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Weak debut for PennyMac, run by ex-Countrywide execs

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By: Jonathan Stempel | July 29, 2009

NEW YORK, July 30 (Reuters) - A company created by former Countrywide Financial Corp executives to buy distressed home loans made a weak stock market debut on Thursday after raising less than its goal through an initial public offering.

PennyMac Mortgage Investment Trust, had priced $320 million of stock, comprising 16 million shares at $20 each.

PennyMac had expected to raise $400 million by selling 20 million shares at that price. In May, it said it hoped to raise as much as $750 million from the IPO.

PennyMac has separately raised several hundred million dollars from private investors.

Spokeswoman Ray Johnson declined to elaborate, citing regulatory rules governing IPOs.

Shares of PennyMac were down 80 cents, or 4 percent, at $19.20 in morning trading on the New York Stock Exchange.

PennyMac, a real estate investment trust based in Calabasas, California, hopes to make money by acquiring delinquent home mortgages from failed banks, often at far below face value, and then restructuring them.

The company has said it has bought four pools of residential mortgage loans, including $558 million of mortgages from the Federal Deposit Insurance Corp following last year's failure of First National Bank of Nevada.

"They could be in a good position to make money if they pick the right loans and securities," said Espen Robak, president of Pluris Valuation Advisors LLC in New York, which helps investors value distressed and illiquid assets.

"The main business risk is that the market turns against you," he added. "You expect to get a fairly significant illiquidity discount when you buy some of these loans, but that discount is there for a reason."

COUNTRYWIDE ALUMNI

PennyMac's chief executive is Stanford Kurland, a former president and chief operating officer of Countrywide.

At least 10 other top PennyMac officials are alumni of Countrywide, which was also based in Calabasas.

Countrywide was once the largest U.S. mortgage lender, but its aggressive lending practices are widely considered to be a major cause of the nation's housing crisis.

PennyMac's business has drawn the attention of critics who have accused Kurland and other Countrywide alumni of trying to profit from a housing crisis they helped create.

Once considered a candidate to succeed Angelo Mozilo as Countrywide's chief executive, Kurland instead quit in September 2006, ending a 27-year career at the company.

Countrywide's business soured less than a year later, and in 2008 Mozilo sold the company to Bank of America Corp.

In June, the U.S. Securities and Exchange Commission sued Mozilo and Kurland's successor, David Sambol, over their activity at Countrywide. PennyMac executives were not targets.

PennyMac's backers include asset manager BlackRock Inc and hedge fund Highfields Capital Management LP.

The company said it plans to privately place 5 percent of the common shares sold in the IPO, also at $20 per share.

Bank of America Merrill Lynch, Credit Suisse and Deutsche Bank Securities Inc arranged the IPO. (Reporting by Jonathan Stempel; Editing by Ted Kerr)