Ditech Holding Corporation (NYSE: DHCP), parent company of Reverse Mortgage Solutions (RMS), elected not to make an approximately $9 million cash interest payment to its creditors that was due on December 17, 2018. With Thursday marking the end of a 30-day grace period related to that payment, that decision has put the beleaguered corporation at risk of default in the midst of an attempted strategic reorganization, according to a new company filing.
“The Company’s failure to make the Interest Payment within thirty days after it was due and payable constitutes an ‘event of default’ under the Indenture,” Ditech’s new 8-K SEC filing reads. “As active discussions are still ongoing regarding the Company’s evaluation of strategic alternatives, the Board determined that the Company would not make the Interest Payment prior to the expiration of the thirty day grace period even though it had sufficient liquidity to do so as of January 16, 2019, resulting in an event of default under the Indenture.”
However, the filing also states that Ditech entered into forbearance agreements with creditors that meet specific financial criteria related to their holdings of Ditech’s debt, and these entities “have agreed to temporarily forbear from the exercise of any rights or remedies they may have” under events of default, which will help the company avoid a second bankruptcy filing for the time being.
The filing also reveals that Ditech has terminated the employment of Chief Operating Officer Ritesh Chaturbedi. No reason was specified.
In November 2018, Ditech was delisted from the New York Stock Exchange following multiple warnings that stemmed from its failure to meet the NYSE listing standard, which requires companies to maintain at least $15 million in average global market capitalization over a consecutive 30-day trading period. Although they experienced a jump in revenue later that month, it did little to stem the tide of difficulties the company is facing.
Earlier in 2018, Ditech emerged from bankruptcy after having previously done business under the name Walter Investment Management Corporation. Walter acquired Reverse Mortgage Solutions in 2012, and in 2017, Walter decided to stop originating Home Equity Conversion Mortgages (HECMs). RMS then turned to servicing only, and closed its retail channel.