NewtekOne, Inc. Closes Offering of $75.0 Million of 8.625% Fixed Rate Senior Notes Due 2029

Rhea-AI Summary

NewtekOne, Inc. (NASDAQ: NEWT) has successfully closed a $75.0 million registered public offering of 8.625% Fixed Rate Senior Notes due 2029. The notes will mature on October 15, 2029, with interest payable quarterly starting January 15, 2025. The company plans to use the proceeds for investments, debt repayment, and general corporate purposes.

CEO Barry Sloane highlighted the importance of this offering in supporting their alternative loan program business and goals of generating higher returns. The company anticipates retiring approximately $22 million of securitization debt in the near term, which is expected to free up cash flow and liquidity. NewtekOne has also confirmed its 2024 annual earnings per share guidance of $1.85 to $2.05 per basic and diluted common share.

Positive

• Successful closure of $75.0 million senior notes offering
• Confirmed 2024 annual EPS guidance of $1.85 to $2.05
• Plans to retire $22 million of securitization debt, potentially improving cash flow
• Anticipated higher returns from alternative loan program business

Negative

• 8.625% interest rate on new notes may increase interest expenses

Insights

Financial Analyst

NewtekOne's $75 million senior notes offering at 8.625% interest rate is a significant move to strengthen its capital position. The 5-year maturity and quarterly interest payments provide a stable long-term funding source. The company's plan to use proceeds for investments, debt repayment and working capital suggests a strategic approach to balance sheet management. The potential listing on Nasdaq could enhance liquidity for these notes.

The company's focus on its alternative loan program and plans to retire $22 million in securitization debt indicate a shift towards more profitable and liquid assets. This strategy, coupled with the confirmed 2024 EPS guidance of $1.85 to $2.05, signals confidence in future earnings growth. However, investors should monitor the execution of these plans and their impact on the company's financial metrics.

Market Research Analyst

The successful closing of this offering, backed by reputable underwriters like Morgan Stanley and UBS, demonstrates strong market confidence in NewtekOne. The 8.625% interest rate is relatively high, reflecting current market conditions and potentially the company's risk profile. This could attract yield-seeking investors in the current economic environment.

The company's strategy to retire securitization debt and redirect cash flows from maturing SBA 7(a) loan securitizations is noteworthy. This move could potentially improve NewtekOne's liquidity position and financial flexibility. The $68 million in accruing loans and $15 million in non-accruing loans at fair value from the 2018-1 and 2019-1 securitizations represent significant assets that could boost the company's cash flow once fully realized. Investors should closely watch how effectively the company manages this transition and its impact on overall financial performance.

BOCA RATON, Fla., Sept. 16, 2024 (GLOBE NEWSWIRE) -- NewtekOne, Inc. (NASDAQ: NEWT) announced today that it has closed a registered public offering (the “Offering”) of $75.0 million aggregate principal amount of its 8.625% Fixed Rate Senior Notes due 2029 (the “Notes”). The Notes will mature on October 15, 2029, and may be redeemed by the Company, in whole or in part, at any time on or after October 15, 2026, at a redemption price equal to 100% of the outstanding principal amount to be redeemed plus accrued and unpaid interest. The Notes will bear interest at a rate of 8.625% per year payable quarterly on each January 15, April 15, July 15 and October 15, commencing on January 15, 2025.

The Notes are expected to be listed on the Nasdaq Global Market^® under the trading symbol “NEWTH,” within thirty days. The Company intends to use the proceeds from the sale of the Notes for funding of investments, repayment of existing debt and general corporate purposes. Morgan Stanley & Co. LLC acted as lead book-running manager along with Keefe, Bruyette & Woods, Inc., Raymond James & Associates, Inc, and UBS Securities LLC. as joint book-running managers for the Offering.

