FOA claims 98% participation in bond exchange offer

Industry-leading reverse mortgage lender Finance of America (FOA) announced this week that nearly all of the holders of outstanding senior notes that were set to mature in 2025 will participate in a new bond exchange offer that was first announced in June and amended last month.

Under the amended offer, the current unsecured notes, due in 2025 with an interest rate of 7.875%, could be swapped for one of two new bond options — those with the same interest rate due in 2026 (with a company option to extend into 2027) or new bonds with a 10% interest rate that would come due in 2029.

Among the holders of notes due in 2025, nearly 98% had agreed to participate in the exchange when the offer initially expired Oct. 25. In response, the company amended the expiration date to Tuesday, Oct. 29, at 5 p.m. ET.

“We are thrilled to have such a high participation rate in our company’s exchange offer,” FOA CEO Graham Fleming said in a statement. “This transaction positions the company to benefit from enhanced financial flexibility and an improved capital structure, while aligning our cash flows with our debt obligations. We sincerely appreciate the continued partnership with our noteholders.”

The deal is applicable for “only eligible holders of 2025 unsecured notes,” who will then be provided with the memorandum detailing the exchange offer and its mechanisms, according to a prior announcement of the offer.

By exchanging the current notes for new, secured debt that will come due beyond the original 2025 maturity date — and prioritizing it for noteholders — FOA can have more immediate financial breathing room. This is taking place as FOA prepares to release its third-quarter earnings results on Nov. 6.

Since closing a deal to acquire American Advisors Group (AAG) in April 2023, FOA has made multiple moves to balance its size with its ambitions for reverse mortgages and other retirement solutions. The company reduced its headcount and faced threats of delisting from the New York Stock Exchange (NYSE) for being out of compliance with its continued listing standard.

But it also successfully implemented a 10-to-1 reverse stock split in June, and it posted improved earnings in the second quarter. The earnings report showed reduced losses — although short of recovery into black ink — and enthusiasm from company leaders over expected business impacts related to the Home Equity Conversion Mortgage (HECM) program and internal marketing efforts.