New Residential prices stock offering, looking to raise $665M

New Residential priced its second stock offering in four months, looking for gross proceeds of nearly $665 million.

The latest offering consists of 40.3 million shares, with 40 million being sold by New Residential and the rest sold by FIG. The offering was priced at $16.35 per share on Feb. 20 before the market opened. Its previous close was $17.02 and the next morning New Residential opened at $16.45 per share.

On Nov. 1, the company priced a 25 million share offering at $17.32 per share for gross proceeds of $433 million.

The offering is expected to close on Feb. 22, and New Residential has granted the underwriters a 30-day option to purchase up to an additional 6 million shares of common stock.

New Residential plans to use its portion of the net proceeds for investments and general corporate purposes.

Morgan Stanley & Co., Credit Suisse Securities (USA) and JPMorgan Securities are joint book-running managers, while BTIG, B. Riley FBR, Keefe, Bruyette & Woods, Piper Jaffray and Raymond James are co-managers for the offering.

The offering was priced eight days after New Residential announced its fourth-quarter results.

New Residential earned $300,000 in the fourth quarter, compared with $185 million in third quarter and $285 million in the fourth quarter of 2017.

For the full year, it earned $964 million, a slight increase over $958 million earned in 2017. Its shares outstanding grew to 341 million from 304 million at the end of 2017 and 238 million at the end of 2016.

"As we entered 2019, the markets have settled down, and the spread widening we saw at the end of the year reversed itself and the mortgage and securitization markets have stabilized," CEO Michael Nierenberg said during the conference call.

"What does this all mean? On the portfolio side of our business, continued focus on mortgage servicing rights acquisition, our cleanup call business and making opportunistic investments where appropriate, more back to the basics of business as usual."

New Residential is looking to increase its ancillary revenue from its mortgage assets, and increase the recapture rate from its servicing portfolio, he said.

Last year, it acquired Shellpoint Partners and its mortgage business, then known as New Penn, now renamed NewRez. The company originated $7.2 billion last year, up from $6.4 billion. "I expect that number [in 2019] to be quite frankly something around $15 billion," Nierenberg told the analyst call.

"As we look at 2019, a lot of that has to do with our own recapture and some growth around some different divisions of the origination business. Non-qualified mortgage origination increased from $20 million in the first quarter of 2018 to $380 million in 4Q."