Planet Financial Group, the parent company of Planet Home Lending, completed the issuance of $475 million in senior unsecured notes this week, the latest mortgage company to raise debt in an oversubscribed transaction. The company’s initial target for the offering was $400 million.
The notes, which carry a 10.5% interest rate, are due in December 2029. Proceeds from the issuance are expected to repay outstanding senior secured debt.
“We were thrilled with the oversubscription of orders, which reflects the confidence of institutional investors in our multichannel business model, strength of financial risk management, and long-term strategy,” Michael Dubeck, president and CEO of Planet Financial Group, told HousingWire in a statement. “The transaction represents Planet’s debut deal in the public high yield market and opens the door to continued liquidity in the future.”
Following the transaction, Fitch Ratings assigned the company a long-term issuer default rating of B+ with a stable outlook. The rating reflects Planet’s “modest but growing” franchise as a correspondent and retail lender, as well as its established role as an agency and government servicer and subservicer.
Connecticut-based Planet, founded in 2007, had 236 sponsored loan officers and 47 active branches as of Friday, according to the Nationwide Multistate Licensing System.
The company originated about $13.5 billion in mortgages between January and September, marking a 33.7% year-over-year decline, according to estimates from Inside Mortgage Finance (IMF). Despite this, it remained the 23rd-largest mortgage lender in the country during this period. It also acquired some of the retail assets of Axia Home Loans in August.
Fitch Ratings ranked Planet as the seventh-largest correspondent lender and the 22nd-largest nonbank retail lender during the same period. While Fitch notes that the firm is well positioned for growth, it also highlights that competition within the correspondent channel and the company’s smaller scale compared to its peers constrain its rating.
Regarding its servicing book, Planet reached $97.5 billion in owned mortgage servicing rights (MSRs) as of September, per IMF. Fitch pointed to a relatively smaller scale compared to competitors, higher leverage, and the potential impact of valuation marks as rates decrease and prepayments increase. But these risks may be mitigated by conservative hedging strategies and a book’s low average coupon rate, which helps to reduce refinancing risks.
Fitch views Planet’s recent debt issuance positively, noting that it will increase unsecured debt to 24.5% of its total debt, pro forma, for third-quarter 2024. Fitch believes the issuance will “reduce asset encumbrance” and “enhance financial flexibility in times of stress.”
Other mortgage lenders, both private and public, are also issuing debt — particularly unsecured debt that carries no collateral and helps to strengthen their balance sheets.
Earlier this month, the parent company of United Wholesale Mortgage (UWM) raised $800 million through an unsecured debt offering, which was 60% higher than initially planned. The offering, priced at 6.625% with senior notes maturing in 2030, was aimed at qualified investors.
Freedom Mortgage, loanDepot, Mr. Cooper and PennyMac have also issued debt over the past two years, leveraging refinancing opportunities and extending terms.
Editor’s note: This story was updated with comments from Planet Financial Group.
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