By guaranteeing the debt and prioritizing noteholders, FOA avoids the upcoming maturity of $350 million worth of debt in 2025 and can gain immediate additional financial breathing room. FOA added that more than 90% of parties to the 2025 unsecured debt agreement agreed to the restructuring.
As part of the restructuring transaction, FOA agreed to “pay and reimburse reasonable and documented consent noteholders’ attorneys’ fees and expenses in connection with the transaction” and to use “commercially reasonable efforts to obtain any regulatory and/or third-party cost of”. All parties’ approvals required to complete the transaction,” the filing reads.
According to its announcement, the FOA is optimistic about the final outcome of the move.
“This announcement marks another important step in improving the company’s capital structure and achieving sustainable growth and profitability,” the company explained.
This is the latest step taken by FOA to improve the company’s financial position.
Last week, FOA announced that it had received shareholder approval for a 10-for-1 reverse stock split based on the recommendation of its board of directors, a move aimed at boosting the company’s share price, another source of recent pressure.
“Our board of directors has determined that it is prudent and in the best interest of the company and our stockholders to reduce the number of shares of our Class A common stock outstanding, with the primary purpose of increasing the trading price per share of our Class A common stock. In order to satisfy the requirements of the New York Stock Exchange price standards for continued listing on the exchange,” the company said in a corresponding 8-K filing with the SEC.
The FOA hopes the move will have a significant impact, according to the documents. In December 2023, the company received a notification from the IRS New York Stock Exchange (NYSE) said it did not meet the exchange’s continued listing standards, which require shares to remain above $1 in a given 30-day trading period. The New York Stock Exchange issued a second notice in February 2024.
At the close of trading on Wednesday, shares were trading at $0.55.
FOA implemented a round of layoffs earlier this month that affected multiple levels of the organization, but the extent of the cuts remains unclear. According to senior executives, the chief retail sales officer also voluntarily resigned from the company at the same time.
Home Equity Conversion Mortgage (HECM) Endorsement Data Reverse Market Insights (RMI), FOA is the nation’s No. 1 lender, with 7,784 endorsements in the 12 months ended May 31, 2024.
Editor’s note: This article has been updated with information regarding FOA’s option to extend the $200 million guaranteed notes through 2027, should FOA choose to do so.
