Clayton Poised to Expand in the Primary Market
On the heels of its successful IPO, Clayton Holdings believes that its new capital base gives it a stronger platform to offer new services to mortgage lenders and servicers.
Chairman and CEO Frank Filipps isn't surprised by the success of the offering, which raised more than $127 million, and he believes it sets the stage for Clayton Holdings to grow.
In addition, Mr. Filipps told MSN that the stock offering gives Clayton "a currency with which we can pursue a number of acquisition opportunities."
Clayton Holdings plans to use the capital to pay back debt, reduce interest costs, and develop new products and markets.
Mr. Filipps said demand for outsourcing is very strong, and Clayton is looking to expand its reach into the primary mortgage market.
"That's going to open a whole new world of opportunity to us," he said.
Already, Clayton Holdings has formed a special servicer to manage problem loans on behalf of one client.
"We are going to try to see what other opportunities there are in the special servicing world," Mr. Filipps said.
And recently, Clayton acquired Mortgage Resource Network, a provider of outsourced origination and pre-closing due diligence services. Mr. Filipps said the company's research shows that mortgage originators increasingly want to outsource certain operational components of their business, and Clayton's strengths in file management and underwriting give it an opportunity to move into that market.
Mr. Filipps said the MRN acquisition will accelerate Clayton's penetration of the loan origination market.
Next up will be international business opportunities, he said. Clayton Holdings' services for the U.S. secondary market create an opportunity to provide servicers to support the growing mortgage securitization industry in Europe, he said.
Mr. Filipps, who formerly led Radian Guaranty Corp., said he has no regrets about moving out of the mortgage insurance business to take the helm of a younger, smaller firm.
"I think the transition has been absolutely great. Its given me an opportunity to build an organization and grow one that is in a similar field so it's able to use my years of experience in the mortgage world and now create a company in the service and product support areas rather than in the insurance or guarantee area."
The recent IPO was made through an underwriting syndicate led by William Blair & Co. as the sole book-running manager and Piper Jaffray & Co. as co-lead manager. SunTrust Capital Markets, JMP Securities and America's Growth Capital acted as co-managers.
Clayton provides information-based analytics to the capital markets and lending institutions. The company's services include due diligence analytics, conduit support services, professional staffing, compliance products and services, credit risk management and surveillance, and specialized loan servicing functions.
Most of Clayton's work involves the nonconforming segment of the MBS market. The company said that by the end of last year it was monitoring 19% of all outstanding U.S. non-agency loans. Customers include Bear Stearns, Lehman Brothers and Morgan Stanley.
Revenue last year rose 33% to nearly $208 million. But net income declined due to rising operating and interest expenses in 2005.
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