FOA Announces Amendment and Update to Bond Exchange Offer

Industry-leading reverse mortgage lender America’s Finance (FOA) on Tuesday announced updates and new details of its previously announced exchange offer, which would involve the exchange of current investor-issued bonds due in 2025 for new bonds due one to four years later.

The current unsecured bonds due in 2025 with an interest rate of 7.875% could be converted into one of two new bond options — bonds with the same interest rate due in 2026 (with a company option to extend them to 2027) or new bonds with an interest rate of 10% due in 2029.

FOA also said that each investor who participates in the program may receive “a cash fee equal to 0.25% of the aggregate principal amount of unsecured exchangeable notes issued in 2025,” the announcement said.

Anyone potentially interested in the deal must apply by 5 p.m. ET on Oct. 25, when the deal is set to expire, the company said. FOA has the right to change that date. The deal is for “only qualified holders of the 2025 Senior Secured Notes,” who will then be provided with a memorandum detailing the exchange offer and its mechanics.

By exchanging its existing bonds for new, secured debt that matures beyond the original 2025 maturity date — and giving it priority over bondholders — FOA can provide itself with immediate financial freedom.

In its original June announcement, FOA said more than 90% of the parties to the 2025 unsecured debt indenture had consented to the exchange offer. The company said Tuesday that 94% of current noteholders had consented to the exchange in advance or “otherwise indicated their intention to participate in the exchange offer and consented in the solicitation of consent.”

FOA has previously made clear that it is optimistic about the ultimate results of this action.

“This announcement represents another significant step toward improving the company’s capital structure and achieving sustainable growth and profitability,” the company said in June.

It’s the latest in a series of moves the industry-leading reverse mortgage company has made in the past few years to shore up its finances. They include closing its forward mortgage arm, selling its Press in title and commercial lending businesses, most notably the acquisition of a former industry-leading lender A group of American advisors (AAG).

Since the AAG transaction closed in April 2023, FOA has taken a number of steps to balance its size with its ambitions in reverse mortgages and other retirement solutions. In addition to uniting the FAR and AAG brands under one umbrella, the company has cut its headcount and faced the threat of delisting. New York Stock Exchange (NYSE) for failing to meet listing standards.

But the company’s fortunes have recently begun to improve. In June, it successfully implemented a 10-for-1 reverse stock split and posted improved second-quarter profits. The earnings report showed narrowing losses—though not recovering the black ink—and enthusiasm from company leaders about the expected business impact of its Home Equity Conversion Mortgage (HECM) program and its own marketing efforts.

FOA CEO Graham Fleming expressed optimism about Ginnie Maethe company’s development of a new HECM-backed securities (HMBS) program called “HMBS 2.0,” stating that it is intended to help further improve the company’s liquidity.

“This exciting program provides a more favorable HMBS structure that will significantly reduce the capital required for redemptions and allow for the securitization of those redemptions in Ginnie Mae-backed pools,” Fleming explained during an August earnings conference call. “This has the potential to have a positive impact on earnings, tangible net worth, and liquidity.”

The company also unveiled a series of new TV spots featuring former AAG spokesman Tom Selleck. He stars in three 2-minute spots that the company says are designed to represent the newly unified brand while also “increasing visibility and customer recognition.”

In late July, FOA also placed an infomercial featuring Selleck in its YouTube channel. In earnings support materials, FOA said its media sentiment analysis of reverse mortgages has continued to improve and that coverage of the company itself is “neutral to positive.”

FOA stock is also higher. After the reverse stock split was implemented in late July, FOA stock rose from $0.73 at the close of trading on July 25 to $7.19 per share the following day. That’s roughly the 10:1 ratio that was supposed to occur on the effective date.

The stock was trading at $11.73 on Tuesday afternoon, showing signs of growth throughout September.

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