Equity and Earnings (Loss) Per Share

Preferred Stock

The Predecessor Company had no preferred stock issued or outstanding.

Post-WIMC Bankruptcy Emergence

On the WIMC Effective Date, all shares of the Predecessor common stock were canceled and 4,252,500 shares of the Successor common stock, par value $0.01 per share, were issued to the previous shareholders of common stock and the Convertible Noteholders. The Successor common stock was valued based on its initial trading price of $10.25 per share for a total value of $43.6 million. The Company reserved 3,193,750 shares of common stock for issuance under an equity incentive plan.

On the WIMC Effective Date, the Company issued 100,000 shares of Mandatorily Convertible Preferred Stock initially valued at $123.2 million to the Senior Noteholders, which are mandatorily convertible into 11,497,500 shares of common stock (a conversion multiple of 114.9750) upon the earliest of (i) February 9, 2023, (ii) at any time following one year after the WIMC Effective Date, the time that the volume weighted-average pricing of the common stock exceeds 150% of the conversion price per share of $8.6975, subject to adjustment as described in the Articles of Amendment and Restatement, for at least 45 trading days in a 60 consecutive trading day period, including each of the last 20 days in such 60 consecutive trading day period, and (iii) a change of control transaction in which the consideration paid or payable per share of common stock is greater than or equal to the conversion price per share, which, subject to adjustment as described in the Articles of Amendment and Restatement, is $8.6975.

In the event of a voluntary or involuntary liquidation, winding-up or dissolution of the Company, each holder of Mandatorily Convertible Preferred Stock will be entitled to receive the greater of (i) a liquidation preference per share of Mandatorily Convertible Preferred Stock, prior to any distribution with respect to any other equity security of the Company, equal to the Liquidation Preference, and (ii) the amount payable per share, participating on an “as converted” basis, upon liquidation to the holders of the Successor common stock. The “Liquidation Preference” equals (i) the face amount of the Mandatorily Convertible Preferred Stock, increased by (ii) the amount of interest that would have accumulated on the face amount of the Mandatorily Convertible Preferred Stock up to (but excluding) the date of any liquidation, winding-up or dissolution of the Company, compounding quarterly at a rate of 7% per annum. Thereafter, holders of Mandatorily Convertible Preferred Stock will have no right or claim to the remaining assets, if any, of the Company. The filing of the DHCP Bankruptcy Petitions triggers the liquidation preference of the Mandatory Convertible Preferred Stock. Refer to Note 31 for further information.

Further, on the WIMC Effective Date, the Company issued to the holders of its common stock and Convertible Noteholders, Series A Warrants to purchase up to an aggregate of 7,245,000 shares of common stock at $20.63 per share and Series B Warrants to purchase up to an aggregate of 5,748,750 shares of common stock at $28.25 per share. All unexercised warrants expire and the rights of the warrant holders to purchase shares of common stock terminate on February 9, 2028, at 5:00 p.m., Eastern Standard Time, which is the 10th anniversary of the WIMC Effective Date. The estimated fair values of the Series A Warrants and Series B Warrants on the WIMC Effective Date were determined to be $1.68 and $0.94 per warrant, respectively, and are classified within additional paid-in capital on the consolidated balance sheets. The DHCP RSA contemplates that holders of equity securities of the Company will not receive any recovery on account of such securities, and such securities will be canceled. Refer to Note 31 for further information.

Termination of Rights Agreement

The Company had previously adopted the Rights Agreement, dated as of June 29, 2015, and subsequently amended and restated on November 11, 2016 and further amended on November 9, 2017 and February 9, 2018, which provided registered holders of common stock of the Predecessor with one preferred stock purchase right per share of common stock, entitling the holder to purchase from the Company one one-thousandth of a fully paid non-assessable share of their junior participating preferred stock. The Rights Agreement provided that if any person or group of persons, excluding certain exempted persons, acquired 4.99% or more of the Company's outstanding common stock or any other interest that would be treated as “stock” for the purposes of Section 382, there would be a triggering event potentially resulting in significant dilution in the voting power and economic ownership of such acquiring person or group. The Rights Agreement was intended to help protect the Company's “built-in tax losses” and certain other tax benefits by acting as a deterrent to any person or group of persons acting in concert from becoming or obtaining the right to become the beneficial owner (including through constructive ownership of securities owned by others) of 4.99% or more of the shares of the Company's common stock.

On the WIMC Effective Date, the Company and Computershare entered into Amendment No. 2 to the Rights Agreement, which accelerated the scheduled expiration date of the Rights (as defined in the Rights Agreement) to the WIMC Effective Date. The Rights issued pursuant to the Rights Agreement, which were also canceled by operation of the WIMC Prepackaged Plan, have expired and are no longer outstanding, and the Rights Agreement has terminated.

In connection with the adoption of the Rights Agreement, the Company filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland, setting forth the rights, powers, and preferences of the Company’s junior participating preferred stock issuable upon exercise of the rights. The cancellation of all existing equity interests by operation of the WIMC Prepackaged Plan included the cancellation of any rights issued under the Rights Agreement. In addition, on the WIMC Effective Date, the Company filed Articles of Amendment with the State Department of Assessments and Taxation of Maryland, which among other things, served to eliminate the Company’s junior participating preferred stock. The Company’s Articles of Amendment and Restatement, adopted on the WIMC Effective Date, include transfer restriction provisions intended to protect the tax benefits described above.

