UPDATE 1-Sherman management buys stakes from Radian, MGIC
Radian said it sold a part of its investment in the debt recovery firm to an entity owned by Sherman management for $278 million. By doing so, Radian reduced its holding in Sherman's outstanding equity to 21.8 percent.
Radian may receive an additional payment if certain return hurdles are exceeded. Radian also entered into an agreement in which Sherman management may purchase Radian's remaining interest at any time over the next year.
MGIC said its Mortgage Guaranty Insurance Corp. subsidiary sold a portion of its interest in Sherman to an entity owned by Sherman's management.
The interest sold by MGIC represented about 16 percent of Sherman's equity.
MGIC said it received $240.8 million in the sale and is entitled to a contingent payment if the management entity's after-tax return on its purchase exceeds 16 percent annually over a period that can end as late as December 31, 2013.
After the sale, MGIC owns 24.2 percent of Sherman and the management owns 54 percent.