**************** DAIWA NEW COLOR: RWT **************************
$150m (+22.5m) sen unsec cb coming tonight from JPM/BARC. Terms: 5y, 4⅞-5⅜% up 12½-17½%, full pctns. UOP=acq of res/mortgage loans/gcp. Co has track record from mid 1990’s, specialising in jumbo res/mortgages w/a smaller commercial u/writing biz. Wants to aggressively grow p/folio given real estate env.
PFdebt=841m,
cash=227m,
LTM ebitda=213m,
fcf=(450m).
We’d assume B+ & L+600 (See Credit Color) ADV=577k, no leaps, 2y 90d 50/90%ile=23/17.
We’d use 20%.Brw just off top and worsens over dvd cycle. We’ll use 50bp blended. Theo=101.6/103.4/105.25. Small deal, would like to see MIDs but again we are realistic. STWD performance will obv help >BUY<
——-> Daiwa New Issue Credit Color: Redwood Trust <———-
* PF Cash $227mm PF Debt $841mm LTM EBITDA $213mm
LTM FCF $(450)mm Debt/Cap 42% Mkt Cap $1625mm
* REIT focused on residential & commercial mortgage loans and securities. Primary focus is residential jumbo mortgages.
* RWT is large player in prime jumbo mortgage sec mkt. Weathered downturn & mkt appears poised to grow this yr. Targeting $7bn sec trans FY13 vs $2bn FY12. Orig comm mortgages, but smaller biz also expect growth this yr. Co plans to expand into sec agency mortgages later this yr. Benefit as US gov’t pulls back from residential mortgage mkt. Proceeds to help fund growth. $150mm comm loan w/house fac provides add’l liquidity.
* Our assigned spread —>L+600<— Src: Bloomberg, Co Filings