Redwood Trust Inc. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation, Other Events, Financial Statements and Exhibits
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| Item 1.01 | Entry Into a Material Definitive Agreement. |
Completion of Public Offering of Senior Notes
On June 18, 2024, Redwood Trust, Inc. (the “Company”) completed its registered underwritten public offering of $85.0 million aggregate principal amount of the Company’s 9.00% Senior Notes due 2029 (the “Notes”) pursuant to an underwriting agreement (the “Underwriting Agreement”) with Morgan Stanley & Co. LLC (“Morgan Stanley”), Goldman Sachs & Co. LLC (“Goldman”), RBC Capital Markets, LLC (“RBC”), Wells Fargo Securities, LLC (“Wells Fargo”), Keefe, Bruyette & Woods, Inc. (“KBW”) and Piper Sandler & Co. (“Piper Sandler”), as representatives of the several underwriters named therein (the “Offering”). In connection with the Offering, the Company granted the Underwriters (as defined below) a 30-day option to purchase up to an additional $12.75 million aggregate principal amount of Notes, to cover solely over-allotments.
The Notes have been registered pursuant to the Registration Statement on Form S-3 (Registration Statement No. 333-263301) (the “Registration Statement”) filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Act”), including the prospectus supplement filed by the Company with the Commission pursuant to Rule 424(b) under the Act dated June 13, 2024 (the “Prospectus Supplement”) to the prospectus contained in the Registration Statement dated March 4, 2022.
The resulting aggregate net proceeds to the Company from the Offering were approximately $81.67 million (or approximately $94.02 million if the Underwriters exercise their over-allotment option in full), after deducting underwriting discounts and estimated expenses. The Company intends to use the net proceeds from the Offering for general corporate purposes, which may include (i) funding of the Company’s business and investment activity, which may include funding the Company’s residential and business purpose lending mortgage banking businesses, acquiring mortgage-backed securities for our investment portfolio, funding other long-term portfolio investments, and funding strategic acquisitions and investments and/or (ii) the repayment of existing indebtedness, which may include the repurchase or repayment of a portion of the 5.75% exchangeable senior notes due 2025 issued by one of the Company’s subsidiaries or the Company’s 7.75% convertible senior notes due 2027.
Base Indenture and Supplemental Indenture
The Company issued the Notes under an indenture dated as of March 6, 2013 (the “Base Indenture”) between the Company and Wilmington Trust, National Association, a national banking association, as trustee (the “Trustee”), as supplemented by the fifth supplemental indenture dated as of June 18, 2024, between the Company and the Trustee (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”).
The Notes bear interest at a rate of 9.00% per year, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, beginning on September 1, 2024. The Notes are senior unsecured obligations of the Company and rank equal in right of payment with the other existing and future senior unsecured indebtedness of the Company and senior in right of payment to any indebtedness that is contractually subordinated to the Notes. The Notes, however, are effectively subordinated in right of payment to the existing and future secured indebtedness of the Company to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to the claims of the Company’s subsidiaries’ creditors, including trade creditors.
The Notes will mature on September 1, 2029 (the “Maturity Date”), unless earlier redeemed or repurchased by the Company.
Upon the occurrence of a change of control repurchase event (as defined in the Indenture) the Company must offer to repurchase the Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest to, but excluding, the repurchase date.
The Company may redeem the Notes at its option, in whole or in part, at any time and from time to time, on or after September 1, 2026 at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No “sinking fund” is provided for the Notes, which means that the Company is not required to redeem or retire the Notes periodically.
If an event of default (as defined in the Indenture) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in aggregate principal amount of the Notes then outstanding by notice to the Company and the Trustee, may, and the Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest on all the Notes to be due and payable. In the case of an event of default arising out of certain bankruptcy or insolvency events (as set forth in the Indenture), 100% of the principal of and accrued and unpaid interest on the Notes will automatically become due and payable.
A copy of the Base Indenture is filed as Exhibit 4.1 to this Current Report. A copy of the Supplemental Indenture, including the form of Note, is filed as Exhibit 4.2 to this Current Report.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant. |
The information required by this Item 2.03 relating to the Notes and the Indenture is contained in Item 1.01 above and is incorporated herein by reference.
| Item 8.01 | Other Events. |
On June 13, 2024, the Company entered into the Underwriting Agreement with Morgan Stanley, Goldman, RBC, Wells Fargo, KBW and Piper Sandler, as representatives of the several underwriters named therein (collectively, the “Underwriters”). Subject to the terms and conditions of the Underwriting Agreement, the Company agreed to sell to the Underwriters, and the Underwriters agreed to purchase from the Company, $85.0 million aggregate principal amount of the Notes. In connection with the Offering, the Company granted the Underwriters a 30-day option to purchase up to an additional $12.75 million aggregate principal amount of Notes, to cover solely over-allotments. Pursuant to the terms of the Underwriting Agreement, the parties have agreed to indemnify each other against certain liabilities, including liabilities under the Act.
A copy of the Underwriting Agreement is filed as Exhibit 1.1 to this Current Report.
Attached as Exhibit 5.1 to this Current Report is a copy of the opinion of Latham & Watkins LLP relating to the validity of the Notes sold in the Offering. Attached as Exhibit 5.2 to this Current Report is a copy of the opinion of Venable LLP regarding certain Maryland law issues.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: June 18, 2024 | REDWOOD TRUST, INC. | |
| By: | /s/ Brooke E. Carillo | |
| Name: Brooke E. Carillo | ||
| Title: Chief Financial Officer | ||