UWM offer for Two Harbors rejected over financing and MSR risks

"Any stockholder who fails, for whatever reason, to make a timely cash election defaults to UWMC stock currently worth approximately $7.58 based on UWMC's closing trading price on May 12, 2026, the board stated. TWO estimates that as many as 30% of its stockholders would be so disadvantagedUWMC estimates this, too, and is hoping to take advantage of this fact to significantly lower the transaction value to the detriment of TWO stockholders."

"The Two Harbors board raised concerns regarding UWM's financial condition and financing capacity. As an example, it cited multiple stress indicators, including two outlook downgrades from rating agency Fitch in the past six months; a decline in UWM's cash position to $425 million as of March 31, down from $503 million on Dec. 31; leverage at an all-time high of 3.2 times; and a doubling of UWM's one-year probability of default over three weeks, based on Bloomberg calculations."

"UWM said its bid is supported by a committed, unsecured $1.3 billion bridge facility from Mizuho Bank Ltd. The negotiations with CrossCountry Intermediate Holdco, an affiliate of CCM, include $3.4 billion of committed financing: a $2 billion secured facility and a $1.4 billion unsecured commitment from Citi. The seller argued that UWM did not raise the facility amount as it offered a higher price, noting that having access to $1.7 billion in capital with the deal represents a net gain of only about $400 million at an implied 14% cost of funds."

"By UWMC's own admission, synergies and capital markets expertise are not driving this deal. So what is the rationale? the board asked. The MSR book Mat Ishbia, UWM chairman and CEO, has said the company is interested in Two Harbors' MSR book, which would aid its goal of building servicing capacities in-house. The board questioned this objective, noting that UWM has historically been the largest seller of low-coupon MSRs in the market, selling $40 billion of low-coupon MSRs just last quarter."

Any stockholder who does not make a timely cash election defaults to receiving UWMC stock valued at about $7.58 based on the May 12, 2026 closing price. UWMC estimates that up to 30% of stockholders could be disadvantaged by this default outcome and seeks to use it to reduce the transaction value. The Two Harbors board raised concerns about UWM’s financial condition and financing capacity, citing Fitch outlook downgrades, a decline in cash to $425 million from $503 million, leverage at 3.2 times, and a sharp increase in one-year probability of default. UWM stated its bid is supported by committed bridge financing and additional committed financing from Citi. The board questioned the deal’s rationale, noting limited synergy drivers and skepticism about building in-house servicing capacity given UWM’s history of selling low-coupon MSRs.

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