ICE borrows $ 6.5 billion to expand its presence in the mortgage industry

ICE did not comment on this article, but said the addition of Ellie Mae to its platform was helping it establish “as a leading provider of end-to-end electronic workflow solutions in the world. service the evolving US residential mortgage industry, ”in a statement earlier this month. announcing his agreement to buy Ellie Mae.

The global financial crisis of 2007-2008 exposed major weaknesses in the mortgage underwriting and servicing industries, which led state attorneys general, including Kamala Harris, to choose Joe Biden as deputy. president, to extract $ 25 billion in foreclosure fines from major US lenders.

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Although Ellie Mae does not provide mortgages herself, she is one of a number of platforms looking to bring more of the estimated $ 11.2 trillion residential mortgage financing market. in the digital age.

Despite the pandemic and its economic shocks, the Federal Reserve’s unprecedented efforts to keep credit affordable and fluid during the crisis are expected to help push home loan inflows in the United States to $ 3.1 trillion this year. year, a new post-2008 record, according to Goldman Sachs analysts.

Rarely has now been a good time for US companies to borrow in the booming US corporate bond market, which last month saw ICE BofA US Corporate Index yields drop below 2% for the first time. times of history.

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The pricing of the five-part ICE bond deal reflects the continued search for yield among investors since March, when the Fed launched its series of emergency lending and bond purchase programs to prevent credit to dry up.

Specifically, the longest, a parcel of 40-year ICE bonds, cleared the market 160 basis points above a risk-free benchmark for a return of 3.04%, according to a person with direct knowledge of the transactions.

Price levels initially disseminated around 180 basis points by bankers seeking to generate interest in the debt offering, rated A3 by Moody’s Investors Service and BBB + by S&P Global.

Most US corporate bonds have a “spread” above TMUBMUSD10Y US Treasuries,
0.680%,
the spread being the amount that an investor is paid over a benchmark to own bonds.

Low bond yields have been credited with bringing major U.S. stock indexes close to their all-time highs, around 100 days since the coronavirus began in the United States, sent stocks into one of the strongest downward spirals in memory. The Dow Jones Industrial Average DJIA,
-0.30%
ended Monday’s session around 5.8% of its February high.

ICE announced plans to raise $ 9.25 billion in cash, including Monday’s debt increase, as well as $ 1.75 billion in equity through the sale of new ICE common shares for buy Ellie Mae, in publicly filed trading documents.

Although mergers and acquisitions collapsed in the first quarter, a team of analysts led by Ken Johnson of the Wells Fargo Investment Institute said they believed volumes, especially in “data automation and analytics Could be on the verge of gaining momentum, in part because US state-owned companies declared more than $ 2.5 trillion in cash in the second quarter.

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“The retail trade and travel and leisure sectors hit hard
could also present attractive merger and acquisition opportunities as the
companies in an effort to repair balance sheets and improve liquidity, ”Johnson’s team wrote in a note Monday.