Walter Investment Management filed for bankruptcy, the move was meant in part to appease creditors who benefit more from a recovering Walter Investment versus one that is totally deconstructed and sold off at wholesale prices. In that scenario, it is unlikely that creditors will see much in return.
Instead, the Walter Investment Management Chapter 11 protection gives the company time to sort out its finances, giving it a better shot to honor its debts to creditors, while regulators would like to see a revitalized company because it would keep mortgage loans from becoming solely concentrated in banks.
“The fundamentals of our core business remain solid,” Chief Executive Officer and President Anthony Renzi said in a statement.
Which is to say that in large part, the Walter Investment Management bankruptcy was motivated by mounting debt and external pressures weighing on the company.
Walter Investment Management Reported Losses in 2016 & 2017
The company has been on a downward spiral in terms of financials for several consecutive years now.
Through the first three quarters of this year, the company is down by a net of loss of $213.86 million. The Walter Investment Management losses in 2017 seemed to be the final straw for the company, leading to bankruptcy.
In 2016, the company was similarly struggling. The company registered a net loss of $529.2 million. The Walter Investment Management losses in 2016 were an unwelcome increase over 2015, when the company’s net loss was about half at $263.2 million.
The continuing cycle of Walter Investment Management revenue decline forced the company to turn towards restructuring to sort out its woes.
Walter Investment Management’s Subsidiary, Ditech Closing Texas Office in 2017, Layoffs to Follow
The Walter Investment Management bankruptcy was preceded by its subsidiaries similarly struggling. Ditech Financial LLC was one such company.
Ditech layoffs hit in Irving, Texas, affecting 437 workers. The Ditech closing was another example of troubles racking the debt-filled parent company.
Despite the Irving shutdown earlier in the year, however, Ditech will not file bankruptcy alongside Walter Investment Management.
“Walter Investment Management files for bankruptcy,” Tampa Bay Times, December 1, 2017.
“Walter Investment files for Chapter 11 bankruptcy,” HousingWire, December 1, 2017.
“Mortgage Crisis Still Claiming Victims as Walter Plans Bankruptcy,” Bloomberg, October 25, 2017.
“Walter Investment Management Corp. Announces Third Quarter 2017 Highlights And Financial Results,” Cision PR Newswire, November 9, 2017.