Redwood Trust Prices $60.0 Million Senior Notes Offering
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Insights
The announcement by Redwood Trust, Inc. regarding their underwritten public offering of $60 million in senior notes due 2029 at a 9.125% interest rate is a significant financial event. This action demonstrates a strategic move to restructure the company's debt profile. The high interest rate offered indicates a potentially higher risk associated with the investment, compared to the current average corporate bond yields. The decision to redeem or repay existing convertible and exchangeable senior notes may improve the company's debt ratio and interest coverage, which could be viewed favorably by investors seeking lower-risk profiles.
Moreover, the intention to list the new notes on the New York Stock Exchange enhances their liquidity, making them more attractive to a broader range of investors. This could potentially lead to a more diversified investor base and increased demand for Redwood's securities. However, the market's reception to the new issuance will depend on the overall economic conditions, interest rate forecasts and investor appetite for corporate debt at the time of issuance.
Receiving an investment grade rating of BBB from Egan-Jones Ratings Company is a crucial aspect of this offering. It suggests that the notes are considered to have a moderate risk of default, which might reassure potential investors about the creditworthiness of Redwood. This rating, however, is from an independent and unaffiliated agency and investors might seek corroboration from more recognized rating agencies.
The redemption rights and the change of control clause provide investors with a level of protection against future corporate restructuring or acquisition events. These features can influence the bond's risk profile and, consequently, its pricing and attractiveness to investors. The company's ability to manage these senior unsecured obligations, especially in a rising interest rate environment, will be a key factor in maintaining its credit rating and investor confidence.
Redwood's use of the net proceeds for general corporate purposes, including funding its mortgage banking businesses and strategic acquisitions, indicates an expansionary strategy. The residential and business purpose lending mortgage banking sectors are subject to fluctuating interest rates and regulatory changes, which could impact the company's performance and the value of its investments.
Investors will likely monitor the deployment of these funds closely, as efficient use could lead to increased revenue streams and improved profitability. Conversely, any missteps in allocation could result in underperformance and potential negative impacts on the stock price. The strategic acquisitions and investments funded by this offering could also reshape the competitive landscape, potentially creating new market opportunities or challenges for Redwood.
Redwood intends to apply to list the Notes on the New York Stock Exchange under the symbol “RWTN” and, if the application is approved, trading of the Notes on the New York Stock Exchange is expected to begin within 30 days after the Notes are first issued. The Notes have received an investment grade rating of BBB from Egan-Jones Ratings Company, an independent, unaffiliated rating agency.
Redwood intends to use the net proceeds from the offering for general corporate purposes, which may include (i) the repurchase or repayment of a portion of Redwood’s
The Notes will be senior unsecured obligations of Redwood. The Notes will bear interest at a rate equal to
Redwood will have the right to redeem the Notes, in whole or in part, at its option at any time on or after March 1, 2026 at a redemption price equal to
Wells Fargo Securities, LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and Keefe, Bruyette & Woods, A Stifel Company, are acting as joint book-running managers for the proposed offering. BTIG is acting as co-manager for the proposed offering.
The public offering will be made pursuant to an automatic shelf registration statement on Form S-3 that was filed by Redwood with the Securities and Exchange Commission (“SEC”) and became effective on March 4, 2022. A preliminary prospectus supplement and accompanying prospectus relating to and describing the terms of the offering have been filed with the SEC and are available on the SEC’s website at www.sec.gov. Copies of the preliminary prospectus supplement and accompanying prospectus may be obtained by contacting:
Wells Fargo Securities, LLC
608 2nd Avenue South, Suite 1000
Attn: WFS Customer Service
Or by telephone: (800) 645-3751
Or by email: wfscustomerservice@wellsfargo.com
Goldman Sachs & Co. LLC
Attention: Prospectus Department
200 West Street
Or by telephone: 866-471-2526
Or by email: prospectus-ny@ny.email.gs.com
Morgan Stanley & Co. LLC
180 Varick Street
Attention: Prospectus Department
Or by telephone: (866) 718-1649
Or by email: prospectus@morganstanley.com
RBC Capital Markets, LLC
Attention: Transaction Management
Brookfield Place
200 Vesey Street, 8th Floor
Or by telephone: 866-375-6829
Or by email: rbcnyfixedincomeprospectus@rbccm.com
Keefe, Bruyette & Woods, Inc.
Attention: Capital Markets
787 Seventh Avenue
4th Floor
Or by telephone: 800-966-1559
This announcement shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.
About Redwood Trust
Redwood Trust, Inc. (NYSE: RWT) is a specialty finance company focused on several distinct areas of housing credit with a mission to help make quality housing, whether rented or owned, accessible to all American households. Our operating platforms occupy a unique position in the housing finance value chain, providing liquidity to growing segments of the
CAUTIONARY STATEMENT: This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, such as statements related to the offering, including the terms thereof, the anticipated closing date, the intention to apply to list the securities on the New York Stock Exchange and the expected use of the net proceeds. Forward-looking statements involve numerous risks and uncertainties. Redwood’s actual results may differ materially from those projected, and Redwood cautions investors not to place undue reliance on the forward-looking statements contained in this release. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan,” and similar expressions or their negative forms, or by references to strategy, plans, or intentions. No assurance can be given that the offering will be completed on the terms described, or at all, or that the net proceeds of the offering will be used as indicated. Completion of the offering on the terms described, the application to list the securities on the New York Stock Exchange and the application of the net proceeds, are subject to numerous conditions, risks and uncertainties, many of which are beyond the control of Redwood, including, among other things, those described in Redwood’s preliminary prospectus supplement dated January 17, 2024, the accompanying prospectus dated March 4, 2022, and the documents incorporated in the prospectus supplement and the prospectus by reference. Redwood undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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Investor Relations
Kaitlyn Mauritz
SVP, Head of Investor Relations
Phone: 866-269-4976
Email: investorrelations@redwoodtrust.com
Source: Redwood Trust, Inc.
FAQ
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