Carlyle-to-Bass Backed Mortgage Insurer NMI Files for IPO

NMI Holdings Inc. (NMIHZ), a mortgage insurer backed by funds tied to Carlyle Group LP (CG) and Kyle Bass, filed to sell shares in an initial public offering as investors bet on a housing-market rebound.

FBR & Co. (FBRC) is leading the sale, according to a regulatory filing today from Emeryville, California-based NMI. The company said it's seeking to raise $25 million, a placeholder amount used to calculate registration fees, according to the document.

Investors have poured cash into mortgage insurance this year as home prices rise, pushing up shares of MGIC Investment Corp. (MTG) and Radian Group Inc. (RDN) by more than 100 percent, and buying their notes in offerings. Essent Group Ltd. (ESNT), a mortgage guarantor funded amid the financial crisis by Goldman Sachs Group Inc. and billionaire George Soros, filed last month for an IPO. The companies cover losses when homeowners default and foreclosures fail to recoup costs.

"As the U.S. housing market continues to recover, the demand for private capital to insure mortgage risk and to facilitate secondary market loan sales will grow," NMI said in the filing.

Claren Road Asset Management LLC, the hedge fund majority owned by Carlyle, is NMI's largest backer, with a 12.6 percent stake, according to the filing. Bass's Hayman Capital Management LP has 9.9 percent and Blue Mountain Capital Management LP owns 9.8 percent. Funds overseen by Perry Corp. have 7.2 percent.

Claren and Perry also have investments in publicly traded mortgage guarantors, according to data compiled by Bloomberg. Hedge fund manager John Paulson has invested in the companies as part of a bet on a recovery in the U.S. housing market. Mortgage insurance is typically required when borrowers pay less than 20 percent of the cost of their home upfront.

Housing Rebound

Home prices rose by the most in more than seven years in the 12 months through July, according to the S&P Case-Shiller index of property values in 20 U.S. cities. Private mortgage guarantors are also benefiting as the U.S. reduces its role insuring home loans.

NMI was founded in 2011 and raised $550 million in a private share sale in 2012, according to the filing. The firm, led by Chief Executive Officer Bradley Shuster, a former manager at PMI Group Inc., began selling mortgage insurance in April.

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Stockholders' equity was about $456 million as of June 30, according to the filing. The filing doesn't show how many shares existing holders plan to sell.

Fannie Mae, the government-controlled mortgage buyer, obtained insurance on a pool of about $5 billion of home loans from NMI, according to a July statement.

Mortgage insurers PMI and Triad Guaranty Inc. (TGICQ) filed for bankruptcy after housing crashed. Old Republic International Corp. also retreated from the mortgage guaranty business.

NMI applied to list on the Nasdaq Stock Market under the symbol NMIH, according to the filing. The company filed as an "emerging growth company" under the Jumpstart Our Business Startups Act, allowing for reduced disclosure.