Stearns Lending canceled plans for an auction after almost two-thirds of its noteholders approved a bankruptcy reorganization proposal that would solidify Blackstone’s ownership of the company.
The modified reorganization plan is subject to approval by the U.S. Bankruptcy Court for the Southern District of New York at a hearing on Oct. 24.
The plan calls for Blackstone to contribute $65 million in new capital plus additional cash to pay certain claims in return for expansion of its majority share in the company to 100% ownership. Other conditions Blackstone would have to fulfill include refinancing up to $30 million in “debtor in possession” financing.
“We are pleased to have obtained the support of our largest noteholders as we take the next step forward in our efforts to reposition Stearns for future growth opportunities and enhanced profitability,” said Stearns CEO David Schneider in a press release.
Blackstone first invested in Stearns in August 2015. The debt being restructured in the bankruptcy was amassed prior to Blackstone’s investment in the mortgage company.
Stearns is active in the wholesale and retail loan channels, and also operates through strategic alliances. It anticipates that will be able to “continue to operate as normal” while bankruptcy court approvals are pending.
Skadden, Arps, Slate, Meagher & Flom is serving as Stearns’ legal adviser, PJT Partners is serving as its financial adviser and Alvarez & Marsal is serving as its restructuring adviser.