Item 1.01
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Entry into a Material Definitive Agreement
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On January 17, 2018 (the
Sale Date), Ditech Financial LLC (Ditech) and New Residential Mortgage LLC (NRZ) executed a side letter agreement (the Side Letter Agreement) pursuant to which, among other things, certain provisions
of that certain Subservicing Agreement, dated as of August 8, 2016, by and between Ditech and NRZ, filed as Exhibit 10.17.1 to the Companys (as defined below) amended Annual Report on Form 10-K/A filed with the Securities and Exchange
Commission on August 9, 2017 (as amended to date, the Subservicing Agreement), were amended and/or waived.
The Side
Letter Agreement was entered into in connection with the sale by Ditech to NRZ of all of Ditechs right, title and interest in certain mortgage servicing rights (MSRs) with respect to a pool of mortgage loans (the Subject
Loans) with an aggregate unpaid principal balance as of the Sale Date of approximately $11.4 billion (the MSR Sale Transaction), such MSR Sale Transaction being executed pursuant to that certain Flow and Bulk Agreement for the
Purchase and Sale of Mortgage Servicing Rights, dated as of August 8, 2016 (as amended to date, the Purchase Agreement), by and between Ditech, as seller, and NRZ, as purchaser. Following the closing of the sale of the MSRs to NRZ,
Ditech will subservice the Subject Loans on behalf of NRZ pursuant to the terms of the Subservicing Agreement and related documents. On January 17, 2018, Ditech received approximately $91.4 million in cash proceeds from NRZ as partial
consideration for the sale of the MSRs to NRZ. Walter Investment Management Corp. (the Company), the indirect parent company of Ditech, used 80% of such cash proceeds to repay borrowings under its Amended and Restated Credit Agreement,
dated as of December 19, 2013, by and among the Company, as borrower, Credit Suisse AG, as administrative agent, and the lenders party thereto, and intends to use the remaining cash proceeds for general corporate purposes.
As previously disclosed, on November 30, 2017, the Company filed a voluntary petition (the Bankruptcy Petition, and the case
commenced thereby, the Chapter 11 Case) under chapter 11 of title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York (the Court) to
pursue its previously announced Prepackaged Chapter 11 Plan of Reorganization, dated November 6, 2017 (as amended and supplemented, the Prepackaged Plan). On January 18, 2018, the Court entered an order confirming the
Prepackaged Plan. The Companys Chapter 11 Case is being administered under the caption In re Walter Investment Management Corp. (Case No. 17-13446). In connection with the Chapter 11 Case and the Prepackaged Plan, as well as other
developments at the Company and Ditech, certain events have occurred, or are expected to occur, that may have caused, or in the future may cause, various defaults or breaches of representations, warranties or covenants or similar non-compliance by
Ditech under, and/or may have triggered certain termination rights for NRZ under, the Purchase Agreement or the Subservicing Agreement, as applicable, including but not limited to the filing of the Bankruptcy Petition. Pursuant to the terms of the
Side Letter Agreement, with respect to only the MSR Sale Transaction and the related Subject Loans and any future mortgage servicing right flow sale transaction executed pursuant to the terms of the Purchase Agreement subsequent to the date of the
Side Letter Agreement, NRZ has agreed to waive any actual, potential or future default under, breach of or similar non-compliance by Ditech or its affiliates with respect to certain provisions of the Subservicing Agreement caused by certain
identified events set forth in the Side Letter Agreement, in each case as further described in the Side Letter Agreement.