Registration Rights Agreement

On the WIMC Effective Date and pursuant to the WIMC Prepackaged Plan, the Company entered into a Registration Rights Agreement that provided certain registration rights to certain parties (together with any person or entity that becomes a party to the Registration Rights Agreement pursuant to the terms thereof) that received shares of the Company’s common stock, warrants and Mandatorily Convertible Preferred stock on the WIMC Effective Date as provided in the WIMC Prepackaged Plan. The Registration Rights Agreement provides such persons with registration rights for the holders’ registrable securities (as defined in the Registration Rights Agreement).

Pursuant to the Registration Rights Agreement, the Company agreed to file, within 60 days of the receipt of a request by holders of at least 40% of the registrable securities, an initial shelf registration statement covering resales of the registrable securities held by the holders. Subject to limited exceptions, the Company is required to maintain the effectiveness of any such registration statement until the earlier of (i) three years following the WIMC Effective Date and (ii) the date that all registrable securities covered by the shelf registration statement are no longer registrable securities.

In addition, holders with rights under the Registration Rights Agreement beneficially holding 10% or more of the common stock have the right to a Demand Registration to effect the registration of any or all of the registrable securities and/or effectuate the distribution of any or all of their registrable securities by means of an underwritten shelf takedown offering. The Company is not obligated to effect more than three Demand Registrations, and it need not comply with such a request if (i) the aggregate gross proceeds from such a sale will not exceed $25 million, unless the Demand Registration includes all of the then-outstanding registrable securities or (ii) a registration statement shall have previously been declared effective by the SEC within 90 days preceding the date of such request.

Holders with rights under the Registration Rights Agreement also have customary piggyback registration rights, subject to the limitations set forth in the Registration Rights Agreement.

These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration statement and the Company’s right to delay or withdraw a registration statement under certain circumstances. The Company will generally pay the registration expenses in connection with its obligations under the Registration Rights Agreement, regardless of whether a registration statement is filed or becomes effective. The registration rights granted in the Registration Rights Agreement are subject to customary indemnification and contribution provisions, as well as customary restrictions such as blackout periods.

Dividends on Common Stock

The decision to declare and pay dividends is made at the discretion of the Company’s Board of Directors and will depend on, among other things, results of operations, cash requirements, financial condition, contractual restrictions and other factors that the Company’s Board of Directors may deem relevant.

Many of the Company’s subsidiaries are subject to restrictions on their ability to pay dividends or otherwise transfer funds to other consolidated subsidiaries and, ultimately, to the Parent Company. These restrictions include, but are not limited to, minimum levels of net worth and other financial requirements imposed by GSEs, Ginnie Mae and other licensing requirements. The aggregate restricted net assets of these subsidiaries was $381.8 million at December 31, 2018; however, the restrictions on the net assets of these subsidiaries do not directly limit the ability to pay dividends from consolidated retained earnings.

In addition, the Company’s ability to pay dividends is limited by conditions set forth in the agreements governing the 2018 Credit Agreement entered into by the Company during February 2018.

Earnings (Loss) Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations shown on the consolidated statements of comprehensive income (loss) (in thousands):



	Successor			Predecessor
	For the Period From February 10, 2018 Through December 31, 2018			For the Period From January 1, 2018 Through February 9, 2018		For the Year Ended December 31, 2017
Numerator for basic and diluted earnings (loss) per share
Net income (loss) available to common stockholders (numerator)	$	(205,094	)	$	521,007	$	(426,899	)

Denominator
Weighted-average common shares outstanding (basic denominator)	4,891			37,374		36,761
Effect of dilutive securities:
RSUs	—			50		—
Weighted-average common shares outstanding (dilutive denominator)	4,891			37,424		36,761

The Company’s shares of Mandatorily Convertible Preferred Stock are considered to be participating securities. During periods of net income, the calculation of earnings per share for common stock is adjusted to exclude the income attributable to the participating securities from the numerator and exclude the dilutive impact of those shares from the denominator. During periods of net loss, as was the case for the period from February 10, 2018 through December 31, 2018, no effect is given to the participating securities because they do not share in the losses of the Company.

For periods in which there is income, certain securities would be antidilutive to the diluted earnings per share calculation. The following table summarizes securities that could potentially dilute earnings per share in the future but have been excluded from the computation of dilutive earnings per share in the periods that the Company has earnings (in thousands):



	Successor	Predecessor
	For the Period From February 10, 2018 Through December 31, 2018	For the Period From January 1, 2018 Through February 9, 2018	For the Year Ended December 31, 2017
Outstanding share-based compensation awards
Stock options ⁽¹⁾	—	3,533	3,533
RSUs	—	327	327
Performance shares	151	—	—
Assumed conversion of Convertible Notes	—	4,932	4,932
Outstanding Series A and B Warrants	12,994	—	—

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(1)	All antidilutive stock options were out-of-the-money at February 9, 2018 and December 31, 2017. There were no stock options granted during the period from February 10, 2018 through December 31, 2018.

The outstanding Series A and B Warrants are antidilutive when calculating earnings per share when the Company's average stock price is less than $20.63 and $28.25, respectively. Upon exercise of warrants, the Company shall either deliver, against payment of the exercise price, a number of shares of common stock equal to the number of warrants exercised, or, if a cashless exercise is elected, the net share settlement amount of common stock equal to number of shares of common stock calculated by dividing the product of the number of shares of common stock underlying the warrants multiplied by the fair market value less the exercise price, by the fair market value.

The Convertible Notes were antidilutive when calculating earnings (loss) per share when the Company's average stock price was less than $58.80. Upon conversion of the Convertible Notes, the Company may have paid or delivered, at its option, cash, shares of the Company’s common stock, or a combination of cash and shares of common stock.