Ocwen's Altisource Spinoff Fires 800 as CEO Pleas for Calm
Altisource Portfolio Solutions served notice to over 800 employees and several hundred more contractors as part of an effort to reassure shareholders whose stock has plunged this week.
Nearly all the cuts were made this week at offices spanning from Boston to India, where several hundred personnel tied to the mortgage technology and outsourcing company were let go, said a person with direct knowledge of the matter.
Chief financial officer Michelle Esterman mentioned the layoffs in an emergency investor call on Friday, intended to halt the dive in company stock after more bad news emerged about former parent company Ocwen Financial. At least 60% of Altisource's revenue still comes from agreements with Ocwen.
"We are eliminating non-revenue generating businesses," Esterman said, without detailing which business segments.
A spokesman for the firm confirmed the layoffs, but declined to offer further comment or identify the affected channels.
It was not clear how much in savings the cuts will immediately produce, but had the reduction plan been in place at the beginning of the fourth quarter (it was not), Altisource would have reduced expenses by $20 million last quarter, according to Esterman.
Altisource is reacting to news that the California Department of Business Oversight is seeking to suspend Ocwen's mortgage license. California requested loan documents from Ocwen 16 times over two years, and the Atlanta-based loan servicer fully complied zero times since the regulator began its probe on Jan. 8, 2013, according to the state.
Altisource Chief Executive Bill Shepro further defended the profitability and capital positions of his company against fears that the firm's fate is the same as Ocwen's. Servicing revenue is expected to be as low as $215 million when Altisource reports fourth-quarter results next month, compared to $248 million in service revenue from the third quarter.
Shepro estimated the likelihood of Ocwen's mortgage license being suspended in California is "very low."
"We are not happy with the fourth quarter 2014 results," Esterman said. "Recognizing that Ocwen is not likely to grow that much in the near-term, we right sized the organization and are realigning our expenses for this new reality."
The Friday call was itself an attempt to qualify the company with the Securities and Exchange Commission to immediately move towards a proposed share buyback plan, according to Shepro, who weathered choice words from the company's fourth largest shareholder, billionaire Leon Cooperman, CEO of hedge fund Omega Advisors.
"You thought your stock was cheap," Cooperman said. "Obviously that was a colossal misallocation of capital," he said, referring to a previous repurchase that Cooperman didn’t think was executed so well. Cooperman later said he is not opposed to the plan.
Altisource said it may purchase 2.5 million shares (12% of its current shares outstanding) at the current price. The move would increase each shareholder's ownership by around 14%, the executives said.
Altisource, which is based in Luxembourg, is seeking shareholder approval. Luxembourg laws authorize the company to buy 15% of outstanding shares.
"We're working with our SEC counsel now to determine whether or not we've disclosed enough information with this call to start the buyback program," said Esterman.
Altisource shares rallied 50% and closed at $27.66 by end of the trading day on Friday. They had risen more than 65% during midday trading.
Ocwen spun off Altisource Portfolio Solutions, a provider of technology, outsourcing and fulfillment services, in August 2009. Altisource Portfolio Solutions later spun off Altisource Residential Corp. and Altisource Asset Management Corp. as two separate public companies in December 2012. Altisource Residential is a real estate investment trust that acquires single-family rental properties by purchasing distressed mortgages and real estate owned properties. Altisource Asset Management provides portfolio management and corporate governance services to real estate investment firms.