Key facts
- CCM plans to issue $500 million in senior unsecured notes.
- The acquisition of Two Harbors Investment Corp. is expected to close in August.
- Fitch Ratings anticipates rating the notes 'BB-(EXP)'.
- Corporate leverage for CCM is projected to rise to 2.4x post-acquisition.
- The combined entity will rank as the eighth-largest servicer by owned portfolios.
CrossCountry Intermediate Holdco (CCM) is preparing to issue $500 million in senior unsecured notes, a move that aligns with the anticipated August closure of its acquisition of Two Harbors Investment Corp. The transaction is valued at $1.26 billion.
Fitch Ratings has indicated it expects to assign a ‘BB-(EXP)’ rating to the new notes, which would be on par with CCM's existing senior unsecured debt. The funds raised are earmarked for repaying mortgage servicing rights (MSR)-backed facilities that were utilized to finance the acquisition.
Following the acquisition, Fitch projects CCM's corporate leverage will increase to 2.4x, a significant rise from 1.2x in the second quarter of 2026 and exceeding the agency's downgrade trigger of 1.5x. However, Fitch also noted that retained earnings growth is expected to guide leverage back toward CCM's medium-term target of 1.0x.
Analysts had anticipated CCM would raise debt to facilitate the Two Harbors deal, identifying increased leverage as a potential integration challenge. They also noted the complexity of bringing a substantial servicing portfolio in-house. The shift from secured to unsecured debt is considered a positive credit development, as it liberates collateral and enhances liquidity.
CCM has previously stated that while leverage will temporarily rise, the combined entity will be substantially larger and more cash-generative. The company anticipates benefiting from higher recurring servicing cash flows, an expanded MSR portfolio, and significant synergy opportunities, all supporting a rapid deleveraging trajectory.
Upon completion, Two Harbors will contribute a $159 billion portfolio to CCM's existing $202 billion portfolio, as of the first quarter. This expansion is set to elevate the combined company's ranking from No. 15 to No. 8 among the largest servicers based on owned portfolios. Furthermore, Two Harbors' acquisition of RoundPoint Mortgage Servicing LLC in 2023 is expected to enhance CCM's business profile by enabling more profitable in-house servicing.
Fitch highlighted CCM's ratings are supported by its expanding distributed retail franchise, conservative debt management, solid profitability, adequate liquidity, limited asset quality risks, and a well-executed growth strategy. Earlier this month, Two Harbors confirmed it had obtained the necessary state and agency approvals for the sale, with only one state's approval pending.