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Nationstar Mortgage Holdings Inc. -- Moody's upgrades Nationstar's senior unsecured rating to B1 from B2, assigns a B1 corporate family rating to Mr. Cooper Group Inc.; outlook stable

·15 min read

Rating Action: Moody's upgrades Nationstar's senior unsecured rating to B1 from B2, assigns a B1 corporate family rating to Mr. Cooper Group Inc.; outlook stableGlobal Credit Research - 18 Feb 2022New York, February 18, 2022 -- Moody's Investors Service ("Moody's") has assigned a B1 corporate family rating (CFR) to Mr. Cooper Group Inc. (Mr. Cooper). Concurrently, Moody's withdrew the B2 CFR and upgraded to B1 from B2 the backed long-term senior unsecured rating of Mr. Cooper's indirect, wholly-owned subsidiary, Nationstar Mortgage Holdings Inc. (Nationstar) and upgraded to B1 from B2 the issuer rating of Mr. Cooper's operating subsidiary, Nationstar Mortgage LLC. A stable outlook was assigned to Mr. Cooper, and Nationstar's and Nationstar Mortgage LLC's outlooks were changed to stable from positive.Assignments:..Issuer: Mr. Cooper Group Inc.......Corporate Family Rating, Assigned B1Upgrades:..Issuer: Nationstar Mortgage Holdings Inc..... Gtd Senior Unsecured Regular Bond/Debenture, Upgraded to B1 from B2..Issuer: Nationstar Mortgage LLC.... Issuer Rating, Upgraded to B1 from B2Withdrawals:..Issuer: Nationstar Mortgage Holdings Inc.......Corporate Family Rating, Withdrawn, Previously Rated B2Outlook Actions:..Issuer: Mr. Cooper Group Inc.....Outlook, Assigned Stable..Issuer: Nationstar Mortgage LLC....Outlook, Changed To Stable From Positive..Issuer: Nationstar Mortgage Holdings Inc.....Outlook, Changed To Stable From PositiveRATINGS RATIONALEMoody's withdrew Nationstar's B2 CFR and assigned a CFR one notch higher at B1 to Mr. Cooper. The B1 CFR reflects the group's improved financial profile, including profitability and capitalization improvements, and its enhanced capacity to grow its capitalization levels through increased earnings, which improves its ability to absorb unexpected losses. The B1 CFR also reflects Mr. Cooper's strong position in the US residential mortgage origination and servicing market. Additionally, it reflects the company's solid liquidity position and the streamlining of its operations through the recent sales of ancillary businesses.Mr. Cooper's profitability as measured by net income to total managed assets in 2021 was strong at 6.9%, and benefitted from gains from the sales of its title and valuations businesses, and reverse mortgage loan portfolio.Mr. Cooper's solid profitability has led to a substantial improvement in capital levels, with adjusted tangible common equity (tangible common equity minus deferred tax assets) to adjusted tangible managed assets (tangible assets minus Ginnie Mae loans eligible for repurchase and Home Equity Conversion Mortgages) of 19.4 % as of year-end 2021, compared to 9.0% as of year-end 2020. The recent sales of the ancillary businesses and the reverse mortgage portfolio is also viewed as a credit positive as it simplified the business allowing the company to focus on its core origination and servicing business.Mr. Cooper has continued to maintain solid liquidity, as evidenced by the extension of the maturity of its corporate debt and its solid cash position. In November 2021, its subsidiary, Nationstar, issued $600 million of 5.75% senior unsecured notes due in 2031, with the proceeds used for general corporate purposes, including the purchase of mortgage servicing rights. Mr. Cooper's liquidity profile also benefits from unrestricted cash of $895 million as of year-end 2021.The stable outlooks reflect Moody's expectation that Mr. Cooper will maintain solid, albeit somewhat lower, profitability and likely will modestly improve its leverage over the next 12-18 months.The B1 senior unsecured bond rating is based on Mr. Cooper's B1 CFR and the application of Moody's Loss Given Default (LGD) for Speculative-Grade Companies methodology and model, which incorporate their priority of claim and strength of asset coverage.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMoody's said that the ratings could be upgraded if the company continues to demonstrate solid financial performance, whereby long-term, through-the-cycle profitability as measured by net income to average assets averages at least 3.0%. In addition, the company would need to maintain solid capital levels, such as adjusted tangible common equity to adjusted tangible assets of at least 17.5%, while preserving its servicing performance and franchise value, and maintaining its current liquidity and funding profile.Moody's said that the ratings could be downgraded if the company's financial performance materially deteriorates, for example, if capitalization falls and is expected to remain below 13.5% as measured by adjusted tangible common equity to adjusted tangible managed assets, or if net income to assets falls to less than 1.5% for an extended period of time, or if the company's liquidity position deteriorates beyond an adequate buffer to its debt covenants. In addition, the ratings could be downgraded in the event of material negative regulatory actions that would impair Mr. Cooper's franchise and ability to remain profitable. The long-term senior unsecured debt and issuer ratings could be downgraded if the company's ratio of secured debt to unsecured debt increases to and remains above 1 to 7.The principal methodology used in these ratings was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Gene Berman Asst Vice President - Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Donald Robertson Associate Managing Director Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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