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Newcastle (NCT) to Spin-Off New Residential (NRZ) May 15

newcastle, NCT, Spin-Off, spinoff, spin-off research, spin-off advisorsNewcastle Investment Corp (NCT) to Spin-Off New Residential Investment Corp (NRZ)

Record Date May 6

On January 7, 2013, Newcastle Investment Corporation (NYSE: NCT; Market Capitalization: $3.0 billion) announced that its board of directors approved a plan to spin-off certain residential mortgage investments consisting of Excess Mortgage Servicing Rights (Excess MSRs), Residential Mortgage Backed Securities (RMBS), and certain other assets into a separate entity, New Residential Investment Corporation (NRZ). The separation is expected to result in the creation of residential-focused mortgage REIT represented by NRZ while NCT will represent a more focused commercial real estate related REIT.

Pursuant to the spin-off, shareholders of NCT are expected to receive 1 share of NRZ for each share of NCT held on the record date. NRZ filed its initial Form-10 on January 7, 2013 and on April 25, 2013, NCT Board formally declared distribution of NRZ shares and set the record date. The distribution will be made on or about May 15th 2013 to NCT shareholders of record on May 6th 2013 as of 5:00 p.m. EST. On May 2, 2013, shares of NRZ began trading on a ‘when-issued’ basis on NYSE under the symbol “NRZWI” while shares of NCT began trading on an ‘ex-distribution’ basis on NYSE under the symbol “NCTWI”. The when-issued and ex-distribution trading is expected to continue up to May 15, 2013, the distribution date. Beginning May 16, 2013, shares of NRZ will trade on a regular-way basis.

Deal Overview

On January 7, 2013, NCT announced that its board of directors approved a plan to spin-off certain residential mortgage investments consisting of Excess Mortgage Servicing Rights (Excess MSRs), Residential Mortgage Backed Securities (RMBS), and certain other assets into a separate entity, New Residential Investment Corporation (NRZ). The separation is expected to result in the creation of residential-focused mortgage REIT represented by NRZ while NCT will represent a more focused commercial real estate related REIT. The spin-off is expected to be taxable. Accordingly, on January 7, 2013, NRZ filed its initial Form-10 providing details about the business and asset portfolio. The distribution of NRZ common stock to NCT holders will be made on or about 15th May 2013 to NCT shareholders of record on May 6th 2013 as of 5:00pm EST. The spinoff is taxable for federal tax purposes.

Spin-Off Timetable

 Announced Date  January 7, 2013 
 Initial Form-10 Filing  January 7, 2013
 Latest Form-10 Filing  April 23, 2013
 When-Issued trading  May 2, 2013
 Record Date  May 6, 2013
 Distribution Date  May 15, 2013
 Regular-Way Trading  May 16, 2013
 Spin-Ratio  1:1
 Tax Status  Taxable
Source: Company Reports and Spin-Off Research

Deal Rationale

Management believes the separation will create two different entities with investment focused in two different asset classes. NRZ’s assets would include investment primarily in residential real estate assets and NCT Stub’s assets would include investment in commercial real estate assets. The management believes that creating two different entities will reduce the complexity associated with the company that has diverse business objectives. In our opinion, the separation of NCT into 2 companies will enable investors to invest in two distinct businesses of their choice, which in turn may result in a higher aggregate market value than the value of the combined company. Having said this, the macro economic factors that affect both the business are almost similar with minimal regulatory or political intervention. However, we believe the commercial business is more stable/less volatile than the residential business. Nonetheless, we believe, the current macroeconomic factors are favorable for both the business.

Organization Structure

Newcastle, nct, spin-off, spinoff, ipo, carve-out, spin-off research, spin-off advisors

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About Newcastle Investment Corp (NCT)

Parent: Newcastle Investrment Corp. (NYSE: NCT)
Sector: Mortgage Finance

Newcastle Investment Corporation is a real estate investment and finance company. NCT
invests and manages a portfolio of real estate securities, loans, excess mortgage servicing rights (MSRs), and other real estate related assets. NCT’s investment strategy focuses primarily on debt investments secured by real estate. The company plans to separate its residential mortgage assets into a separate entity.

About New Residential Investment Corp (NRZ)

Spin-Off: New Residential Investment Corporation (NRZWI)
Sector: Mortgage Finance

New Residential Investment Corp was formed in September 2011 as a subsidiary of NCT. The company intends to primarily invest in Excess MSRs, RMBS, non-performing loans, and mortgage servicing advances. The company’s initial investment portfolio will consist of all of NCT’s Excess MSRs, all of its Non-Agency RMBS acquired since 2012, and a portion of its Agency RMBS. NRZ is expected to be separated from NCT by March 2013.

 

 

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