No. of Recommendations: 8
United Wholesale Mortgage got into trouble last week, disclosing a hedging mistake that cost it more than $600mn. Its saviour: Oaktree Capital, another non-bank lender that sits on $227bn of assets and has swooped in, leading a $2bn rescue financing package.
Oaktree, like most alternative lenders, knows an opportunity when it sees one. It has taken preferred shares with a 10 per cent coupon, which rises if UWM chooses to pay interest in kind rather than cash, and warrants convertible into around 15 per cent of the company.
That should tide UWM over until the housing market stabilises, albeit at a high cost to its shareholders — and Oaktree meanwhile gets paid to wait.
Financial Times: Financial TimesLooks like a deal from Buffet’s playbook.
