Radian Announces Further Actions to Strengthen Capital Structure
June 18 2015 - 8:40AM
Business Wire
-- Purchase of $389 million principal amount of
2017 Convertible Notes –
-- Termination of Portion of Capped Call for
Consideration of approximately $55 million –
-- Plans to Launch Accelerated Share Repurchase
Program –
Radian Group Inc. announced today that, following the pricing of
its 5.250% Senior Notes due 2020 (the 2020 Senior Notes), it has
entered into privately negotiated agreements with certain of the
holders (Sellers) of its 3.000% Convertible Senior Notes due 2017
(the 2017 Convertible Notes) to purchase an aggregate of $389
million principal amount of 2017 Convertible Notes for a
combination of cash and shares of Radian common stock (the
Convertible Purchase). Radian plans to fund the Convertible
Purchase with $127 million in cash (plus accrued and unpaid
interest) and by issuing to the Sellers approximately 28.4 million
shares of common stock. Following the Convertible Purchase, which
is expected to close by June 23, 2015, subject to the satisfaction
of customary closing conditions, $61 million principal amount of
the 2017 Convertible Notes will remain outstanding.
In order to reduce the dilutive impact of the Convertible
Purchase, Radian also intends to enter into an accelerated share
repurchase program (ASR) to repurchase an aggregate of
approximately $202 million of Radian’s common stock. Under the ASR,
Radian expects to receive an upfront delivery of approximately 9.2
million shares with the total number of shares ultimately delivered
to Radian to be based on the volume-weighted average price of
Radian’s common stock during the term of the transaction, less a
discount and subject to adjustments pursuant to the terms and
conditions of the program. Radian expects to fund the ASR with a
portion of the net proceeds from the 2020 Senior Notes.
In connection with the purchase of the 2017 Convertible Notes,
Radian is terminating a corresponding portion of the Capped Call it
had entered into in 2010 in connection with the initial issuance of
the 2017 Convertible Notes, for expected proceeds of approximately
$12 million in cash and 2.3 million in shares of Radian common
stock.
“We are pleased to address our corporate capital structure in a
way that will reduce our overall cost of capital, while improving
the maturity profile of our debt,” said Radian’s Chief Executive
Officer S.A. Ibrahim. “These actions help to improve our financial
position, underscore our commitment to creating stockholder value
and reinforce our confidence in Radian’s long-term growth and
financial performance.”
The purchases of the 2017 Convertible Notes are expected to
result in an estimated pre-tax, non-operating charge of
approximately $92 million from this transaction in the second
quarter of 2015. This estimated charge represents
- the $35 million market premium paid to
Sellers of the 2017 Convertible Notes in excess of the conversion
value for the purchased 2017 Convertible Notes,
- the $53 million difference between the
fair value and the carrying value of the liability component of the
purchased 2017 Convertible Notes, and
- the $4 million net impact of
transaction costs and unamortized debt issuance costs on the
purchased 2017 Convertible Notes.
Excluding the charge related to the Convertible Purchase,
pre-tax savings related to interest and amortization of debt
issuance costs on the purchased 2017 Convertible Notes are expected
to be approximately $86 million between the closing date of the
Convertible Purchase and the original maturity date of the
purchased notes in November 2017. After consideration of the
anticipated ASR*, Radian expects the combination of the 2020 Senior
Notes issuance, the purchase of the 2017 Convertible Notes and the
consideration to be received from the Capped Call termination to
result in
*assumes, solely for purposes of these estimates, that Radian’s
stock price is $18.68 during the term of the ASR
- a net increase in available holding
company liquidity of approximately $24 million,
- a net increase in long-term debt of
approximately $16 million,
- a net decrease in the equity component
of currently redeemable convertible senior notes of approximately
$55 million,
- a net increase in stockholders’ equity
of approximately $89 million, which includes the consideration to
be received for the Capped Call termination, and
- an estimated net increase in fully
diluted shares outstanding of approximately 2.8 million. This
estimate includes the actual net increase in shares outstanding of
15.3 million, of which, absent the Convertible Purchase,
approximately 12.5 million would have already been included in the
calculation of diluted earnings per share related to the conversion
premium of the 2017 Convertible Notes, assuming an average stock
price of $18.68.
The press release is for information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy
any security of the company, nor will there be any sale of any such
security in any jurisdiction in which such offer, sale or
solicitation would be unlawful.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia,
provides private mortgage insurance and related risk mitigation
products and services to mortgage lenders nationwide through its
principal operating subsidiary, Radian Guaranty Inc. These services
help promote and preserve homeownership opportunities for
homebuyers, while protecting lenders from default-related losses on
residential first mortgages and facilitating the sale of
low-downpayment mortgages in the secondary market.
FORWARD-LOOKING STATEMENTS
All statements in this report that address events, developments
or plans that we expect or anticipate may occur in the future,
including the company’s share repurchase plan, 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 including those detailed in Item 1A of
Part I of our Annual Report on Form 10-K for the year ended
December 31, 2014 and in our 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 press release. 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/20150618005626/en/
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
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