Ready Capital Targets $850M Free Cash, 60% CRE Book Reduction, 25% Cost Cut
Ready Capital’s Q4 plan targets $850 million of free cash and a 60% reduction in its commercial real estate book to $2 billion, having generated $380 million so far. It posted a GAAP loss of $1.46, saw book value drop to $8.79, set a 25% cost-reduction goal and made leadership changes.
1. Balance-Sheet Repositioning Plan
Ready Capital aims to generate over $850 million of free cash and reduce its legacy commercial real estate portfolio by 60% to approximately $2 billion, having already produced $380 million in Q4 through $130 million of sales and $250 million of runoff. The two-phase strategy begins with aggressive asset management and moves to a streamlined CRE origination model under external manager Waterfall.
2. Q4 Financial Results
The company reported a GAAP loss of $1.46 per share and a distributable loss of $0.43, with book value declining to $8.79 following a $173 million increase in valuation allowances and CECL reserves. Nonaccrual loans rose to 27%, recurring revenue fell to $41.5 million, and operating expenses increased to $59.9 million.
3. Leadership Changes and Cost Reduction
Dominick Scali was promoted to Chief Credit Officer and Co-President of ReadyCap Commercial, while Gary Taylor shifted to President of ReadyCap Lending. Management also set a 25% operating cost-reduction target and plans to boost capital-light small business lending allocation to 20% from 10%.
4. Debt Maturities and Liquidity Strategy
The company faces near-term debt maturities of $67 million in Q3 and $450 million in Q4, having retired its 5.75% senior unsecured note. The liquidity plan is designed to generate free cash in excess of these obligations, with optional refinancing of accretive maturities to enhance earnings and cash flow.