Ready Capital Targets $850M Free Cash, 60% CRE Portfolio Reduction
Ready Capital aims to generate over $850 million free cash and cut its legacy CRE portfolio by 60% to $2 billion, after producing $380 million in Q4 via $130 million sales and $250 million runoff. Management plans a 25% operating cost cut and increases small-business lending allocation to 20%.
1. Balance Sheet Repositioning
Ready Capital is executing a two-phase plan to generate over $850 million in free cash and reduce its legacy CRE portfolio by 60% to $2 billion. It generated $380 million in Q4, including $130 million of loan sales and $250 million from portfolio runoff and asset resolutions, and aims for an additional $500 million from runoff and $1.5 billion of loan sales by year-end.
2. Q4 Financial Results
In Q4, the company reported a GAAP loss of $1.46 per share and a distributable loss of $0.43, with book value sliding to $8.79 from $10.28. Combined valuation allowances and CECL reserves rose by $173 million; nonaccrual loans climbed to 27%, reflecting elevated credit stress in legacy assets.
3. Leadership Changes and Cost Reduction
Management promoted Dominick Scali to Chief Credit Officer and Co-President of ReadyCap Commercial and shifted Gary Taylor to lead the SBA lending unit. The company targets a 25% reduction in operating expenses and plans to increase capital allocation to small-business lending to 20%, up from 10%.
4. Debt Maturities and Liquidity Strategy
Near-term debt maturities include $67 million due in Q3 and $450 million in Q4, with management prepared to retire or refinance obligations. The liquidity plan is designed to produce free cash significantly exceeding these maturities, highlighted by the recent retirement of a 5.75% senior unsecured note on maturity.