Robert Heimowitz

Robert Heimowitz of Concise Capital asked about the expected lag time for the recent pickup in foreclosure starts to impact financial results. He also inquired about other government agency policies that might be ending, similar to the VA moratorium, and sought clarification on the expected accounting gain on the balance sheet in Q1 from the debt restructuring.

Answer

William Shepro, Chairman and CEO, explained that while Altisource is conservatively forecasting flat delinquency rates, they are hearing anecdotally from clients to expect an increase in foreclosure starts. He noted that re-defaults on FHA-modified loans are increasing, which may drive future activity. Regarding the financial impact, Shepro confirmed annualized interest expense would drop from approximately $32 million to $13.4 million. Michelle Esterman, an executive, clarified that Q1 interest expense will still be relatively high because the prior debt structure was in place until February 19.

Asked about the timing of foreclosure start increases impacting results, the status of other agency moratoriums similar to the VA's, and the expected accounting gain in Q1 from the debt restructuring.

Answer

William Shepro noted that while they are conservatively forecasting flat delinquency rates, they are hearing anecdotally from clients to expect an increase in foreclosure starts, especially after the VA moratorium ended. He highlighted the FHA's modification programs and observed that many borrowers are re-defaulting, which is starting to increase FHA-related revenue. Regarding Q1, Shepro expects strong performance, potentially better than Q4, with strong revenue and EBITDA. Michelle Esterman clarified that interest expense will still be high in Q1 due to the timing of the debt transaction closing in mid-February, but Shepro confirmed that annualized interest expense will drop significantly.

Robert Heimowitz inquired about the company's strategy for its senior notes, which have an upcoming coupon step-up, asking if a refinancing is being considered versus simply paying down the balance. He also asked if Five Point intends to contribute its own capital to new growth ventures to show sponsor alignment.

Answer

CFO Kim Tobler responded that the company is actively evaluating a potential refinancing of the notes, contingent on favorable market conditions, but believes it is prudent to pay down the debt regardless. COO and Chief Legal Officer Michael Alvarado added that for new growth ventures, Five Point would expect to contribute some equity, though likely a smaller percentage than its 37.5% stake in the Great Park Venture.

Asked for an EBITDA guide by business segment to assess dividend coverage and questioned if the upcoming 2025 bond maturity is driving the potential sale of the Great American business.

Answer

Trailing operating EBITDA is approximately $340M, and the company feels good about covering the dividend and interest (~$60M/quarter) even with some segments underperforming. The potential sale of Great American is not driven by a need to pay off bonds, as they have sufficient cash and assets; rather, it's an opportunistic decision to recycle capital from a valued-up asset.