8-K: Rithm Capital Prices $250M Series F Preferred Stock Offering

Rithm Capital Corp. has entered into an underwriting agreement to sell 10 million shares of its 8.750% Series F Fixed-Rate Reset Cumulative Redeemable Preferred Stock, raising significant capital for investments and general corporate purposes.

Summary

• Rithm Capital Corp. (RITM) entered into an underwriting agreement with Morgan Stanley & Co. LLC and other underwriters to sell 10,000,000 shares of its 8.750% Series F Fixed-Rate Reset Cumulative Redeemable Preferred Stock.
• The shares have a liquidation preference of $25.00 per share and were sold to underwriters at a purchase price of $24.2125 per share.
• The public offering price is $25.00 per share, with an underwriting discount of $0.7875 per share, totaling $7,875,000 for the initial shares.
• Net proceeds to the company, before estimated offering expenses, are approximately $242,125,000.
• Underwriters have a 30-day option to purchase up to an additional 1,500,000 shares of Series F Preferred Stock, which would increase net proceeds to approximately $278,443,750 if fully exercised.
• The offering is expected to close on January 21, 2026.
• Dividends on the Preferred Stock will be 8.750% per annum until February 15, 2031, and then reset to the five-year treasury rate plus 5.009% per annum.
• The first dividend payment is scheduled for May 15, 2026, in the amount of $0.69271 per share.
• The Preferred Stock is perpetual but redeemable by the company on or after February 15, 2031, at $25.00 per share plus accumulated unpaid dividends, or earlier under specific REIT preservation or Change of Control conditions.
• The company intends to use the net proceeds for investments and general corporate purposes.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company successfully secured a significant amount of capital through a preferred stock offering, which is a positive for funding future investments and general corporate purposes. While it adds to financial obligations, it's a standard and expected financing activity for a REIT. No negative surprises or adverse events were disclosed.

Positives

• Successfully secured significant capital of approximately $242.1 million (potentially $278.4 million with over-allotment) for investments and general corporate purposes.
• The issuance of preferred stock provides a stable, long-term financing source without immediate dilution of common stock.
• The 8.750% fixed-rate dividend offers an attractive return for preferred shareholders, potentially broadening the investor base.

Negatives

• The issuance of preferred stock adds to the company's financial obligations through cumulative dividend payments.
• Potential future dilution for common shareholders if the preferred shares are converted into common stock, although this is subject to specific conditions and caps.

Risks

• The company has agreed to indemnify underwriters against certain liabilities, including under the Securities Act of 1933, and to contribute to payments if unable to indemnify.
• The company's ability to maintain its qualification as a real estate investment trust (REIT) is crucial, and the preferred stock terms include provisions for redemption to preserve this status.
• The market price of the preferred stock could be affected by changes in interest rates, the company's financial performance, and general market conditions.

Future Outlook

The company intends to use the net proceeds from this offering for investments and general corporate purposes. It also plans to apply to list the Series F Preferred Stock on the NYSE within 30 days after the closing and will use its best efforts to maintain its REIT qualification for its taxable years as long as deemed in the best interests of shareholders.

Industry Context

This capital raise by Rithm Capital Corp., a real estate investment trust (REIT), is a common strategy in the financial services and real estate sectors to secure funding for growth initiatives, portfolio expansion, or general liquidity. The issuance of preferred stock, particularly with a fixed-rate reset feature, allows the company to tap into a segment of the market seeking yield and potentially less volatility than common equity, while managing its cost of capital in a dynamic interest rate environment. The ability to maintain REIT status is critical for tax efficiency in this industry.

Comparison to Industry Standards

• The 8.750% initial fixed-rate dividend for the Series F Preferred Stock is competitive within the preferred stock market, especially for REITs, reflecting current market conditions and the company's credit profile. For example, other mortgage REITs or financial services companies might offer preferred stock with similar or varying yields depending on their specific risk profiles and market demand at the time of issuance.
• The 'fixed-rate reset' feature, tied to the five-year treasury rate plus a spread (5.009%), is a common mechanism in preferred stock offerings to adjust to future interest rate environments, providing a balance between fixed income stability and market responsiveness. This structure is comparable to preferred offerings from peers like Annaly Capital Management (NLY) or AGNC Investment Corp. (AGNC), which also utilize preferred shares with reset features to manage their capital structure.
• The liquidation preference of $25.00 per share is standard for preferred stock offerings in the U.S. market, making it accessible to a broad range of investors.

Related Party Transactions

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

Stakeholder Impact

• **Shareholders (Common Stock):** The issuance of preferred stock provides capital for company growth, which could benefit common shareholders in the long term. However, the conversion right of preferred shares could lead to dilution of common stock if exercised, though subject to caps.
• **Preferred Shareholders (New Series F):** These investors will receive a fixed-rate dividend (initially 8.750%) and a liquidation preference, offering a potentially stable income stream and priority in liquidation over common stock.
• **Creditors:** The capital raise strengthens the company's balance sheet, potentially improving its credit profile.
• **Company Operations:** The additional capital will be used for investments and general corporate purposes, supporting the company's strategic initiatives and operational flexibility.

Next Steps

• The offering is expected to close on January 21, 2026.
• The company will file the Certificate of Designations with the Secretary of State of Delaware prior to the closing time.
• The company will apply to list the Series F Preferred Stock on the New York Stock Exchange (NYSE) within 30 days after the closing time.
• The first dividend payment on the Series F Preferred Stock is scheduled for May 15, 2026.

Key Dates

Recommendation

The filing details a routine capital raise through preferred stock, which is a standard financing activity for a REIT. It provides capital for general corporate purposes and investments, which is generally positive for the company's strategic flexibility. However, it does not present new information that would fundamentally alter the investment thesis for Rithm Capital Corp. The terms of the preferred stock are in line with market expectations, and while the capital infusion is beneficial, it doesn't suggest a significant undervaluation or overvaluation of the common stock based solely on this announcement. Investors should continue to hold and monitor the company's overall performance and market conditions.

Keywords

Rithm Capital Corp, RITM, Preferred Stock, Series F, Capital Raise, Underwriting Agreement, Fixed-Rate Reset, Cumulative Redeemable, REIT, New York Stock Exchange, Morgan Stanley