The convertible notes will be senior unsecured obligations of the mortgage real estate investment trust.
In addition to MBS investment, proceeds could be used to fund residential mortgage purchases, the origination of commercial loans, or other general corporate purposes.
Interest on the notes will be payable semiannually on April 15 and Oct. 15, beginning in October of this year. The notes will mature April 15, 2018.
Upon conversion, noteholders will receive shares of Redwood’s common stock subject to some ownership limitations.
Holders may convert into stock shares at any time prior to the close of business on the second scheduled trading day prior to the maturity date, unless the notes have previously been repurchased by Redwood.
The initial conversion rate for each $1,000 aggregate principal amount of notes is 41.1320 shares of common stock, equivalent to a conversion price of approximately $24.31 per share. This represents a 20% premium to the closing price of Redwood’s common stock on Feb. 28.
Redwood cannot redeem the notes at its option, but may at any time repurchase notes by tender officer, open market purchases, negotiated transactions, or other means allowed under applicable securities law.
If Redwood undergoes what it defines as a “fundamental change,” subject to certain conditions, holders of the notes may require Redwood to repurchase for cash all or part of their notes at 100% of the principal amount plus accrued and unpaid interest, if any, up to—but excluding—the repurchase date.
JPMorgan Securities LLC and Barclays Capital are acting as joint book-running managers for the offering. Goldman Sachs and JMP Securities LLC are co-lead managers.
