Redwood Trust Inc. Issues $205M of 7.00% Convertible Senior Notes due 2030

What Happened

• Redwood Trust, Inc. announced on September 15, 2026 that it issued $205,000,000 aggregate principal amount of 7.00% Convertible Senior Notes due 2030 under an indenture with Wilmington Trust, N.A. The notes were sold under a purchase agreement dated September 10, 2026; the initial purchasers exercised an option to buy an additional $20,000,000 (the offering was originally $185M plus a $20M option). Interest is 7.00% per year, paid semi‑annually beginning March 15, 2027, and the notes mature on September 15, 2030.

Key Details

• Principal and pricing: $205,000,000 aggregate principal issued on September 15, 2026 (includes $20M option exercise).
• Conversion terms: initial conversion rate of 204.0608 shares per $1,000 principal (≈ $4.90 per share), ~35% premium to Redwood’s Sept 10, 2026 closing stock price; conversion restricted before June 17, 2030 except upon certain events, and freely convertible thereafter until two trading days before maturity.
• Payment/settlement: the company may settle conversions in cash or cash plus common stock; conversion value will be paid in cash at least up to the principal amount of notes converted (over a 25‑trading‑day Observation Period).
• Rank and rights: notes are general unsecured obligations, equal in right of payment with other senior unsecured debt, effectively subordinated to secured debt and structurally subordinated to subsidiaries’ creditors; company may redeem notes as needed to preserve REIT status.
• Other transaction terms: indenture dated September 15, 2026 (Wilmington Trust trustee); directors and officers agreed to a 60‑day lock‑up from Sept 10, 2026; offering made to qualified institutional buyers (Rule 144A).

Why It Matters

• This financing raises $205M of capital through a convertible security that can dilute equity if converted, while carrying a 7.00% coupon cash interest cost until conversion or repayment. The terms (conversion price ~ $4.90, 35% premium) and the company’s redemption rights to protect REIT status are material to shareholders and creditors because they affect potential dilution, interest expense, and the company’s capital structure. Investors should note the notes’ unsecured status and subordination to secured lenders, conversion mechanics, and the timing restrictions on conversions.