Stearns Holdings, the parent company of Stearns Lending, announced Tuesday the company has filed for Chapter 11 bankruptcy and reached an agreement with majority equity holder Blackstone on a financial restructuring plan.
Executives for Stearns Lending said that, with the plan in place, it will reduce overall debt, allowing it to continue operations, preserve approximately 2,700 jobs and be in a better position for long-term success.
“The action we are taking today is the next step in our efforts to reposition Stearns for future growth opportunities and enhanced profitability,” David Schneider, CEO of Stearns Lending said in a statement. “We have taken deliberate and proactive actions to reduce costs and refocus on our core businesses. We are now undertaking a comprehensive financial restructuring with the goal of moving forward in a stronger financial position.”
As part of the restructuring, Blackstone will acquire substantially all ownership of the company in exchange for providing $60 million in new capital, as well as a $35 million bankruptcy loan. Blackstone has been an investor in Stearns since August 2015.
“As a long-term investor in the company, Blackstone knows our business well,” Schneider said. “They share our confidence in Stearns’ future prospects and are dedicated to supporting us through this transition.”
Stearns owes money to approximately 200-299 entities according to its filing, including a $189 million contingent and unliquidated claim to Wilmington Trust. BlackKnight Financial Services and CoreLogic are also among the vendors to which the company owes money.
The move to file for bankruptcy comes at a time when mortgage interest rates are still near historic lows, meaning the company is pulling in less profit on mortgages it provides. And despite the low interest rates, home sales have also been steadily declining year-over-year.
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