KBRA Affirms Issuer Rating for Rithm Capital Corp.; Revises Outlook to Positive

KBRA affirms the Issuer rating of BB+ for Rithm Capital Corp. (NYSE: RITM; “Rithm” or “the company”), as well as, affirms the Issuer rating of BB+ for Newrez LLC (“Newrez”), an indirect, wholly-owned subsidiary of Rithm. The Outlook for the ratings is revised to Positive from Stable.

Key Credit Considerations

The change to Positive Outlook for Rithm and Newrez ratings, is driven principally by the favorable, recent period operating performance by the mortgage company, similarly positive trends exhibited by Sculptor Capital Management ("Sculptor") since the late-2023 acquisition of the manager, and Rithm’s maintenance of a consistent balance sheet profile. Rithm / Newrez ratings remain supported by the parent company’s scale as a ‘Top 6’ mortgage servicer, appropriate consolidated capitalization – $6.7 billion of common equity (representing ~15% of assets at 1Q25) – and a favorable liquidity and funding profile for a non-bank financial company.

Importantly, Rithm, as well as its large mortgage operating business, reflects seasoned, well-regarded management and operating teams. Even with its recent year business diversification – notably Genesis Capital, a bridge construction lender acquired in 2021, Adoor (an SFR rental portfolio manager), and Sculptor – the mortgage operating company maintains the most significant capital allocation and is expected to remain the principal driver of earnings trends over the near-term.

Rithm now reflects a considerably more durable funding profile than the company did pre-pandemic; one which has focused on term borrowings and minimizing financing with daily MTM except for its most liquid collateral. Higher unrestricted cash balances, recently, firmly >$1 billion, are also a favorable aspect of more conservative balance sheet management.

Since 4Q24, Rithm has enhanced financial disclosure surrounding the company’s MSR-specific, financial instrument hedge performance, which KBRA considers additive from a variety of perspectives. Most notably, we consider the disclosure to add operational and financial clarity to a favorable risk management principal associated with MSR investment, which naturally remains substantial for Rithm.

Rating Sensitivities

Consistent operating performance, including contribution from Sculptor, could lead to additional positive rating momentum. Operating challenges and / or more aggressive capital management could negatively impact ratings.

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Methodologies