8-K: Ready Capital Corporation Announces $115 Million Senior Unsecured Notes Offering

Ready Capital Corporation has entered into an agreement to issue $115 million in 9.00% senior unsecured notes due 2029, with an expected closing date of December 10, 2024.

Summary

• Ready Capital Corporation has agreed to sell $115 million of 9.00% senior unsecured notes due in 2029.
• The notes will be priced at $25.00 each, plus accrued interest if settlement occurs after December 10, 2024.
• The company expects to receive net proceeds of approximately $110.9 million after deducting underwriting discounts and offering expenses.
• The proceeds will be contributed to the company's operating partnership, Sutherland Partners, L.P.
• The operating partnership intends to use the funds to originate or acquire target assets and for general corporate purposes.
• Pending these uses, the operating partnership may temporarily reduce borrowings or invest in short-term instruments.
• The notes are registered with the Securities and Exchange Commission and are expected to be listed on the New York Stock Exchange.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a successful capital raise. The terms are standard, and the company is following a typical path for a REIT. There are some minor negatives, such as the cost of the offering, but overall, the sentiment is positive.

Positives

• The offering provides Ready Capital with a significant amount of capital, approximately $110.9 million, to fund its investment strategy.
• The funds will be used to originate or acquire target assets, which aligns with the company's core business.
• The notes are expected to be listed on the NYSE, which should provide liquidity for investors.
• The company has secured a 9.00% interest rate on the notes, which may be attractive to investors.

Negatives

• The company will incur approximately $4.1 million in underwriting discounts and offering expenses.
• The operating partnership may temporarily invest proceeds in lower-yielding short-term investments, which could reduce overall returns.
• The company is subject to customary closing conditions, which could potentially delay the issuance of the notes.

Risks

• The company's ability to use the proceeds effectively to originate or acquire target assets is subject to market conditions and execution risks.
• The temporary reduction of borrowings or investment in short-term instruments may not generate the same returns as the company's target assets.
• The company's ability to maintain its REIT status is dependent on its investment strategy and compliance with tax regulations.
• There are risks associated with the company's ability to list the notes on the NYSE within the expected timeframe.

Future Outlook

The company intends to use the net proceeds from the sale of the notes to originate or acquire target assets consistent with its investment strategy and for general corporate purposes. Pending such anticipated uses, the Operating Partnership may use a portion of the net proceeds from this offering to temporarily reduce borrowings outstanding under our loan repurchase agreements or credit facilities and may invest the net proceeds in interest-bearing, short-term investments.

Industry Context

This offering is a common method for REITs to raise capital for investment and operations. The issuance of senior unsecured notes is a typical financing strategy for companies in the real estate and finance sectors, allowing them to access capital markets and diversify their funding sources.

Comparison to Industry Standards

• The 9.00% interest rate on the senior unsecured notes is within the typical range for similar offerings by REITs, although the specific rate will depend on the company's credit rating and market conditions.
• The use of proceeds for asset origination and acquisitions is a standard practice for REITs, as they seek to deploy capital into income-generating properties.
• The involvement of multiple underwriters, including Morgan Stanley, Piper Sandler, RBC Capital Markets, UBS Investment Bank, and Wells Fargo Securities, is typical for a debt offering of this size, indicating a broad market interest.
• The expected listing on the NYSE is a common practice for publicly traded debt securities, providing liquidity and transparency for investors.

Stakeholder Impact

• Shareholders will benefit from the company's ability to raise capital for growth and investment.
• Employees may see increased opportunities as the company expands its operations.
• Customers and suppliers may experience continued business relationships with the company.
• Creditors will be impacted by the new debt issuance, which will increase the company's overall leverage.

Next Steps

• The company will proceed with the issuance and sale of the notes on December 10, 2024, subject to customary closing conditions.
• The operating partnership will deploy the net proceeds into target assets and for general corporate purposes.
• The company will apply to list the notes on the NYSE and expects trading to commence within 30 days of the issue date.

Key Dates

Keywords

senior unsecured notes, debt offering, capital raise, real estate investment trust, REIT, fixed income, underwriting agreement, Sutherland Partners, Waterfall Asset Management, NYSE