Citi Eyes Argent Deal
Citigroup has inked a deal that gives it an "option" to buy subprime wholesale giant Argent Mortgage, Orange, Calif., and the $65 billion servicing platform of its sister company, Ameriquest Mortgage.
If Citigroup winds up taking over Ameriquest's portfolio of A- to D receivables it will become the nation's largest subprime servicer with $129 billion in product.
One veteran investment banker, requesting anonymity, described the servicing platform as the "crown jewel" of Ameriquest. The unit is based in Illinois, the rest of the firm in California.
At year-end, Countrywide Financial Corp., Calabasas, Calif., ranked second among subprime servicers with $119 billion, according to figures compiled by the Quarterly Data Report.
Both Ameriquest Mortgage (the retail arm) and Argent (wholesale) are owned by ACC Capital Holdings, a company controlled by mortgage industry veteran Roland Arnall who is currently serving as U.S. ambassador to the Netherlands. Mr. Arnall himself, whose wife chairs ACCCH, also will pump money into the company's ailing mortgage units but it was not disclosed how much.
In a press statement, ACCCH revealed that Citigroup not only has an option to buy Argent and the $65 billion in receivables, but is providing "additional working capital" to ACCCH's subprime units, becoming their primary warehouse lender.
Citigroup - a top-ranked subprime lender and servicer itself - also will buy most of Argent's whole loan production, a move that will help the bank's trading desk.
The option to buy Argent - which reportedly is for nine months - does not include the retail division of Ameriquest and is subject to "certain requirements including achieving business milestones and satisfaction of regulatory filings and approvals," according to the ACCCH statement.
Last spring, faced with declining subprime production and a changing retail landscape, Ameriquest Mortgage - once the nation's largest subprime lender - closed its entire retail branch network (229 locations) slashing 3,800 jobs in the process.
Investment bankers expect that eventually ACCCH will close the retail operation, which now includes four consumer-direct call centers. The company's spokesman would not comment.
The privately held company, typically, does not disclose earnings or production figures. Back in 2003 and 2004 - before the B&C market began correcting - Ameriquest/Argent, combined, reportedly earned about $1 billion (pretax) each year.
It is now believed to be losing money. ACCCH has been actively trying to sell its mortgage business since last summer. Its advisor is J.P. Morgan Chase.
Interested investors have included not only Citigroup, but Morgan Stanley - which dropped out of the bidding - and two hedge funds. Among subprime servicers, Ameriquest ranks fourth ($65 billion) and Citigroup fifth ($64.25 billions), according to fourth-quarter edition of the QDR.
Two years ago, Ameriquest and Argent, combined, ranked first among all subprime funders and servicers. Today, the franchise is a shadow of its former self, the victim of a declining subprime market hurt by falling home values, poor underwriting, delinquencies and razor-thin profit margins. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com