Blackstone President and COO Jonathan Gray and Stearns Lending CEO David Schneider (Credit: Getty Images)
Stearns Holdings, the parent company of residential mortgage lender Stearns Lending, filed for Chapter 11 protection Tuesday morning after agreeing on a debt-restructuring plan with majority owner Blackstone Group.
The restructuring will erase $184 million in outstanding bond debt from the California-based firm’s balance sheet, the Wall Street Journal reported. Stearns is also seeking court authorization to continue normal business operations during the bankruptcy process, including the payment of suppliers and vendors, and salaries and benefits for about 2,700 employees.
Blackstone acquired a majority stake Stearns Holdings in 2015. The financial firm is providing $60 million in new money for the restructuring, as well as a bankruptcy loan of up to $35 million to help the lender continue operations. Warehouse lenders have committed $1.5 billion to the plan.
Stearns’ $184 million in outstanding bonds are due to mature next August. The company paid down some of its bond debt last year by selling off most of its mortgage-servicing rights. In its Chapter 11 filing, it listed assets and liabilities each between $1 billion and $10 billion.
Mortgage rates tumbled in recent months after the Fed held off on raising interest rates further. A preceding period of rising rates had cut into Stearns’ lending business. [WSJ] — Kevin Sun