Blackstone Dips Toes In Mortgage Securities
Bayview, which oversees a $2 billion fund that invests in mortgage loans and mortgage-backed securities, manages a mortgage service business called Bayview Loan Servicing.
July 29, 2008
The Blackstone Group didn’t get caught up in the subprime market meltdown, but that doesn’t mean the New York private equity firm isn’t willing to capitalize on the dislocated mortgage finance market.
Blackstone has moved to invest in the mortgage securities business through a deal with Bayview Asset Management. While specific financial transaction terms were not released, the all-equity investment gives firm affiliate Blackstone Capital Partners a minority stake in the mortgage finance company, a subsidiary of Miami-based Bayview Financial.
The investment, announced on Monday, wasn’t completely unexpected. A press report surfaced in the New York Post last Friday about Blackstone’s pending investment in Bayview. The story pegged Blackstone’s commitment to the mortgage company at $1.2 billion.
Bayview, which oversees a $2 billion fund that invests in mortgage loans and mortgage-backed securities, manages a mortgage service business called Bayview Loan Servicing.
A secondary purchaser of mortgages, Bayview’s strategy revolves around servicing mortgage loans and helping borrowers avoid foreclosure.
Foreclosures increased 53% in June 2008, or one in every 501 US households received a foreclosure filing, compared with June of the prior year, according to Irvine, Calif.-based foreclosure database company RealtyTrac. The states that generated the most foreclosures were Arizona, California and Nevada.
Bayview’s clients, meanwhile, include some of the largest institutional investors in the world including leading corporate and public pension funds.
David Ertel, chief executive of Bayview, said: “With this investment from Blackstone, I am confident that Bayview is well positioned to take advantage of the significant dislocation in the secondary mortgage market.”
Blackstone’s investment hinges on financial institutions’ de-leveraging of balance sheets, which is expected to result in opportunities for Bayview to purchase mortgage loans and securities, according to Chinh Chu, a senior managing director of Blackstone.
JPMorgan Securities and Milestone Advisors are serving as financial advisors to Bayview, which is relying on Clifford Chance, Schulte Roth & Zabel and Stearns Weaver Miller Weissler Alhadeff & Sitterson.
Deutsche Bank is acting as advisor to Blackstone, which is using Simpson Thacher & Bartlett for counsel.
Blackstone isn’t the only US private equity firm that has tapped into the mortgage finance business in the wake of last year’s subprime route.
Lightyear Capital, a New York-based financial services investment firm managed by former PaineWebber chieftain Donald Marron, executed a $400 million deal in May to back a new monoline mortgage insurer with publicly traded Winston Salem, N.C.-based mortgage insurer Triad Guaranty. Unlike Blackstone’s transaction with Bayview, Lightyear’s investment is predicated on what is expected to be strong demand for mortgage default insurance in the next several years.
For more information on related topics, visit the following:
