Redwood Trust selling $225M of convertible debt

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Redwood Trust is raising $225 million in a debt offering with the proceeds to be used to repay borrowings that come due next year.

The interest rate and offering price are to be determined by negotiations between Mill Valley, Calif.-headquartered Redwood and the deal's underwriters. The company is offering unsecured debt to be issued as convertible senior notes due in 2023.

These notes will mature on Aug. 15, 2023 and payments will be made on Feb. 15 and Aug. 15. They can be converted into a yet-to-be determined amount of common stock at any time prior to the close of business on the second scheduled trading day before the maturity date.

Proceeds will be used to repay a portion of the $250 million in principal currently outstanding on its 4.625% convertible senior notes due 2018. Those notes mature on April 15, 2018, but Redwood will purchase some of this debt on the open market or in privately negotiated transactions.

Redwood may also use a portion of the proceeds to temporarily reduce its outstanding warehouse line of credit borrowings and short-term securities repurchase facilities borrowings.

JPMorgan Securities and Wells Fargo Securities are the joint book-running managers for the proposed offering. Goldman Sachs & Co. is the lead manager and JMP Securities is the co-manager.

Redwood expects to grant the underwriters a 30-day option to purchase an additional $33.75 million of these notes to cover any overallotments.

The notes will not be listed on any exchange, according to the prospectus. Redwood can't redeem these notes prior to their maturity, except to the extent needed for it to preserve its real estate investment trust status. The company originates and securitizes jumbo mortgages.

As of June 30, Redwood had $3 billion in outstanding secured indebtedness and $451 million in outstanding senior unsecured indebtedness, the prospectus said.

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