Ditech runs into trouble with creditors; boots COO after just 9 months

Servicing

Well, we’ve gone a solid two months without a bad headline for Ditech Holding Corp., the nonbank formerly known as Walter Investment Management, but it looks like the company is in trouble again.

Last year, the company emerged from Chapter 11 bankruptcy after successfully completing a financial restructuring plan that eliminated $800 million in corporate debt and changed its name to Ditech Holding.

All of that came at the end of a long string of financial losses for the company, which also basically had a revolving door in its CEO’s office for several years.

But the moves weren’t enough to stem the tide. In June, Ditech warned investors that it was exploring “strategic alternatives to enhance stockholder value,” which included possibly selling the company.

Then, in November, the nonbank ran into more trouble when it was kicked off of the New York Stock Exchange over to the company’s low share price and market cap.

Things have been quiet since then, but that all changed this week.

On Thursday, Ditech disclosed in a filing with the Securities and Exchange Commission that it is firing its chief operating officer, Ritesh Chaturbedi, who’s only been with the company for nine months.

Chaturbedi joined Ditech in April 2018, but, according to the SEC filing, was terminated without cause on Jan. 11, 2019. The filing does not provide any details on what led to Chaturbedi’s termination.

Chaturbedi doesn’t leave empty-handed though. According to the filing, Chaturbedi is getting one year’s salary ($450,000) as a severance payout.

But that’s not the only rough water Ditech is now in.

The company also disclosed that it did not make a scheduled interest payment on some of its debt, despite apparently having “sufficient liquidity” to make the payment on time.

According to the filing, Ditech was supposed to make a $9 million payment on Dec. 17, 2018, but elected not to make the payment because it is still in “active discussions” with creditors and “other parties” about the company’s future. The company also did not make the payment within 30 days of that, which would trigger an “event of default” on the debt.

The company said that it has been in discussion with its creditors and has agreed to enter into forbearance on the debts in question while the company continues to discuss “strategic alternatives.”

The forbearance agreements expire on Feb. 8, 2019. 

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