Flagstar Bank has closed its $400 million public offering, which included nearly 116 million shares of common stock priced at $1 per share. At the same time, the company said it is selling $474 million of non-performing first mortgage loans at a loss.
The company also sold over 14 million shares of preferred stock; net proceeds from the sale were nearly $386 million. After the stock deal was priced earlier this week, investors trashed Flagstar's common stock price to a new 52-week low of $1.13 per share. So far on Wednesday, it has traded between $1.16 and $1.20 per share.
The sale of the non-performing loans to an undisclosed buyer reduced Flagstar's total level of non-performing first mortgages by 71%. The company has also reclassified an additional $86 million in non-performing residential mortgages as available for sale. This brings the total reduction to 84%.
Proceeds from the sale are expected to be $209 million or 44% of book value. There are $133 million of reserves associated with the loans to be sold, so the deal should result in a $132 million loss for Flagstar. JP Morgan Securities was the advisor on the sale.
Flagstar said either the Federal Housing Administration or the Department of Veterans' Affairs insures the remaining $106 million of non-performing loans.
