Redwood Trust Prices $185M Convertible Notes Offering

Redwood Trust priced an upsized $185 million convertible senior notes offering due 2030, directing the capital toward repurchasing older maturing debt and buying back its own common stock.

Upsized Offering and Conversion Terms

The real estate investment trust priced $185 million in aggregate principal amount of 7.00% convertible senior notes due 2030 in a private offering, according to an Investing.com report. The transaction size was increased from a previously announced $150 million.

The initial conversion rate is established at 204.0608 shares of common stock per $1,000 principal amount of notes. This equates to a conversion price of approximately $4.90 per share, which represents a 35.0% premium over the company's common stock closing price on Wednesday.

Deployment of Net Proceeds

Redwood Trust intends to allocate roughly $129.29 million of the net proceeds from the 2030 notes to repurchase approximately $123.79 million of its outstanding 7.75% convertible senior notes due 2027. Additionally, the company plans to use about $20 million to buy back 5,509,641 shares of its common stock.

In the public markets, Redwood Trust Inc. (NYSE: RWT) stock closed down 2.20% at $3.55, according to Finnhub market data.

Mechanics of Convertible Senior Notes

Convertible senior notes combine debt and equity features. They allow investors to hold a fixed-income instrument that pays a regular coupon, set at 7.00% annually in this case, while retaining the option to convert the debt into common stock if the company's share price exceeds the conversion threshold before maturity.

By upsizing the offering and utilizing the proceeds to retire 2027 notes ahead of maturity, Redwood Trust restructures its near-term debt obligations while executing share repurchases at the current market valuation.