September 7, 2022 – The Debtors filed a motion requesting each of a bidding procedures order and a sale order [Docket No. 406]. The bidding procedures order would: (i) approve bidding procedure in relation to the sale of substantially all of the Debtors’ assets (the “Sale(s)”), (ii) authorize the Debtors to select one or more stalking horse bidders and offer bid protections* to any selected stalking horse (none selected yet, with October 7th set as a deadline to notify Court of any selected) and (iii) adopt a proposed auction/sale timetable culminating in an auction on October 20th and a sale hearing on October 31st. The sale order would approve the Sale.
* The motion and proposed bidding procedures do not specify the amount of a permitted break-up fee or expense reimbursement.
Case Status
On June 30, 2022, First Guaranty Mortgage Corporation and one affiliated Debtors (“FGMC” or the “Debtors”) filed for Chapter 11 protection noting estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn. At filing, FGMC, which operated as a full-service, non-bank mortgage lender, noted that bankruptcy shelter “was necessitated by significant operating losses and cash flow challenges experienced by the Company due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility.”
On August 4th, the Court hearing the FGMC cases issued final orders in respect of two debtor-in-possession ("DIP") financing facilities: (i) a $22.0mn "Cash Flow DIP Facility" from LVS II SPE XXXIV LLC, (the “Cash Flow DIP Lender”) [Docket No. 292] and (ii) a $125.0mn "DIP Repo Facility" with Barclays Bank PLC as agent [Docket No. 288].
In recent weeks, the Debtors have received Court approval for the sale of mortgages and mortgage servicing rights, including: (i) a $4.8mn private sale of certain mortgage servicing rights (“MSRs”)* to BSI Financial Services, Inc [Docket No. 390], (ii) the private sale of $25.0mn in mortgages to Freddie Mac [Docket No. 386] and (iii) the private sale of $15.0mn in mortgages to Fannie Mae [Docket No. 394].
Bidding Procedure Motion
The motion [Docket No. 406] states, “The Debtors and their advisors have engaged in extensive discussions with the Cash Flow DIP Lender and DIP Repo Guarantor regarding the sale and liquidation of the Debtors’ assets in these chapter II cases. The parties have agreed on terms for conducting a sale or sales of substantially all of the Debtors’ assets, or a sub-set thereof. This agreement will allow the Debtors to proceed with their chapter I I cases to enable the Debtors to engage in a postpetition marketing process and effectuate a sale or sales, by separate sale order(s) in parallel with the concurrent Plan solicitation and confirmation process.
The Debtors believe the Bidding Procedures will best facilitate a value maximizing sale or sales for the benefit of the Debtors’ estates. The Bidding Procedures provide for substantial flexibility with respect to the structure of any Sale. For example, the Debtors may, in an exercise of their business judgment, select one or more Stalking Horse Bidder(s) and provide Bid Protections to the extent that doing so would maximize the value of the estates. The Bidding Procedures likewise will allow the Debtors sufficient time to fully market their assets, receive and evaluate bids, execute a stalking horse agreement and designate one or more Stalking Horse Bidder(s) (if any), and hold an auction (if necessary) to determine the highest or otherwise best bid. In addition, the marketing process and the Bidding Procedures proposed herein are aligned with the parties’ agreed milestones.
The Debtors believe that their marketing efforts contemplated by the Bidding Procedures provide for an efficient marketing and sale process for the Debtors’ Assets, and that approval of the Bidding Procedures and the related relief requested in this Motion are in the best interests of the Debtors’ estates and their stakeholders.”
Proposed Key Dates
- Bidding Procedure Objection Deadline: September 15, 2022.
- Staliking Horse Notice Deadline: October 7, 2022
- Sale Objection Deadline: October 14, 2022
- Bid Deadline: October 10, 2022
- Auction: October 20, 2022
- Post-Auction Objection Deadline: October 24, 2022
- Sale hearing: October 31, 2022
About the Debtors
According to the Debtors: “Prior to the Petition Date, the Debtors operated as a full service, non-bank mortgage lender offering a full suite of residential mortgage loan options tailored to borrowers’ different financial situations. The Debtors were one of the leading independent mortgage companies in the United States that originated residential mortgages through a national platform… [t]he Debtors’ business included the origination, purchase, service, sale and/or securitization of residential real estate mortgage loans….
FGMC’s corporate headquarters are located in Plano, Texas. The Debtors have regional offices in Texas, Virginia, Utah, Hawaii, Maryland, Missouri, Nevada, New Jersey and North Carolina. FGMC is licensed to operate in all fifty states and the District of Columbia and is a national Ginnie Mae and Fannie Mae direct lender and approved Freddie Mac seller and servicer, with licenses and/or approvals from the Federal Housing Administration ('FHA'), the United States Department of Veterans Affairs ('VA') Ginnie Mae, and the United States Department of Agriculture."
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