Redwood Trust has priced an upsized $185 million offering of 7% convertible senior notes due 2030, raising additional capital to refinance existing convertible debt, repurchase shares and support its housing finance businesses.
The specialty housing finance company increased the offering from its previously announced $150 million size. Initial purchasers also received an option to buy up to an additional $20 million of notes.
The senior unsecured notes mature on September 15, 2030, with interest payable semiannually beginning in March 2027. The transaction was expected to close on September 15, subject to customary conditions.
Redwood intends to use approximately $129.29 million of the proceeds to repurchase about $123.79 million principal amount of its 7.75% convertible senior notes due 2027.
Another approximately $20 million is expected to fund the repurchase of 5,509,641 Redwood shares. Remaining proceeds are intended for general corporate purposes, including its Sequoia, Aspire and CoreVest mortgage banking businesses, investments and potential strategic acquisitions.
The notes initially convert at 204.0608 Redwood shares per $1,000 principal amount, equivalent to approximately $4.90 per share.
That represents an approximately 35% premium to Redwood’s September 10 closing share price. Upon conversion, Redwood can settle the notes in cash or a combination of cash and shares, with at least the principal amount paid in cash.
Redwood operates across housing credit markets that it believes are underserved by government programs, with residential finance platforms Sequoia, Aspire and CoreVest alongside its Redwood Investments portfolio.
