Origen Will Be Okay

Origen Financial (ORGN) shares soared today on news of a $46 million cash infusion that will enable to the Company to pay off its existing debt and avoid an event of default. The cash comes courtesy of a secured financing arrangement with the William M. Davidson Trust u/a/d 12/13/04 (the “Lender”), an affiliate of one of the Company’s principal stockholders. The Lender is a grantor revocable trust established by William M. Davidson as the grantor. Mr. Davidson is the sole member of Woodward Holding, LLC, which owns approximately 6.8% of the Company’s common stock. The sole manager of Woodward Holding, LLC is the Chairman of the Origen Board of Directors.

Ron Klein, CEO of Origen, remarked that

We are extremely pleased with this financing. Given the pending expiration of the extended term of our credit facilities, and amid difficult credit markets, we are fortunate to have arranged this financing on competitive terms.

"Competitive" must be relative - the financing consists of a secured note bearing interest at 14.5% per year secured by all of Origen's assets. The note matures in three years, subject to a one-year extension option by Origen. As part of the financing, Origen issued 5-year warrants to the lender to purchase 2,600,000 shares of Origen common stock at an exercise price of $1.22 per share.

I guess compared to Thornburg's $1.35 billion financing, Origen got a pretty good deal. Even though the interest rate is high, it does enable Origen to continue managing and servicing its existing portfolio for another four years while the Company waits for the capital market turmoil to subside.