Guild Mortgage looks to raise approximately $176M in its IPO

Guild Mortgage is the latest nonbank mortgage lender to file for an initial public offering, expecting the deal will price between $17 per share and $19 per share.

This is the sixth mortgage company to go public in recent weeks, with the most recent being Finance of America.

Guild's offering will consist of 8.5 million Class A shares with an additional 1.275 million shares that could be sold as part of the underwriters' option. At the midpoint of the price range, with the additional shares included, Guild would raise approximately $176 million.

However, there will be a Class B of common stock, which gives its sole holder, McCarthy Partners Management, 10 votes per share. As a result, McCarthy will have nearly 95% of the combined voting power.

In 2007, company management with an investment by McCarthy acquired control of Guild. Upon completion of the IPO, management will own approximately 21% of the outstanding common stock, the prospectus said.

"Through steady organic growth and a series of targeted acquisitions, we grew our annual origination volume from $1.4 billion for the year ended Dec. 31, 2007 to $27.8 billion for the 12 months ended June 30, and grew our servicing portfolio from $2.5 billion of unpaid principal balance as of Dec. 31, 2007 to $52.8 billion of UPB as of June 30," Guild's prospectus noted.

For the first six months of this year, Guild had net earnings of $110.8 million, including $322.9 million net earnings from the origination segment and net losses of $147.8 million from mortgage servicing and $64.4 million from other areas.

For the first half of last year, it lost $47 million, driven by a $104.1 million loss on its servicing business.

Based on preliminary estimates, Guild expects to report net income between $178 million and $187 million for the period, the prospectus said. It earned $8.5 million in the third quarter of 2019.

On the originations side, 96.5% of volume came from retail, with just 3.5% in the correspondent channel during 2019. Its third quarter origination volume was $10 billion, the prospectus said.

Guild's CEO is Mary Ann McGarry and under her stewardship, the company has become one of the mortgage lenders who has consistently been on top of the J.D. Power customer satisfaction survey. It was third behind Quicken and Fairway Mortgage in the 2019 survey with a score of 854. The 2020 survey is expected to be released in November.

In the 2020 servicer survey, Guild ranked ninth, but its score of 803 was well above the industry average of 781.

Since 2007, the company has made six acquisitions, with the most recent being Cornerstone Mortgage in 2018. That acquisition expanded the San Diego-based company's presence in the Midwest region.

Among risks of note in the prospectus was a 2016 False Claims Act case filed against Guild involving loans originated between 2006 and 2011 was still active.

The publicly traded company will be named Guild Holdings and trade under the ticker symbol GHLD on the New York Stock Exchange.