The Mill Valley, California-based real estate investment trust has priced $85 million of senior unsecured notes due in 2029 at 9%. The underwriters have an option to purchase an additional $12.75 million for 30 days to cover over-allotments.

Proceeds can be used for Redwood's residential and business purpose mortgage lending operations, acquiring mortgage-backed securities for investment and/or for funding long-term portfolio investments and potential acquisitions.

The new funds can also be used to purchase or pay down prior debt, including the 5.75% exchangeable senior notes due 2025 issued by one of its subsidiaries or the 7.75% convertible senior notes due 2027. The notes will be traded on the New York Stock Exchange. It is expected to close on June 18.

Net proceeds from this offering are expected to be approximately $81.7 million, or about $94 million if the underwriters exercise their over-allotment option in full.

This is Redwood's second debt offering this year. In January, it sold $60 million of senior unsecured notes at a 9.125% interest rate, with the primary reason being to pay down or repurchase the older debt above, as well as from the 5.625% convertible senior notes due 2024 offering.

In the latest offering, note payments will be made on the first day of each quarter, starting on Sept. 1. They can be redeemed in whole or in part anytime after Sept. 1, 2026.

Morgan Stanley & Co., Goldman Sachs & Co., RBC Capital Markets, Wells Fargo Securities, Keefe, Bruyette & Woods and Piper Sandler & Co., are acting as joint book-running managers for this offering, while Citizens JMP Securities is the co-manager.

In the first quarter, Redwood Trust had GAAP net income of $29 million. It locked $1.8 billion of jumbo mortgages during the period, up from $1.2 billion in the fourth quarter. 

The REIT participated in three jumbo securitizations during the quarter totalling $1.2 billion, as well as whole loan sales of $202 million. 

Redwood Trust also funded $326 million of residential investor loans in the first quarter, down from $343 million in the fourth quarter of 2023.

In March, Redwood Trust entered into an agreement with the Canada Pension Plan Investment Board for a $750 million transaction. The deal included a $250 million corporate secured revolving financing facility CPP provided to Redwood Trust, as well as creating a $500 million joint venture that will invest in residential investor bridge and term loans.

The CPP facility has a two-year term, with a one-year extension option.

Among some recent debt transactions involving publicly traded nonbank mortgage lenders includes Loandepot exchanging nearly $500 million in 6.5% notes coming due in 2025 for 8.25% notes due in 2027. 

Rithm Capital, the parent of Newrez that is also structured as a REIT, in March conducted a $775 million offering of 8% unsecured senior notes to come due in 2029.

A January $1 billion debt offering from Mr. Cooper was one of the factors that pushed its common stock to a new high at that time. Subsidiary Nationstar Mortgage Holdings priced the senior notes at 7.125%, and they are due on Feb. 1, 2032.

Pennymac upsized its December debt sale by $100 million to $750 million of senior unsecured notes at a 7.875% rate.