Radian Increases Stake in Debt Buyer Sherman Financial

Mortgage insurer Radian Group Inc. (NYSE: RDN) said Thursday that it has increased its stake in Sherman Financial Group, one of the largest debt purchasers in the U.S.

In a press release issued late Thursday, Radian informed investors that it has completed the largest phase of its capital improvement plan. The mortgage insurer has been hit hard by the real estate market downturn and subsequent financial sector fallout. Radian said that it is contributing the ownership stake of another business to its core mortgage insurance unit, bolstering its liquidity.

Along with the announcement on capital improvements, Radian said that it had recently increased its ownership stake in Sherman from 22 percent to 29 percent.

The move comes about a month after another major stakeholder in Sherman, fellow mortgage insurer MGIC Investment Corp., sold its entire stake for $209 million (“Minority Owner Sells Stake in Sherman Financial for $209 Million,” Aug. 15). MGIC sold its stake to Sherman management.

Radian noted that Sherman had contributed $19.5 million in dividends to its business in the first half of 2008 and that the company “expects Sherman to continue to provide it with a meaningful dividend contribution and to serve as a potential source of additional capital.”

Shares of Radian soared in early trading Friday on the capital improvement news. At midday, Radian’s shares were up 30 percent to $6.50.

Sherman is one of the largest accounts receivable management firms in the U.S. with revenues of more than $1 billion in 2006, according to MGIC’s annual report for that year.