Redwood Trust, Inc. today announced that it has priced the offering of $50 million aggregate principal amount of its 7.75% convertible senior notes due 2027 (the “Notes”) to certain investors in a direct placement registered under the Securities Act of 1933, as amended. The Notes will be issued as a reopening of, and will be part of the same series as, the 7.75% convertible senior notes due 2027 that the Company originally issued in June 2022 (the “Initial Notes”) and the 7.75% convertible senior notes due 2027 that the Company issued in October 2024 (the “Initial Additional Notes” and, together with the Initial Notes, the “Existing Notes”). Currently, $247,170,000 aggregate principal amount of Existing Notes are outstanding. The issuance and sale are expected to close on August 25, 2025, subject to the satisfaction of certain closing conditions.
Interest on the Notes is payable semi-annually in arrears on June 15 and December 15 of each year; the Notes will mature on June 15, 2027, unless earlier repurchased, redeemed or converted. If Redwood undergoes a “fundamental change” (as defined in the indenture governing the Notes), then, subject to certain conditions, holders of the Notes may require Redwood to repurchase all or part of their Notes for cash in an amount equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.
Before March 15, 2027, holders have the right to convert their Notes only upon the occurrence of certain events. From and after March 15, 2027, holders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. Redwood has the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of its common stock. However, upon conversion of any Notes, the conversion value, which will be determined over a period of multiple trading days, will be paid in cash up to at least the principal amount of the Notes being converted. Any conversions of Notes into shares of Redwood common stock will be subject to certain ownership limitations set forth in Redwood’s charter documents. The conversion rate is 95.6823 shares of common stock per $1,000 principal amount of Notes, equivalent to a conversion price of approximately $10.45 per share, which is an approximately 78.0% premium to the closing price of Redwood’s common stock on August 21, 2025. The conversion rate and conversion price are subject to customary anti-dilution adjustments.
Redwood has the right to redeem the Notes, in whole or in part, at its option at any time prior to maturity to the extent necessary to preserve its status as a real estate investment trust for U.S. federal income tax purposes. In addition, subject to certain limitations, Redwood has the right to redeem the Notes, in whole or in part, at its option on or after June 16, 2025 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of Redwood’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price for any Note called for redemption will be a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any.
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