NEW YORK--(BUSINESS WIRE)--Capstone Equities Capital Management, L.P. (“Capstone”), a shareholder of Altisource Residential Corporation (“RESI”), announced today that it has sent a demand letter to RESI’s board of directors. In the demand, Capstone requests that the board take action to terminate the asset management agreement with Altisource Asset Management Corporation (“AAMC”) for cause without paying any termination fee pursuant to Section 11 of the asset management agreement and also terminate the servicing agreement with a subsidiary of Ocwen Financial Corporation (collectively, “Ocwen”). Capstone has also requested that the board investigate any claims that RESI has against AAMC, Ocwen, and officers and directors of these companies.
“A corporate board of directors should act loyally and in good faith to its company and its shareholders, but the RESI board has repeatedly failed to do so at the expense of both the company and its shareholders,” said Joshua Zamir, managing principal at Capstone Equities.
Capstone believes these actions will add significant value for RESI shareholders. Capstone currently values RESI at $28.10 per share. If RESI’s board acts to terminate AAMC for cause and hires a new asset manager at market rates, Capstone estimates the stock will be worth $34.10 per share.
Capstone’s demand states that it supplements prior shareholder demands made on RESI’s board based on events that have occurred since the prior demands were made. For instance, Capstone’s demand cites a December 19, 2014 Consent Order with the New York Department of Financial Services in which Ocwen stipulated and agreed to engaging in “numerous and significant” violations of law and imprudent servicing practices.
According to Capstone, Ocwen’s admissions provide grounds for termination of the servicing agreement under which Ocwen services RESI’s mortgage loan portfolio. Capstone states moreover that, by having failed to terminate Ocwen despite the admitted misconduct, AAMC has materially breached its obligations as RESI’s asset manager. This breach by AAMC, Capstone believes, allows RESI’s board of directors to break the asset management agreement under which AAMC manages RESI’s investments without paying any termination fee. Capstone further believes that RESI’s agreements with AAMC and Ocwen are unenforceable due to conflicts of interest existing at the time of their authorization.
For access to the full Altisource Residential Demand Letter please visit www.capstonecm.com