Radian Strengthens Capital Structure
March 21 2016 - 5:30AM
Business Wire
-- Purchases $288 million principal amount of
2019 Convertible Notes and $30 million principal amount of 2017
Convertible Notes –
-- Reduces fully diluted share count by
approximately 20 million shares –
-- Achieves investment grade rating from
S&P for Radian Guaranty –
Radian Group Inc. announced today that on March 18, 2016, it
completed its previously announced public offering of $350 million
principal amount of 7.000% Senior Notes due 2021 (the 2021 Senior
Notes). Radian also announced that it entered into
privately negotiated agreements with certain of the holders
(Sellers) of its convertible notes. Under these agreements, Radian
is purchasing for a combination of cash and/or shares of Radian
common stock
- an aggregate of $288 million principal
amount of its 2.25% Convertible Senior Notes due 2019 (the 2019
Convertible Notes); and
- an aggregate of $30 million principal
amount of its 3.00% Convertible Senior Notes due 2017 (the 2017
Convertible Notes).
Radian plans to fund these purchases with $192 million in cash
(plus accrued and unpaid interest on the purchased notes) and by
issuing to the Sellers approximately 17.0 million shares of common
stock. Following these purchases, which are expected to close
today, subject to the satisfaction of customary closing conditions,
$102 million principal amount of the 2019 Convertible Notes and $22
million principal amount of the 2017 Convertible Notes will remain
outstanding.
“We have taken steps to simplify and strengthen our capital
structure, which improves the maturity profile of our debt and
significantly reduces our number of diluted shares outstanding,”
said Radian’s Chief Executive Officer S.A. Ibrahim. “We believe the
strong participation in our senior note offering and the recent
rating agency upgrades reflect the confidence the financial
community places on Radian’s financial strength, flexibility and
prospects for future growth.”
The purchases of the convertible notes are expected to result in
an estimated pre-tax charge to GAAP earnings of approximately $56
million in the first quarter of 2016. This estimated charge
represents
- the $40 million market premium paid to
Sellers of the convertible notes in excess of the conversion value
of the purchased notes,
- the $15 million difference between the
fair value and the carrying value of the liability component of the
purchased convertible notes, net of unamortized issuance costs,
and
- estimated transaction costs of $1
million.
Excluding the charge related to the purchases of the convertible
notes, pre-tax savings related to interest and amortization of debt
issuance costs on the purchased convertible notes are expected to
be approximately $58 million between the closing date of the
purchases and the original maturity dates of the purchased notes in
March 2019 and November 2017.
The 2021 Senior Notes issuance and the purchases of the
convertible notes, together with the recently completed $100
million share repurchase program (pursuant to which Radian
purchased approximately 9.4 million of its common shares) are
expected to yield the following in the first quarter of 2016:
- An estimated net increase in available
holding company liquidity of approximately $50 million. As of
December 31, 2015, Radian Group had approximately $340 million of
currently available liquidity.
- An estimated net increase in long-term
debt of approximately $62 million
- An estimated net increase in
stockholders’ equity of approximately $5 million
- An estimated net decrease in fully
diluted shares outstanding of approximately 19.9 million. This
estimate reflects the difference between the actual net increase in
shares outstanding of approximately 7.3 million, and the
approximately 27.2 million that would have already been included in
the calculation of diluted earnings per share related to the 2019
Convertible Notes and the 2017 Convertible Notes.
RATING AGENCY UPGRADES
On March 14, 2016, Standard & Poor’s Ratings Services
(S&P) upgraded the long-term issuer credit rating on Radian
Group to BB-. S&P also upgraded its financial strength and
long-term issuer credit ratings on Radian Group’s principal
mortgage insurance subsidiary, Radian Guaranty Inc., to an
investment grade rating of BBB-. Both Radian companies maintain a
positive outlook.
On January 28, 2016, Moody’s Investors Service (Moody’s)
upgraded the senior unsecured debt rating on Radian Group to Ba3.
Moody’s also upgraded its insurance financial strength ratings of
Radian Guaranty to an investment grade rating of Baa3. Both Radian
companies maintain a stable outlook.
You may find the complete rating agency reports and information
regarding the companies’ ratings on Radian’s website here.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia,
provides private mortgage insurance, risk management products and
real estate services to financial institutions. Radian offers
products and services through two business segments:
- Mortgage Insurance, through its
principal mortgage insurance subsidiary Radian Guaranty Inc. This
private mortgage insurance protects lenders from default-related
losses, facilitates the sale of low-downpayment mortgages in the
secondary market and enables homebuyers to purchase homes more
quickly with downpayments less than 20%.
- Mortgage and Real Estate Services,
through its principal services subsidiary Clayton, as well as Green
River Capital, Red Bell Real Estate and ValuAmerica. These
solutions include information and services that financial
institutions, investors and government entities use to evaluate,
acquire, securitize, service and monitor loans and asset-backed
securities.
Additional information may be found at www.radian.biz.
FORWARD-LOOKING STATEMENTS
All statements in this press release that address events,
developments or results that we expect or anticipate may occur in
the future are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the
Exchange Act and the U.S. Private Securities Litigation Reform Act
of 1995. In most cases, forward-looking statements may be
identified by words such as "anticipate," "may," "will," "could,"
"should," "would," "expect," "intend," "plan," "goal,"
"contemplate," "believe," "estimate," "predict," "project,"
"potential," "continue," "seek," "strategy," "future," "likely" or
the negative or other variations on these words and other similar
expressions. These statements, which may include, without
limitation, projections regarding our future performance and
financial condition, are made on the basis of management's current
views and assumptions with respect to future events. Any
forward-looking statement is not a guarantee of future performance
and actual results could differ materially from those contained in
the forward-looking statement. These statements speak only as of
the date they were made, and we undertake no obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. We operate in a
changing environment. New risks emerge from time to time and it is
not possible for us to predict all risks that may affect us. The
forward-looking statements, as well as our prospects as a whole,
are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in the
forward-looking statements.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
the Risk Factors detailed in Item 1A of Part I of our Annual Report
on Form 10-K for the year ended December 31, 2015, and subsequent
reports and registration statements filed from time to time with
the U.S. Securities and Exchange Commission. We caution you not to
place undue reliance on these forward-looking statements, which are
current only as of the date on which we issued this presentation.
We do not intend to, and we disclaim any duty or obligation to,
update or revise any forward-looking statements to reflect new
information or future events or for any other reason.
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version on businesswire.com: http://www.businesswire.com/news/home/20160321005184/en/
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
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