Ready Capital Corporation Announces Closing of $220.0 Million of Senior Secured Notes

Rhea-AI Summary

Ready Capital (NYSE: RC) announced the closing of a private placement of $220.0 million in aggregate principal amount of 9.375% Senior Secured Notes due 2028 through its indirect subsidiary ReadyCap Holdings, on February 21, 2025.

The Notes are senior secured obligations backed by first-priority liens on specific assets and guaranteed by Ready Capital and several subsidiary entities. The company plans to use the net proceeds to repay existing debt and for general corporate purposes.

Piper Sandler & Co. served as the placement agent, with Alston & Bird LLP and Ropes & Gray LLP providing legal counsel. The Notes and Guarantees are not registered under the Securities Act and cannot be offered or sold in the US without registration or applicable exemption.

Positive

• Secured $220.0 million in new financing
• First-priority lien security structure enhances debt quality
• Debt proceeds will help restructure existing indebtedness

Negative

• High interest rate of 9.375% on the notes
• Adds significant secured debt to balance sheet

Insights

Fixed Income Analyst

The successful placement of $220 million in senior secured notes represents a significant financing milestone for Ready Capital, though it comes with notable implications for investors. The 9.375% interest rate is relatively high in the current environment, reflecting both market conditions and the company's risk profile. This rate structure will result in annual interest expenses of approximately $20.6 million.

The multi-layered security package, including first-priority liens and multiple subsidiary guarantees, provides robust protection for noteholders. This comprehensive structure suggests careful consideration of risk mitigation, though it also indicates that key assets are now encumbered, potentially limiting future financing flexibility.

The private placement approach, rather than a public offering, typically allows for faster execution and potentially more flexible terms, but often comes at the cost of higher interest rates. The choice of this funding route could indicate a strategic preference for speed and certainty of execution over potentially lower costs through a public offering.

The use of proceeds for debt repayment suggests a liability management exercise rather than growth capital. This refinancing approach could help optimize the company's debt maturity profile, though the high coupon rate may increase overall debt service costs. The impact on Ready Capital's weighted average cost of capital and interest coverage ratios will be important metrics to monitor in upcoming quarters.

The 2028 maturity provides a reasonable runway for the company, but investors should note that this debt will need to be refinanced or repaid in an environment that may have different interest rate and market conditions. The success of this placement demonstrates continued market access, though the terms reflect current market challenges in the real estate financing sector.

NEW YORK, Feb. 24, 2025 (GLOBE NEWSWIRE) -- Ready Capital Corporation (NYSE: RC) (“Ready Capital” or the “Company”) today announced that on February 21, 2025, ReadyCap Holdings, LLC (“ReadyCap”), an indirect subsidiary of the Company closed a private placement of $220.0 million in aggregate principal amount of its 9.375% Senior Secured Notes due 2028 (the “Notes”). The Notes are senior secured obligations of ReadyCap. Payments of the amounts due on the Notes are fully and unconditionally guaranteed (the “Guarantees”), at issuance, by the Company, Ready Capital Partners I, LLC, Ready Capital Subsidiary REIT II, LLC (“SubREIT II”), RCSR I Investments, LLC (“RCSR I”), RCSR II Investments, LLC (“RCSR II”) and RCSR I Intermediate Holdings, LLC (collectively, the “Guarantors”). ReadyCap’s and the Guarantors’ respective obligations under the Notes and the Guarantees are secured by a first-priority lien on the assets of RCSR I and RCSR II and the capital stock of RCSR I, RCSR II, SubREIT II and certain other subsidiaries of the Company.

The Company intends to use the net proceeds from the private placement to repay its indebtedness and for general corporate purposes.

Piper Sandler & Co. acted as the placement agent for the offering. Alston & Bird LLP served as counsel for the Company, and Ropes & Gray LLP served as counsel for the placement agent.

The Notes and the Guarantees will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from the registration requirements of the Securities Act of 1933, as amended, or any state securities laws.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the Company’s securities, nor shall there be any sale of the Company’s securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

About Ready Capital Corporation

Ready Capital Corporation (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services lower-to-middle-market investor and owner occupied commercial real estate loans. The Company specializes in loans backed by commercial real estate, including agency multifamily, investor, construction, and bridge as well as U.S. Small Business Administration loans under its Section 7(a) program and government guaranteed loans focused on the United States Department of Agriculture. Headquartered in New York, New York, the Company employs approximately 500 professionals nationwide. The Company is externally managed and advised by Waterfall Asset Management, LLC.

Forward-Looking Statements

This press release contains certain forward-looking statements. Words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “could,” “would,” “may,” “potential” or the negative of those terms or other comparable terminology are intended to identify forward-looking statements. These forward-looking statements include statements relating to, among other things, the expected use of the net proceeds from the private placement. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions, many of which are beyond the control of the Company, including, without limitation, the risk factors and other matters set forth in the Company’s Annual Report on Form 10–K for the year ended December 31, 2023 filed with the SEC and in its other filings with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

Contacts:
Investor Relations
Ready Capital Corporation
212-257-4666
InvestorRelations@readycapital.com

FAQ

What is the interest rate and maturity of Ready Capital's (RC) new senior secured notes?

Ready Capital's new senior secured notes carry a 9.375% interest rate and mature in 2028.

How much did Ready Capital (RC) raise in its February 2025 senior secured notes offering?

Ready Capital raised $220.0 million through its senior secured notes offering in February 2025.

What will Ready Capital (RC) use the proceeds from the $220M notes offering for?

Ready Capital will use the net proceeds to repay existing indebtedness and for general corporate purposes.

Who are the guarantors of Ready Capital's (RC) February 2025 senior secured notes?

The notes are guaranteed by Ready Capital , Ready Capital Partners I, Ready Capital Subsidiary REIT II, RCSR I Investments, RCSR II Investments, and RCSR I Intermediate Holdings.

What assets secure Ready Capital's (RC) new $220M senior secured notes?

The notes are secured by a first-priority lien on the assets of RCSR I and RCSR II and the capital stock of RCSR I, RCSR II, SubREIT II, and certain other subsidiaries.