RAIT Financial Trust (“RAIT”) (NYSE: RAS) today announced the pricing of its public offering of $125 million aggregate principal amount of its 4.00% Convertible Senior Notes due 2033 (the “Notes”) in an underwritten public offering. RAIT granted the underwriters a 30-day option to purchase up to an additional $18.75 million aggregate principal amount of the Notes in the proposed offering to cover over-allotments. The Notes will be senior unsecured obligations of RAIT. RAIT expects the offering to close on December 10, 2013, subject to customary closing conditions. Barclays Capital Inc. and Deutsche Bank Securities are acting as joint book-running managers for the offering. JMP Securities is acting as co-manager for the offering.
The Notes will pay interest semi-annually in arrears on April 1 and October 1 of each year beginning on April 1, 2014, at an annual rate of 4.00%, and will mature on October 1, 2033 unless earlier redeemed, repurchased or converted. The conversion rate will initially be 104.4523 RAIT common shares per $1,000 principal amount of Notes, equivalent to an initial conversion price of approximately $9.57 per common share, which is a 12.5% premium to the last reported sale price of RAIT’s common shares on December 4, 2013. The conversion rate is subject to adjustment in certain events. Upon conversion, RAIT will deliver or pay, as the case may be, common shares, cash or a combination of common shares and cash, at RAIT’s election.
The net proceeds to RAIT from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $120.9 million (assuming no exercise by the underwriters of their option to purchase additional notes).
RAIT intends to use a portion of the net proceeds from the sale of the Notes to repurchase or repay a portion of our indebtedness, including the potential repurchase of RAIT’s 7.00% Convertible Senior Notes which mature April 1, 2031. RAIT also intends to use a portion of the net proceeds of this offering to fund payment of the cost of a capped call transaction that RAIT has entered into with an affiliate of Barclays Capital Inc. (the “Hedge Counterparty”) in connection with the pricing of the Notes. Any remaining net proceeds from the sale of the Notes will be used for working capital and general trust purposes. If the underwriters exercise their option to purchase additional Notes, RAIT intends to use a portion of the net proceeds from the sale of additional Notes to fund our entry into an additional capped call transaction with the Hedge Counterparty.