Stearns Holdings noteholders agree to support plan; auction canceled

By Caroline Salls

Pittsburgh, Sept. 11 – Stearns Holdings, LLC has reached an agreement with its largest noteholders under which the noteholders will support the company’s modified plan of reorganization, according to a news release.

The noteholders who entered the agreement and/or funds that they advise and manage collectively hold almost two-thirds of the face amount of Stearns’ notes.

With the noteholders’ support, Blackstone will serve as the plan sponsor and will contribute $65 million in new capital plus additional cash to pay some claims on the plan effective date in return for 100% of the ownership of the reorganized company.

This contribution is in addition to up to $30 million in debtor-in-possession financing that Blackstone has agreed to refinance under the plan.

The modified plan is subject to confirmation by the U.S. Bankruptcy Court for the Southern District of New York.

Having received the support of the noteholders for the modified plan, Stearns said it has canceled the auction previously scheduled to take place on Sept. 16. The company will seek confirmation of the plan at a hearing scheduled for Oct. 24.

“We are pleased to have obtained the support of our largest noteholders as we take the next step forward in our efforts to reposition Stearns for future growth opportunities and enhanced profitability,” David Schneider, chief executive officer of subsidiary Stearns Lending, LLC, said in the release.

“We have taken deliberate and proactive actions to reduce costs and refocus on our core businesses, and this is an ideal outcome for our company.

“As a long-term investor in Stearns, Blackstone knows our business well and their desire to deepen their relationship and ongoing commitment to our business, employees and partners demonstrates their confidence in Stearns’ future prospects.”

Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal adviser to Stearns, PJT Partners is serving as its financial adviser, and Alvarez & Marsal is serving as its restructuring adviser.

Stearns is a Santa Ana, Calif.-based independent mortgage origination and servicing company. The company filed bankruptcy on July 9 under Chapter 11 case number 19-12226.

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