Centerbridge Capital Said to Seek $1 Billion for Loan Servicer Green Tree

Centerbridge Capital Partners LLC is seeking to sell Green Tree Servicing LLC, the loan servicer it acquired in 2007, for about $1 billion, according to two people with knowledge of the matter.

Morgan Stanley is running the sale and has contacted private-equity firms and potential strategic buyers about purchasing Green Tree, said the people, who declined to be identified because the process is private. Green Tree has about $175 million of annual earnings before interest, taxes, depreciation and appreciation, the people said.

Green Tree, based in St. Paul, Minnesota, has increased the volume of loans it services by about 50 percent since a Centerbridge-led group acquired it from Fortress Investment Group LLC and Cerberus Capital Management LP, one of the people said. The company had $34 billion in servicing assets under management in 2009.

“Scale is the name of the game,” said Matthew Anderson, managing director at Foresight Analytics, an Oakland, California-based real-estate research firm. “If you can get scale and market share you can become a very profitable business.”

The company says it’s the largest servicer in the U.S. for manufactured housing loans, and also services residential mortgages, second liens and home-equity lines of credit, according to its website. Green Tree has more than 1,800 employees in 29 offices.

A Morgan Stanley spokeswoman declined to comment, and Centerbridge didn’t return a call seeking comment.

Centerbridge

New York-based Centerbridge led a group that won approval in June to buy the assets of Extended Stay Hotels Inc., which had filed the largest bankruptcy case by a U.S. hotel owner.

Green Tree has expanded servicing for loans on manufactured homes. In 2004, Green Tree bought an $8.6 billion manufactured home loan-servicing portfolio from North Fork Bancorp, which had acquired it as part of its purchase of GreenPoint Financial Corp. In 2005, Green Tree agreed to purchase another manufactured-home portfolio from Bombardier Inc.

There may not be much demand from investors for a residential-servicing business like Green Tree’s, said Chris Whalen, a former Federal Reserve Bank of New York analyst and co-founder of Institutional Risk Analytics in Torrance, California. The trustee for Lehman Brothers Holdings Inc. has decided to shutter the servicing business rather than sell it and Bank of America Corp. is looking to sell some of its servicing assets as well, Whalen said.

Fortress

In July, Fortress agreed to buy CW Financial Services, the parent of the second-largest manager of delinquent U.S. commercial real-estate loans, from a unit of Caisse de Depot et Placement du Quebec.

Fortress, Cerberus and J. Christopher Flowers’ private- equity firm purchased Green Tree in 2003 from insurer Conseco Inc. for $850 million, before selling it to Centerbridge. Conseco had bought Green Tree Financial Corp. in 1998 for $6 billion, and the bad loans that accompanied the acquisition eventually pushed the insurer into bankruptcy.

To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Jonathan Keehner in New York at jkeehner@bloomberg.net; Dakin Campbell in New York at dcampbell27@bloomberg.net.

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net; David Scheer at dscheer@bloomberg.net.