8-K: Rithm Capital Designates 8.75% Series F Preferred Stock

Rithm Capital Corp. has designated 11.5 million shares of 8.750% Series F Fixed-Rate Reset Cumulative Redeemable Preferred Stock, enhancing its capital structure.

Summary

• Rithm Capital Corp. filed a Certificate of Designations on January 21, 2026, to designate 11,500,000 shares of its authorized preferred stock as 8.750% Series F Fixed-Rate Reset Cumulative Redeemable Preferred Stock (Series F Preferred Stock).
• The Series F Preferred Stock has a par value of $0.01 per share and a liquidation preference of $25.00 per share.
• Quarterly cumulative cash dividends will be paid in arrears, on or about the 15th day of February, May, August, and November.
• The dividend rate is 8.750% per annum from January 21, 2026, to February 15, 2031 (the First Reset Date).
• After the First Reset Date, the dividend rate will reset to the five-year treasury rate plus 5.009% per annum for each subsequent reset period.
• Series F Preferred Stock ranks senior to the company's common stock regarding dividend payments and rights upon liquidation, dissolution, or winding up.
• The Series F Preferred Stock is not redeemable before February 15, 2031, except under specific circumstances related to REIT qualification or a Change of Control.
• On or after February 15, 2031, the company may redeem the Series F Preferred Stock, in whole or in part, at its option, for $25.00 per share plus accumulated and unpaid dividends.
• Upon a Change of Control, the company may redeem the stock, or holders may convert their shares into common stock based on a defined formula.
• Holders generally have no voting rights, but limited voting rights are granted if the company fails to pay dividends for six or more full quarterly periods.

Sentiment

Score: 6

Explanation: The designation of new preferred stock is a standard capital markets action for a REIT, providing capital flexibility. While it introduces fixed costs, it diversifies funding sources and is generally viewed as a neutral to slightly positive event for the company's financial stability.

Positives

• The designation of Series F Preferred Stock provides Rithm Capital Corp. with a flexible and potentially stable source of capital.
• The fixed-rate dividend for the initial period (8.750% until February 15, 2031) offers an attractive yield for preferred shareholders.
• The ability to redeem the preferred stock after February 15, 2031, provides the company with financial flexibility to manage its capital structure in response to market conditions.

Negatives

• The issuance of preferred stock introduces additional fixed dividend obligations, increasing the company's cost of capital.
• The Series F Preferred Stock ranks senior to common stock, meaning common shareholders are subordinated in terms of dividend payments and liquidation rights.
• Potential dilution for common shareholders exists if the Series F Preferred Stock is converted into common stock upon a Change of Control.

Risks

• There are restrictions on ownership of the Series F Preferred Stock intended to preserve the company's qualification as a real estate investment trust (REIT) for U.S. federal income tax purposes, and failure to comply could have adverse tax consequences.
• Holders of Series F Preferred Stock generally have no voting rights, limiting their influence on corporate decisions, except under specific conditions such as failure to pay dividends for six or more full quarterly periods.

Future Outlook

The Series F Preferred Stock features a fixed dividend rate until February 15, 2031, after which the rate will reset based on the five-year treasury rate plus a spread of 5.009% per annum. This structure provides a predictable cost of capital for the initial period and then adjusts to prevailing market interest rates, offering long-term financing flexibility.

Industry Context

The issuance of preferred stock is a common financing strategy for Real Estate Investment Trusts (REITs) like Rithm Capital Corp. It allows REITs to raise capital without diluting common equity immediately, while providing a stable income stream for preferred shareholders. The fixed-to-floating rate structure is typical for preferred securities in the current interest rate environment, balancing investor demand for yield with issuer flexibility.

Comparison to Industry Standards

• Many REITs, such as Annaly Capital Management (NLY) and AGNC Investment Corp. (AGNC), frequently utilize preferred stock offerings to diversify their capital base and fund investments. For example, Annaly has multiple series of preferred stock with similar fixed-to-floating rate structures and liquidation preferences of $25.00 per share.
• The 8.750% initial fixed dividend rate for Rithm Capital's Series F Preferred Stock is competitive within the current market for REIT preferred shares, especially considering the prevailing interest rate environment and the company's credit profile.
• The reset mechanism, tied to the five-year treasury rate plus a spread, is a standard feature designed to make preferred stock attractive over the long term by adjusting to future interest rate changes, similar to preferred offerings by other mortgage REITs.

Corporate Governance

Stakeholder Impact

• **Shareholders (Common Stock):** Common shareholders will be subordinated to the new Series F Preferred Stock regarding dividend payments and liquidation rights. There is also a potential for dilution if the preferred stock is converted into common stock upon a Change of Control.
• **Shareholders (Preferred Stock Series F):** These shareholders will receive a fixed-rate cumulative cash dividend for an initial period, offering a predictable income stream. They also have a senior claim over common stock in liquidation and limited voting rights under specific conditions.
• **Creditors:** The issuance of preferred stock generally sits below debt in the capital structure, so the direct impact on existing creditors is typically limited, though it does add to the company's overall financial obligations.

Next Steps

• Rithm Capital Corp. will pay quarterly cumulative cash dividends on the Series F Preferred Stock, when declared, on or about the 15th day of February, May, August, and November.
• The company may, at its option, redeem the Series F Preferred Stock on or after February 15, 2031.
• Holders of Series F Preferred Stock may have the right to convert their shares into common stock upon a Change of Control, subject to the company's redemption election.

Key Dates

Recommendation

The designation and offering of Series F Preferred Stock is a capital structure management event, not a fundamental operational change. While it provides Rithm Capital Corp. with additional capital and flexibility, it also introduces new fixed dividend obligations and subordinates common shareholders. For a seasoned investor, this event alone does not significantly alter the long-term investment thesis for the common stock, warranting a 'hold' recommendation as part of ongoing portfolio management.

Keywords

Preferred Stock, Capital Raise, REIT, Fixed-Rate Reset, Cumulative Redeemable, Dividends, Rithm Capital Corp., SEC Filing, 8-K