Tuesday, coal producer Walter Industries Inc. (WLT) announced plans to segregate its Financing business from its core Natural Resources business. Following the spin-off, JWH Holding company, a wholly-owned subsidiary of Walter Industries, will merge with Hanover Capital Mortgage Holdings, a New Jersey-based real estate investment trust or REIT, with headquarters in Tampa, Florida. The spin-off and merger are expected to be completed early 2009 with the transaction anticipated to close in three stages. The company also lowered its metallurgical coal sales guidance for the third and fourth quarter based on reduced advance rates and reported the extent of negative impact by hurricanes on the finance segment during the third quarter.
The Tampa, Florida-based company said that it has plans to distribute 100% of its interest in JWH Holding Company, LLC, the parent company of Walter Mortgage Company and Jim Walter Homes, to its shareholders. Prior to this distribution, Jim Walter Homes will be sold or separated from JWH Holding Company and will not be part of the spin-off entity.
The company also announced that JWH Holding Company has entered into a definitive agreement to merge with Hanover Capital Mortgage Holdings, Inc. (HCM) following the spin-off and the combined company will continue to operate as a publicly traded REIT, re-christened as Walter Investment Management Corporation.
Following the merger, Mark O'Brien, Chairman and CEO of JWH Holding Company, will become chairman and CEO of Walter Investment Management. Charles Cauthen, currently president of Walter Mortgage Company, will become president and CEO of the new company. The Board of Directors of Walter Industries will designate six directors, including Tokarz and O'Brien, to Walter Investment Management's board and Hanover will designate one.
The entire transaction, which is to be executed in immediate succession, starts with spin-off of JWH Holding company and is expected to be a tax-free stock distribution to Walter Industries' shareholders. Following this will be a taxable distribution of stock and cash from JWH Holding Company to its shareholders and the final step would be a merger between JWH Holding Company and Hanover. The transaction requires approval of Hanover's shareholders and favorable rulings from the Internal Revenue Service apart from clearing customary closing conditions.
After the spin-off, taxable distribution and merger, Walter Industries shareholders will own approximately 98.5 percent of Walter Investment Management's publicly traded common stock. Shareholders of Hanover will own the remaining 1.5 percent. Walter Investment Management plans to list its shares on the American Stock Exchange.
In another development, the company said that it has completed previously authorized $25 million share repurchase program and the Board of Directors has approved a new $50 million program.
The company, on its update about Homebuilding business said that it will remain with Walter Industries until one of the alternatives under review is implemented, which the company still expects to complete by year-end. As previously announced, all future financing for Jim Walter Homes' customers will be provided by third party lenders.
In case of Metallurgical coal business, considering the impact of shipping disruptions during and after Hurricanes Gustav and Ike, as well as slower-than-planned advance rates on the new Southwest "A" longwall panel in Jim Walter Resources' No. 7 Mine, the company revised its third quarter expectations for metallurgical coal sales to 1.4 to 1.5 million tons, with an average operating margin per ton in the range of $62.00 to $65.00 compared to previous expectations in the range of 1.7 to 1.8 million tons of sales with an average operating margin in the range of $75.00 to $81.00.
Also, the Southwest "A" panel's advance rates have been slower than anticipated as a result of higher than expected levels of methane gas. Even though the panel is still expected to produce approximately one million tons of coal, approximately 350,000 tons of production originally planned for the third and fourth quarters is now expected to be produced in the first quarter 2009. Because of the reduced advance rates, the company also adjusted its fourth quarter expectations for metallurgical coal sales to a range of 2.0 to 2.1 million tons with a revised operating margin of $90 to $95 per ton, compared to previous guidance of 2.1 to 2.2 million tons of sales and margins in the range of $95 to $100 per ton.
As far as finance segment is concerned, the company anticipates that recent Gulf Coast hurricanes may result in increased insurance claims and delinquencies from customers affected by the storms. Although estimates are still preliminary, the company expects these issues to negatively impact third quarter financial results by $4.0 million to $6.0 million.
Walter Industries closed Tuesday's regular trading at $47.45, up $5.36 or 12.73%, on a volume of 3.13 million shares on the NYSE. In after-hours trade, the stock is currently trading at $47.35, down $0.10 or 0.21%.
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.