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May 02, 2018  

Bayview Completes Buyback From Blackstone

Bayview Asset Management has finished buying back a large minority stake it sold to Blackstone as the financial crisis was entering its worst phase.

Bayview’s management started the buy-back process in March 2015 by repurchasing a 15.3% stake in the Coral Gables, Fla., operation, and continued with annual installments that wrapped up in March.

The mortgage-focused Bayview agreed to sell a 46% interest to Blackstone in July 2008 — with Bayview chief executive David Ertel continuing to hold a controlling stake in the firm and parent Bayview Financial. Since then, Bayview’s assets under management have soared from $2 billion to some $13 billion.

It’s unclear how much Bayview’s leaders paid for Blackstone’s share. One source estimated the firm’s total value at $500 million to $1 billion, depending on performance and fee income.

Under the terms of its investment, Blackstone had the right, beginning in October 2014, to take Bayview public or sell 100% of the firm’s equity to another investor — including Ertel’s stake. But Bayview also had the right to submit an offer to Blackstone prior to a sale. Once the buy-back process started, Blackstone lost the ability to appoint directors to Bayview’s board or to approve matters presented to the board.

Blackstone bought its stake in Bayview through its fifth buyout fund, which held a final close in 2007. At $21.7 billion, that vehicle stood as the largest of its kind until 2017, when an Apollo Management entity raised $23.5 billion.

The Blackstone fund was producing a net internal rate of return of 7.1% at midyear 2017, according to limited partner Florida State Board. That’s below the usual target for a large private equity fund, but typical for one of its era.

Blackstone separately runs a $3.3 billion vehicle called Strategic Capital Holdings Fund that buys stakes in hedge fund operators.

Blackstone and Bayview have long done business with each other. Placement agent Park Hill Group, which spun off from Blackstone in 2015, has marketed several Bayview funds. And Blackstone continues to be a major investor in Bayview’s vehicles.

Bayview, founded by Ertel in 1993, invests in a mix of mortgages, home-loan securities and servicing rights. In June 2017, it agreed to buy asset manager Pingora Holdings from Annaly Capital.