In addition,
and with respect to only the MSR Sale Transaction and the related Subject Loans and any future mortgage servicing right flow sale transaction (and the related mortgage loans) executed pursuant to the terms of the Purchase Agreement subsequent to the
date of the Side Letter Agreement,
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Ditech and NRZ also agreed to amend certain provisions of the Subservicing Agreement relating to, among other things, the initial term of the subservicing engagement and the term of subsequent
renewals thereof, and certain financial metrics, in each case as further described in the Side Letter Agreement. The foregoing summary of the Side Letter Agreement does not purport to be complete and is qualified in its entirety by reference to the
text of the Side Letter Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
Cautionary Statements
The Company cautions that trading in the Companys securities during the pendency of the Chapter 11 Case is highly speculative and poses
substantial risks. As discussed above, the Prepackaged Plan has been approved by the Court, and pursuant to the Prepackaged Plan, the Companys common stock, as well as all unexercised options, warrants or rights to acquire or receive an equity
interest in the Company, in each case, outstanding immediately prior to effectiveness of the Prepackaged Plan, will be cancelled and cease to exist on the Effective Date, and the holders of the Companys common stock will receive only the pro
rata portion of New Common Stock as set forth in the Prepackaged Plan. Even though the Companys common stock continues to trade on the New York Stock Exchange (the NYSE), under the Prepackaged Plan, its underlying value may be
significantly less than the current trading price on the NYSE, and the Companys stockholders should not view the trading activity of the Companys common stock on the NYSE or any other market or trading platform as being indicative of any
value they would receive in respect of the Companys common stock in connection with the Chapter 11 Case.
Certain statements in this
Current Report on Form 8-K constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Statements that are not historical fact are forward-looking
statements. Certain of these forward-looking statements can be identified by the use of words such as believes, anticipates, expects, intends, plans, projects,
estimates, assumes, may, should, could, would, shall, will, seeks, targets, future, or other similar expressions.
Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, and our actual results, performance or achievements could differ materially from results, performance or achievements expressed in these
forward-looking statements. Such statements include, but are not limited to, statements relating to the Prepackaged Plan and Chapter 11 Case, descriptions of managements strategy, plans, objectives, expectations, or intentions and descriptions
of assumptions underlying any of the above matters and other statements that are not historical fact.
These forward-looking statements
are based on the Companys current beliefs, intentions and expectations and are not guarantees or indicative of future performance, nor should any conclusions be drawn or assumptions be made as to any potential outcome of any proposed
transactions the Company considers. Risks and uncertainties relating to the restructuring include: the Courts rulings in the Chapter 11 Case and the outcome of the Chapter 11 Case in general; the length of time the Company will operate under
Chapter 11; risks associated with third-party motions in the Chapter 11 Case, which may interfere with the Companys ability to develop and consummate the Prepackaged Plan or other plan of reorganization; the ability to satisfy all conditions
precedent to the Prepackaged Plan; the ability of the Company to successfully execute the Prepackaged Plan without substantial disruption to the business of, or a Chapter 11 bankruptcy filing by, one or more of its primary operating or other
subsidiaries; the effects of disruption from the restructuring making it more difficult to maintain business, financing and operational relationships, to retain key executives and to maintain various licenses and approvals
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necessary for the Company to conduct its business; increased legal and advisor costs related to the Chapter 11 Case and other litigation and the inherent risks involved in a bankruptcy process;
the ability of the Company to comply with the terms of its restructuring support agreements, including completing various stages of the restructuring within the dates specified by the restructuring support agreements; the ability of the Company to
maintain the listing of its common stock on the NYSE; and the ability of the Company to continue as a going concern. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking
statements include, but are not limited to, those factors, risks and uncertainties described in more detail under the heading Risk Factors and elsewhere in the Companys annual and quarterly reports, including amendments thereto,
and other filings with the Securities and Exchange Commission.
The above factors, risks and uncertainties are difficult to predict,
contain uncertainties that may materially affect actual results and may be beyond the Companys control. New factors, risks and uncertainties emerge from time to time, and it is not possible for management to predict all such factors, risks and
uncertainties. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore any of these statements may prove to be
inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the results or
conditions described in such statements or the Companys objectives and plans will be achieved. These forward-looking statements speak only as of the date such statements were made or any earlier date indicated, and the Company does not
undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in underlying assumptions or otherwise. If the Company were in any particular instance to update or correct a
forward-looking statement, investors and others should not conclude that the Company would make additional updates or corrections thereafter.