UWM Sets Terms for 200 Million-Share Rights Offering to Raise at Least $400 Million

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UWM Holdings Corporation has set the terms for a rights offering of 200 million Class A shares, moving forward with a plan designed to raise at least $400 million as the parent of United Wholesale Mortgage continues a broader balance-sheet overhaul announced last month.

The Pontiac, Michigan-based company said Tuesday that each holder of Class A common stock will receive one transferable subscription right for each share held as of 5 p.m. Eastern on Oct. 2. The rights are expected to be distributed beginning Oct. 5, according to UWM’s announcement.

The subscription price will be the greater of $2 per share or 85% of the volume-weighted average price of UWM’s Class A stock over the 10 trading days from Oct. 27 through Nov. 9. The offering is scheduled to expire at 5 p.m. Eastern on Nov. 12 unless UWM extends it.

Shareholders who fully exercise their basic subscription rights will also be able to request additional shares that remain unsubscribed, subject to pro rata allocation. UWM said the rights themselves are expected to trade on the New York Stock Exchange on a when-issued basis beginning Oct. 1 under the symbol UWMC RTWI, then on a regular-way basis beginning Oct. 6 under UWMC RT.

The announcement does not represent a new decision to raise capital. UWM first disclosed the planned rights offering on Aug. 5 as part of a much larger financing transaction with the Ishbia family and Oaktree Capital Management. What changed Tuesday is that the company formally laid out the mechanics and timetable for Class A shareholders.

Under the Aug. 5 financing disclosed to the Securities and Exchange Commission, UWM received $1.65 billion in gross proceeds from preferred equity issued to Oaktree-affiliated funds and an Ishbia family investment vehicle, along with warrants to purchase Class A shares. UWM described the broader arrangement as a $2.05 billion strategic capital partnership and suspended its common dividend as it prioritized debt reduction and balance-sheet strength.

The rights offering accounts for the remaining planned $400 million of that $2.05 billion capital framework. UWM’s SEC disclosures say the company agreed to raise at least $400 million through the sale of the 200 million Class A shares.

The offering is also backed by arrangements involving Oaktree, SFS Group Capital and UWM Chairman and CEO Mat Ishbia. If subscriptions do not produce at least $400 million, Oaktree-affiliated purchasers have the right to purchase securities covering some or all of the shortfall, with the Ishbia support parties committed to cover any remaining unfunded amount, subject to the terms and conditions of the backstop agreement.

That distinction matters: Tuesday’s announcement sets the offering terms, but the capital has not yet been raised through the rights offering. Participation by existing shareholders, the final subscription price and any amount ultimately funded through the backstop will not be known until the process runs its course.

The capital raise comes after a difficult second quarter for UWM. The company reported $39.7 billion of loan origination volume for the quarter ended June 30, along with $888 million of total revenue and a $451.9 million net loss. When it announced the Oaktree-Ishbia financing in August, UWM said the additional capital was intended to strengthen liquidity and its balance sheet while allowing the company to keep investing in technology, servicing and the wholesale mortgage channel.

For shareholders, the next key date is Oct. 2, when ownership of Class A shares will determine eligibility for the subscription rights. The offering is expected to begin Oct. 5, with the pricing measurement period starting Oct. 27 and ending Nov. 9.