Key facts
- UWM Holdings Corp. has set terms for a rights offering to raise at least $400 million.
- The offering involves 200 million new Class A shares.
- The subscription price will be the greater of $2 per share or 85% of the volume-weighted average price from Oct. 27 to Nov. 9.
- Oaktree Capital Management and the Ishbia parties (via SFS Group Capital LLC) will backstop the offering.
- The backstop ensures at least $400 million in gross proceeds, potentially through preferred stock and warrants.
- UWM previously raised $1.65 billion from Oaktree and SFS Group in August.
UWM Holdings Corp., the parent company of United Wholesale Mortgage, announced Tuesday the terms for a rights offering designed to raise at least $400 million. This offering is part of a larger capital raise initiative totaling $2.05 billion, which was initially announced in August and involves Oaktree Capital Management and the Ishbia family, through their investment vehicle SFS Group Capital LLC.
The rights offering will allow existing shareholders to purchase new Class A shares. The subscription price is set at the greater of $2 per share or 85% of the volume-weighted average price of UWM's Class A stock over a 10-day period from October 27 to November 9. The distribution of these rights is scheduled to commence on October 5.
To ensure the offering meets its target, Oaktree investors have the option, and the Ishbia parties have the obligation, to purchase any unsubscribed securities to cover any shortfall below $400 million. These backstop securities can be issued as common stock at the same subscription price or as junior perpetual non-convertible preferred stock accompanied by warrants.
This capital raise follows a period where UWM experienced a $603 million loss on interest rate derivatives and failed in its bid to acquire Two Harbors Investment Corp. Analysts from Keefe, Bruyette & Woods expressed skepticism about the rights offering's success given that UWM's common stock has recently traded below the $2 floor price, closing at $1.26 on Wednesday. They anticipate that Oaktree or SFS will likely fund the $400 million through a preferred investment.