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PHILADELPHIA-RAIT Financial Trust has completed its previously announced private offering of 6.9% convertible senior notes due in 2027. The aggregate principal amount of the notes is $425 million, which included the $75-million over-allotment option.
Net proceeds, after the initial purchaser's discount and offering expenses, is approximately $414.3 million. The locally based specialty financial REIT has used $74.4 million of the proceeds to repurchase common shares of RAS stock at $27.34 per share. The remaining $339.9 million will be principally applied to investments in the company's targeted assets.
Before April 15, 2026, the notes will be convertible at the option of the holder at an initial conversion rate of nearly 28.7 shares per $1,000 of the principal amount of the notes. The initial conversion price of $34.86 represents a 27.5% premium over the April 12 price of $27.34 per share of RAS common stock, which trades on the NYSE.
On or after April 15, 2026, the notes will be convertible at any time prior to the second business day prior to maturity at the option of the holder. The holder will receive cash up to the principal amount of the notes. Prior to April 20, 2012, the notes will not be redeemable at RAIT's option, except to preserve the company's status as a REIT. On or after April 20, 2102, RAIT may redeem all or a portion of the notes at a redemption price equal to the principal amount, plus accrued and unpaid interest.
In addition, note holders may require RAIT to repurchase all or a portion of the notes at a price equal to the principal amount, plus accrued and unpaid interest on the notes on April 15, 2102, April 15, 2017, and April 2022. This will also apply if there is a change in certain control transactions, not specified in the company's statement, before April 20, 2012.
RAIT originates secured and unsecured credit facilities, including bridge and mezzanine loans, preferred equity investments, trust preferred securities and subordinated debt for private and corporate owners of commercial real estate, REITs and real estate operating companies and their intermediaries throughout the US and Europe. It was formed in December 2006 through a merger of RAIT Investment Trust and Taberna Realty Finance Trust, also based here. Betsey Cohen, chairman of the former RAIT, is chairman, and Daniel Cohen, her son, chairman of the former Taberna, is CEO.
RAIT common stock closed at $29.47 per share on April 18, down 2.6% for the day but $2.13 per share above the company's purchase price following the close of the senior note offer. RAS shares reached a 52-week high of $38.25 per share this Feb. 7, and fell to a low of $24.81 per share on May 17, 2006, prior to the merger of the two companies.
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