TPG Mortgage REIT Taps Houlihan for Strategic Alternatives

(Bloomberg) -- TPG RE Finance Trust Inc. tapped investment bank Houlihan Lokey Inc. for advice as it grapples with tumult in the U.S. mortgage-finance market caused by the coronavirus pandemic, according to people with knowledge of the matter.

The real estate investment trust is working with Houlihan to explore potential transactions including financing and strategic alternatives, said one of the people, who asked not to be identified discussing private talks. A representative for TPG RE declined to comment. A Houlihan spokesperson didn’t immediately respond to a request for comment.

Shares of TPG RE plunged 12% at 9:40 a.m. in New York, after Bloomberg reported the hiring of Houlihan. The stock has fallen more than 80% this year, leaving the company with a market value of about $250 million.

TPG RE, led by Chief Executive Officer Greta Guggenheim, last month delayed the payment of its first-quarter dividend, citing a cash crunch caused by margin calls. The Covid-19 crisis “caused real estate securities markets to experience significant volatility and widening credit spreads,” leading to “a negative impact” on the REIT’s mostly floating-rate commercial real estate debt securities portfolio, it said in a March 23 statement.

Fluctuations in the portfolio, which had a face value of about $960 million last month, required the company to post cash collateral with its lenders. The fluctuations and collateral requirements “have been, and may continue to be, material,” TPG RE said, and “there is no certainty that the company will be in a position to continue to fund such payments.”

TPG RE also said it had a loan portfolio with an aggregate unpaid principal balance of about $5.1 billion, for which it may be required to post cash collateral to lenders. The New York-based REIT is monitoring government programs and engaging in active discussions with lenders and other potential sources of financing, it said last month, adding that it “cannot predict whether it will be able to agree to terms with such parties on an expedited basis.”

The REIT is externally managed by an affiliate of TPG and counts one of the alternative-asset firm’s executives, Avi Banyasz, as its chairman.

©2020 Bloomberg L.P.

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