Altisource Portfolio Solutions (ASPS) M&A Announcement summary

Deal rationale and strategic fit

• Strengthens balance sheet and cash flow, reducing refinancing risk and distractions, and positions the company for sustainable long-term growth and value creation.

• Provides more time to benefit from default markets, origination, and real estate investor solutions, and to execute the operating plan.

• Aims to diversify revenue streams and customer base, focusing on less default-reliant businesses and expansion into origination and commercial real estate markets.

• Reduces management, employee, and customer distractions, allowing focus on operating plan execution.

• Offers pre-transaction shareholders potential for increased ownership if share price rises via warrants.

Financial terms and conditions

• Reduces outstanding debt from $231M to $110M term loan plus $50M non-interest-bearing exit fee and $12.5M super senior credit facility, with some sources noting a reduction to $172.5M at closing.

• Annual interest expense reduced by $18M, with new facility at SOFR + 6.50% (about 10.9%).

• Maturity extended by five years to April 30, 2030.

• Lenders receive 57.9M common shares (63.5% pro forma equity/ownership).

• Pre-transaction shareholders receive warrants for 115M shares at $1.20/share, with staggered expirations and settlement methods.

Synergies and expected cost savings

• Annual interest expense reduced by $18M, with cash and PIK interest each reduced by about $9M.

• Net cash used in operating activities improved by over $55M since 2021.

• Expected to be accretive as debt reduction outweighs equity dilution from new shares issued to lenders.

• Improved leverage and debt service coverage ratios, with further improvement possible from excess cash flow and warrant exercises.

• Operating cash flow improved by $55M over three years through cost reductions and sales growth.