Jeffries Financial Group is purchasing a 50% stake in the parent company of Hildene Capital Management, which has a secondary market/securitization arrangement with Crosscountry Mortgage.
Concurrent with this transaction, Hildene Capital Management is acquiring the holding company for SILAC Insurance, a provider of fixed and fixed indexed annuities for $550 million in cash.
Compensation for the Jeffries deal involves returning a revenue share in Hildene's asset management business it has owned since 2022, a portion of an interest in a Hildene managed private fund and $340 million in cash in return for the 50% stake in Hildene Holding Co.
"Origination and management of credit investment opportunities remain a central part of Jefferies' long-term strategy," a press release statement attributed to Rich Handler, CEO, and Brian Friedman, president, said.
Crosscountry entered into its
In return, Crosscountry Capital, an affiliate of the mortgage company, invested in an account managed by Hildene. But Hildene did not take an equity stake in the mortgage company nor provide any other form of liquidity in exchange for the production.
Earlier this year,
The
Hildene plans to continue programmatically issuing non-QM securitizations through its relationship with Crosscountry after the deals are completed, sources familiar with the company said.
To offset and effectively fund Jeffries' cash outlay in Hildene, it is making an over $500 million reduction in its investment in certain platforms and strategies in the Leucadia Asset Management division.
For accounting purposes, Jeffries will not consolidate Hildene or SILAC on its balance sheet and will instead use the equity method. It will record its 50% share of Hildene's consolidated earnings.
"Since our launch in 2008, we have sought to invest in innovative credit products that consistently deliver strong risk-adjusted returns for our clients," said Brett Jefferson, president and co-chief investment officer of Hildene, and Dushyant Mehra, the other co-CIO, in the Jeffries press release.
"We believe that expanding our partnership with Jefferies and completing the acquisition of SILAC will best position us to scale our platform, broaden our origination capabilities and support the long-term interests of SILAC's policyholders while meeting the evolving needs of our clients and capital partners," the statement continued.
As for SILAC, in what was a busy 2022, Hildene made a minority investment in the insurer. This purchase builds on that as well as a reinsurance arrangement between SILAC and Hildene Re SPC.
Since 2023, Hildene has managed a portion of SILAC's investment portfolio; after the deal closes, it is expected to manage all of the insurer's investment assets.
"This acquisition represents an important inflection point for SILAC," said G. Daniel Acker, current president and chief marketing officer, who will assume the CEO title at the insurer when the deal is completed. "It will enable us to accelerate our strategy and further enhance our capabilities as a leading annuity provider."
Current SILAC CEO Stephen Hilbert will be stepping down.
For the SILAC transaction, Jeffries was Hildene's financial advisor and Kirkland & Ellis the legal advisor. Kirkland & Ellis had the same function for Hildene for the Jeffries investment.
SILAC was advised by Piper Sandler (financial) and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo (legal).
Jeffries served as its own financial advisor on the Hildene investment, with Sidley Austin as the legal advisor.
