Redwood Trust plans $150M convertible notes offering due 2030

Redwood Trust, Inc. (NYSE: RWT) announced plans to offer $150 million in aggregate principal amount of convertible senior notes due 2030 in a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933.

The company said it expects to grant initial purchasers an option to buy up to an additional $22.5 million in principal amount of the notes within 13 days of the initial issuance. The notes will be senior unsecured obligations, with the interest rate and offering price to be determined through negotiations with initial purchasers.

According to a press release, Redwood Trust intends to use a portion of the proceeds to repurchase some of its existing 2027 notes and up to $20 million to buy back shares of its common stock, both through privately negotiated transactions. The remaining proceeds are earmarked for general corporate purposes, including funding its Sequoia, Aspire, and CoreVest mortgage banking platforms, acquiring assets for its Redwood Investments portfolio, and pursuing strategic acquisitions.

The company noted that holders of the 2027 notes that are repurchased may buy Redwood Trust common stock in the open market to unwind hedge positions, which could affect the trading price of the common stock and the initial conversion price of the new notes. The concurrent stock repurchases may also result in the common stock trading at higher prices, potentially leading to a higher initial conversion price.

The notes and any shares issuable upon conversion have not been registered under the Securities Act and may not be offered or sold absent an applicable exemption from registration requirements.

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