Quarterly report pursuant to Section 13 or 15(d)

ORGANIZATION (Tables)

v3.2.0.727
ORGANIZATION (Tables)
6 Months Ended
Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Summary of Consideration Paid
The total consideration is summarized as follows:
Total Consideration
 
Amount
Share Issuance Consideration
 
28,286,980

New Residential's 4/6/2015 share price
 
$
15.3460

Dollar Value of Share Issuance(A)
 
$
434,092

Cash Consideration
 
621,982

HLSS Seller Financing(B)
 
385,174

New Merger Payment (71,016,771 @ $0.704059)(C)
 
50,000

Total Consideration
 
$
1,491,248


(A)
Share Issuance Consideration
The share issuance consideration consists of 28.3 million newly issued shares of New Residential common stock with a par value $0.01 per share. The fair value of the common stock at the date of the acquisition was $15.3460 per share, which was New Residential’s volume weighted average share price on April 6, 2015.
(B)
HLSS Seller Financing
New Residential agreed to deliver $1.0 billion of cash purchase price, including a promise to pay an amount of $385.2 million immediately after closing from the proceeds of financing that was committed in anticipation of the HLSS Acquisition and is collateralized by certain of the HLSS assets acquired.
(C)
New Merger Payment
The New Merger Agreement, and the $50.0 million consideration related thereto, is included as a part of the business combination in conjunction with the Share and Asset Purchase Agreement. The range of outcomes for this contingent consideration is from $0 to $50.0 million, dependent on whether the New Merger is approved by HLSS shareholders and other factors.

Summary of Preliminary Purchase Price Allocation
The preliminary allocation of the total consideration, following reclassifications to conform to New Residential’s presentation, is as follows:
Total Consideration ($ in millions)
$
1,491.2

Assets
 
Cash and cash equivalents
$
51.5

Servicer advances, at fair value
5,098.2

Excess mortgage servicing rights, at fair value
919.5

Residential mortgage loans, held-for-sale(A)
418.8

Deferred tax asset(B)
186.8

Investment in HLSS Ltd.
46.0

Other assets(C)
405.3

Total Assets Acquired
$
7,126.1

 
 
Liabilities
 
Notes payable
5,583.0

Deferred tax liabilities
(0.7
)
Accrued expenses and other liabilities(D)(E)
52.6

Total Liabilities Assumed
$
5,634.9

 
 
Net Assets
$
1,491.2


(A)
Represents $424.3 million UPB of GNMA early buy-out (“EBO”) residential mortgage loans not subject to ASC No. 310-30 as the contractual cash flows are guaranteed by the Federal Housing Administration (“FHA”).
(B)
Due to the difference between carryover historical tax basis and acquisition date fair value of one of HLSS’s first tier subsidiaries.
(C)
Includes restricted cash and receivables not subject to ASC No. 310-30 which New Residential has deemed fully collectible.
(D)
Includes liabilities arising from contingencies regarding ongoing HLSS matters (Note 14).
(E)
Contingencies for HLSS class action law suits have not been recognized at the acquisition date as the criteria in ASC No. 450 have not been met (Note 14).

Summary of Unaudited Pro Forma Combined Interest Income and Income (Loss) Before Income Taxes
The following table presents unaudited pro forma combined Interest income and Income Before Income Taxes for the three and six months ended June 30, 2014 and 2015 prepared as if the HLSS Acquisition had been consummated on January 1, 2014.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Pro Forma
 
 
 
 
 
 
 
Interest income
$
184,083

 
$
187,020

 
$
349,138

 
$
364,009

Income Before Income Taxes
100,912

 
252,716

 
172,129

 
356,647