Radian to Sell Shares, Notes to Boost Mortgage-Unit CapitalZachary Tracer
Radian Group Inc. said it is issuing shares and convertible notes as the company boosts capital for its unprofitable mortgage insurance business.
The insurer has begun offering as many as 30 million shares of common stock and $200 million in notes, Philadelphia-based Radian said today in a statement.
Chief Executive Officer S.A. Ibrahim has helped Radian outlast rivals such as PMI Group Inc. and Triad Guaranty Inc., which were forced to stop selling new policies after falling short of regulatory standards. Radian’s stock more than doubled in the past 12 months as the housing market improved and Ibrahim benefited from reinsurance deals. Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs.
Radian will use proceeds for “additional capital support for our mortgage insurance business,” to fund working capital requirements and for general purposes, according to the statement.
Selling 30 million shares would raise about $244.5 million based on today’s closing price of $8.15 a share. The stock dropped to $7.70 at 5:04 p.m. in extended trading.
Five-year credit-default swaps on Radian debt fell 57 basis points to 611 basis points at 4:28 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Credit-default swaps, which typically fall as investor confidence improves, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
Underwriters have the option to buy an additional 4.5 million shares and $30 million in notes, according to the statement. Morgan Stanley and Goldman Sachs Group Inc. are managing the offerings.
The senior notes are due in 2019 and are convertible into stock, cash or a combination, according to the company.