Barry Sloane, President, Chairman and CEO commented, “We are very pleased to have worked with Morgan Stanley as lead book-running manager on this Offering. The underwriting group also was bolstered by the efforts of UBS, Keefe Bruyette & Woods, and Raymond James. We are extremely appreciative of the relationship that we have with these underwriters and their distribution systems. The proceeds of the Offering will be used for general working capital purposes, repayment of existing debt and funding of investments, including, importantly, the continued funding of our extremely profitable alternative loan program business, which is financed at our holding company. We therefore anticipate that this long-term capital will support our goals of generating higher rates of return and high returns on average assets, as well as returns on tangible common equity. We are excited about our upcoming third quarter 2024 earnings release in early November as we have recently confirmed our 2024 annual earnings per share guidance of $1.85 to $2.05 per basic and diluted common share.”

Barry Sloane continued, “One important use of our corporate liquidity will be to retire securitization debt as our outstanding securitizations of unguaranteed portions of SBA 7(a) loans reach their clean up calls. We anticipate that in the near term, we will be able to retire approximately $22 million of securitization debt and free up cash flow and liquidity. For example, the 2018-1 and 2019-1 SBA 7(a) securitizations contain approximately $68 million of accruing loans as of August 31, 2024, and approximately $15 million of non-accruing loans at fair value, which are in liquidation. It is important to note that in the month of August, the 2018-1 and 2019-1 securitization note holders received approximately $3 million of principal and interest payments. Once we call these securitization notes, the cash flows from these loans can flow through to the Company. In addition, as the non-accrual loans are liquidated (as they are currently marked at $15 million of fair value) over approximately a 6–24-month period of time, those cash flows can also accrue to the benefit of the Company. We are excited to make announcements like this to continue to demonstrate the over two-decade long capability of our management team and our ability to generate above-market rates of return managing our technology enabled business and financial solutions organization.”

About NewtekOne, Inc.

NewtekOne^®, Your Business Solutions Company^®, is a financial holding company, which along with its bank and non-bank consolidated subsidiaries (collectively, “NewtekOne”), provides a wide range of business and financial solutions under the Newtek^® brand to independent business owners. Since 1999, NewtekOne has provided state-of-the-art, cost-efficient products and services and efficient business strategies to independent business owners across all 50 states to help them grow their sales, control their expenses and reduce their risk.

NewtekOne’s and its subsidiaries’ business and financial solutions include: banking (Newtek Bank, N.A.), Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.

Newtek^®, NewtekOne^®, Newtek Bank^®, National Association, Your Business Solutions Company^®, One Solution for All Your Business Needs^® and Newtek Advantage are registered trademarks of NewtekOne, Inc.

Note Regarding Forward-Looking Statements

Certain statements in this press release are “forward-looking statements” within the meaning of the rules and regulations of the Private Securities Litigation and Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results or occurrences and are subject to change, possibly materially. See “Note Regarding Forward-Looking Statements” and the sections entitled “Risk Factors” in the NewtekOne’s filings with the Securities and Exchange Commission which are available on NewtekOne's website (https://investor.newtekbusinessservices.com/sec-filings) and on the Securities and Exchange Commission’s website (www.sec.gov). Any forward-looking statements made by or on behalf of NewtekOne speak only as to the date they are made, and NewtekOne does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.

SOURCE: NewtekOne, Inc.

Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com

FAQ

What is the interest rate and maturity date of NewtekOne's (NEWT) new senior notes?

NewtekOne's (NEWT) new senior notes have an interest rate of 8.625% and will mature on October 15, 2029.

How does NewtekOne (NEWT) plan to use the proceeds from the $75 million senior notes offering?

NewtekOne (NEWT) plans to use the proceeds from the $75 million senior notes offering for funding investments, repaying existing debt, and general corporate purposes.

What is NewtekOne's (NEWT) earnings per share guidance for 2024?

NewtekOne (NEWT) has confirmed its 2024 annual earnings per share guidance of $1.85 to $2.05 per basic and diluted common share.

How much securitization debt does NewtekOne (NEWT) anticipate retiring in the near term?

NewtekOne (NEWT) anticipates retiring approximately $22 million of securitization debt in the near term.