8-K: Rithm Capital Launches $190M Series E Preferred Stock Offering

Rithm Capital Corp. announced an underwriting agreement to sell 7.6 million shares of 8.750% Series E Fixed-Rate Cumulative Redeemable Preferred Stock, aiming to raise approximately $184 million in net proceeds for investments and general corporate purposes.

Summary

• Rithm Capital Corp. entered into an underwriting agreement to sell 7,600,000 shares of its 8.750% Series E Fixed-Rate Cumulative Redeemable Preferred Stock.
• The shares have a liquidation preference of $25.00 per share and were sold to underwriters at $24.2125 per share.
• The public offering price is $25.00 per share, resulting in gross proceeds of $190,000,000 from the initial offering.
• The underwriting discount is $0.7875 per share, totaling $5,985,000 for the initial offering.
• Net proceeds to the company, before estimated offering expenses, are approximately $184,015,000.
• Underwriters have a 30-day option to purchase up to an additional 1,140,000 shares of Series E Preferred Stock, which would increase net proceeds to approximately $211,617,250 if fully exercised.
• The company intends to use the net proceeds for investments and general corporate purposes.
• Dividends on the Series E Preferred Stock will be fixed at 8.750% per annum, payable quarterly in arrears.
• The first dividend payment is scheduled for February 15, 2026, in the amount of $0.85069 per share.
• The Series E Preferred Stock is perpetual but may be optionally redeemed by the company on or after November 15, 2030, at $25.00 per share plus accumulated unpaid dividends.
• A special optional redemption right exists upon a Change of Control, allowing redemption at $25.00 per share plus accumulated unpaid dividends within 120 days.
• The company also has a redemption right to preserve its qualification as a Real Estate Investment Trust (REIT).
• In connection with a Change of Control, holders may have a conversion right into common stock, subject to a Share Cap of 4.01284 and an Exchange Cap of 30,497,584 common shares (or 35,072,222 if the over-allotment option is fully exercised).
• The company intends to apply to list the Series E Preferred Stock on the New York Stock Exchange (NYSE) under the ticker symbol RITM PR E within 30 days of initial issuance.
• Morgan Stanley & Co. LLC is acting as the representative of the several underwriters.

Sentiment

Score: 7

Explanation: The offering provides Rithm Capital Corp. with significant capital for investments and general corporate purposes, strengthening its financial position. The fixed dividend rate offers stability for preferred shareholders, and the capital raise is a positive for the company's strategic flexibility.

Positives

• The offering provides Rithm Capital Corp. with approximately $184 million in net proceeds (or up to $211.6 million if the over-allotment option is fully exercised) for investments and general corporate purposes, strengthening its capital base.
• The issuance of fixed-rate preferred stock provides a stable source of capital for the company.
• The company's intention to apply for listing on the NYSE enhances liquidity and visibility for the new Series E Preferred Stock.

Negatives

• The offering incurs an underwriting discount of $0.7875 per share, totaling $5,985,000 for the initial offering, which reduces the net proceeds to the company.
• The 8.750% fixed dividend rate represents a cost of capital for the company.
• The conversion right for preferred stock in a Change of Control scenario, while capped, introduces potential future dilution for common shareholders.

Risks

• The Underwriters may terminate the agreement if there is a material adverse change in the company's financial condition, earnings, business affairs, or prospects.
• Termination may occur due to material adverse changes in U.S. or international financial markets, outbreaks of hostilities, or significant changes in political, financial, or economic conditions.
• Suspension or material limitation of trading in the company's securities on the Commission or NYSE, or general market trading suspensions, could lead to termination.
• A material disruption in commercial banking or securities settlement/clearance services in the United States, or a banking moratorium, could also result in termination of the agreement.
• There is a risk of default by one or more underwriters in their obligation to purchase shares, which could impact the total capital raised.

Future Outlook

Rithm Capital Corp. intends to use the net proceeds from this offering for investments and general corporate purposes. The company also plans to apply to list the Series E Preferred Stock on the New York Stock Exchange within 30 days of initial issuance and will continue to use its best efforts to meet the requirements to qualify as a REIT under the Code for its taxable years, as long as the Board of Directors deems it in the best interests of shareholders.

Industry Context

This preferred stock offering is a common capital-raising strategy for Real Estate Investment Trusts (REITs) like Rithm Capital Corp. It allows the company to secure long-term financing with a fixed dividend cost, which can be attractive to investors seeking stable income. The use of proceeds for general corporate purposes and investments aligns with typical REIT strategies to expand portfolios or manage existing assets, while maintaining REIT qualification is crucial for tax efficiency in the sector.

Comparison to Industry Standards

• The 8.750% fixed-rate cumulative redeemable preferred stock offering is a standard financing instrument used by REITs and other financial services companies to raise capital.
• The liquidation preference of $25.00 per share is typical for preferred stock offerings in the U.S. market.
• The optional redemption features, including a call date after approximately five years (November 15, 2030) and a special redemption upon a change of control, are common terms designed to provide flexibility to the issuer.
• The conversion rights tied to a Change of Control, with specified share and exchange caps, are also standard provisions in preferred stock designed to protect preferred shareholders in specific corporate events.
• The intention to list on the NYSE is standard practice for publicly traded preferred securities to ensure liquidity for investors.

Corporate Governance

Related Party Transactions

• Certain underwriters and their affiliates have in the past provided, are currently providing, and may in the future from time to time provide investment banking and other financing, trading, banking, research, transfer agent, and trustee services to the company, its subsidiaries, and its affiliates, for which they have received or may receive fees and expenses.
• Additionally, certain underwriters and their affiliates may sell assets to the company from time to time.

Stakeholder Impact

• Shareholders (Common): Potential for future dilution if the preferred stock is converted into common stock, although conversion is limited to a Change of Control event and subject to caps. The capital raise strengthens the company's financial position, which can be beneficial.
• Preferred Shareholders: Will receive a fixed 8.750% cumulative dividend, providing a stable income stream. The listing on NYSE is expected to provide liquidity.
• Company: Gains significant capital for investments and general corporate purposes, enhancing financial flexibility and supporting strategic initiatives. Incurs a fixed cost of capital through preferred dividends.
• Underwriters: Earn an underwriting discount and fees for their services in facilitating the offering.

Next Steps

• The offering is expected to close on September 25, 2025.
• The company will file the Certificate of Designations with the Secretary of State of Delaware on or prior to the Closing Time.
• The company will apply to list the Series E Preferred Stock on the New York Stock Exchange within 30 days after the Closing Time.
• The first dividend payment on the Series E Preferred Stock is scheduled for February 15, 2026.

Key Dates

Recommendation

The offering of 8.750% Series E Fixed-Rate Cumulative Redeemable Preferred Stock provides Rithm Capital Corp. with substantial capital for investments and general corporate purposes, which is a positive for the company's strategic flexibility. However, for common shareholders, a preferred stock issuance, while strengthening the balance sheet, also introduces a fixed cost of capital and potential future dilution if the preferred shares are converted under specific conditions (Change of Control). Without further details on the specific investments or the broader financial context of the company's common stock valuation, a 'hold' recommendation is appropriate as this event is a standard financing activity rather than a direct indicator of significant upside or downside for common equity.

Keywords

Rithm Capital, RITM, Preferred Stock, Series E, Fixed-Rate, Cumulative Redeemable, Capital Raise, Underwriting Agreement, SEC Filing, REIT, Financial Services, Investment, Dividend