CCM to Issue $500M Notes as Two Harbors Deal Nears Close

CrossCountry Intermediate Holdco (CCM) is preparing to issue $500 million in senior unsecured notes, a move anticipated to coincide with the projected August closing of its acquisition of Two Harbors Investment Corp. Fitch Ratings has indicated it expects to assign a rating of ‘BB-(EXP)’ to this issuance, which will rank equally with CCM’s existing senior unsecured debt. The funds raised from these notes are intended to repay mortgage servicing rights (MSR)-backed facilities that were utilized to finance the transaction. Following the acquisition, Fitch Ratings estimates that CCM’s corporate leverage will rise to 2.4x, an increase from its leverage of 1.2x recorded in the second quarter of 2026. This projected leverage level exceeds CCM’s stated downgrade trigger of 1.5x. However, Fitch also noted that the growth in retained earnings is expected to guide leverage back towards CCM’s medium-term target of 1.0x. A negative rating action could be triggered if CCM is unable to reduce its corporate leverage to 1.5x or below within the rating outlook period. Analysts had anticipated CCM would secure debt financing to facilitate the Two Harbors deal, which carries a valuation of $1.26 billion. They had flagged the rising leverage as a potential integration challenge, alongside the complex undertaking of bringing a substantial servicing portfolio in-house. The transition from secured to unsecured debt is viewed positively by analysts, as it liberates collateral and enhances liquidity. CCM previously communicated to HousingWire that while leverage will temporarily increase post-transaction, this should be considered within the context of a significantly larger and more cash-generative business. The company stated that the combined entity will benefit from substantially higher recurring servicing cash flows, an expanded MSR portfolio, and significant synergy opportunities, all of which are conducive to rapid deleveraging over time. As of the first quarter, Two Harbors contributes a $159 billion portfolio to CCM’s existing $202 billion portfolio, according to data from Inside Mortgage Finance. This acquisition is set to elevate the combined lender’s position from the eighth largest servicer by owned portfolios to the eighth largest, moving up from the fifteenth spot. Fitch’s analysis also highlights that Two Harbors’ portfolio is comprised of a significant volume of MSRs, which are a key component of the transaction's strategic rationale for CCM.