Print Page  Close Window

SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
Entire Document
 
<PAGE>   42
 
 
                                   BUSINESS
 
GENERAL
 
  Background
 
     The Company is a specialty finance company the activities of which will
include (i) acquiring primarily subprime Single-Family Mortgage Loans, (ii)
originating, holding, selling and servicing Multifamily Mortgage Loans and
Commercial Mortgage Loans, (iii) securitizing Mortgage Loans and retaining
interests therein, (iv) purchasing Mortgage Assets in the secondary mortgage
market, (v) managing the resulting combined portfolio in a tax-advantaged REIT
structure, and (vi) offering due diligence services to buyers, sellers and
holders of Mortgage Loans. The Company's principal business objective is to
generate increasing earnings and dividends for distribution to stockholders. The
Company will acquire Single-Family Mortgage Loans through a network of sales
representatives targeting financial institutions throughout the United States.
The Company will originate Multifamily Mortgage Loans and Commercial Mortgage
Loans through HCMC. The Company will elect to be taxed as a real estate
investment trust under the Code, beginning with its tax year ending December 31,
1997. The Company will generally not be subject to Federal income tax to the
extent that it distributes its earnings to its stockholders and maintains its
qualification as a REIT. Taxable affiliates of the Company, however, including
HCP, HCMC and HCS, will be subject to Federal income tax. See "Federal Income
Tax Considerations -- Requirements for Qualification as a REIT," "-- Taxation of
the Company" and "-- Taxation of Taxable Affiliates." The Company will be
self-advised and self-managed.
 
     The Company has determined to elect REIT status primarily for the tax
advantages. Management believes that the REIT structure is the most desirable
structure for owning Mortgage Assets because it eliminates corporate-level
Federal income taxation. In addition, as the Company will not be a traditional
lender which accepts deposits, it will be subject to substantially less
regulatory oversight and incur lower compliance expenses than banks, thrifts and
many other originators of Mortgage Assets. The Principals believe that the
Company will generate attractive earnings and dividends per share for
stockholders through the combination of (i) its focus on originating Multifamily
Mortgage Loans and Commercial Mortgage Loans, which generally have higher yields
than conforming Single-Family Mortgage Loans, (ii) purchasing subprime
Single-Family Mortgage Loans which generally have higher yields than newly
originated conforming Single-Family Mortgage Loans, and (iii) using long-term
financing that allows the Company to realize net interest income over time as
REIT-qualified income, as opposed to fully taxable gain-on-sale income. Although
HCP has previously rendered advisory services in connection with securitization
transactions, neither it nor HCMC has securitized any significant amount of
Mortgage Loans. See "Risk Factors -- Recent Formation and Limited Operating
History."
 
     Management of the Company estimates that during the first year of
operations, approximately 97% of the Company's gross income will be generated by
its Investment Portfolio (Mortgage Securities -- approximately 47%; Multi-Family
Mortgage Loans and Commercial Mortgage Loans -- approximately 16%; and Single-
Family Mortgage Loans -- approximately 34%). The balance of the Company's gross
income, in the form of dividends from its taxable subsidiary, HCP, is estimated
to be approximately 3%. Management of the Company further estimates that the
Investment Portfolio will comprise approximately 99% of the Company's assets
(Mortgage Securities -- approximately 31%, Multi-Family Mortgage Loans, and
Commercial Mortgage Loans -- approximately 21%, and Single-Family Mortgage
Loans -- approximately 47%). There are no assurances that Management's estimates
will ultimately be indicative of the results of the Company's operations.
 
  Business Strategy
 
     The Company's strategy is to pursue acquisitions and originations of
Mortgage Loans where it believes it can receive acceptable rates of return on
invested capital and effectively utilize leverage. Key elements of this strategy
include:
 
          - growing the Investment Portfolio by utilizing the Company's
            wholesale Commercial, Multifamily and Single-family Mortgage Loan
            acquisition network to create attractive investment opportunities;
 
                                       42