Redwood Trust Inc Senior Notes (RWTO)

Today, I present to you a short-term BABY bond with a maturity of fewer than 5 years, a $25 face value, issued by Redwood Trust, Inc. (NYSE: RWTO).

Key Details:

RWTO are 5-year notes redeemable at the issuer's option starting September 1, 2026, at a price of $25 per note plus accrued and unpaid interest, maturing ultimately on September 1, 2029. They feature a compelling interest rate of 9.00% per annum, which translates to $2.25 annually or $0.5625 quarterly, paid to investors.

As of today, the price stands slightly above par at $25.10, inclusive of $0.40 in accrued interest. With the next ex-interest payment scheduled for February 14, 2025, the yield has adjusted slightly upwards to approximately 9.34% if held to maturity—a detail that could catch the eye of yield-seeking investors.

A few words for the issuing company:

Redwood Trust, Inc. is a specialized financial institution with a focus on the investment, financing, and management of non-agency residential and commercial real estate loans and securities.

The company operates through three main segments: its residential conduit, residential securities portfolio, and commercial mortgage portfolio. With a market capitalization of $860 million, Redwood positions itself firmly in the mid-market cap range within the mREIT sector.

As a bondholder, your capital is much more protected than investing in the common stock of the company. This security is a good opportunity for investors seeking high dividends and low to mid tolerance for capital risk.

In conclusion, the RWTO offers an appealing blend of yield and security for certain investor profiles. As always, potential investors should consider their individual risk tolerances and investment goals before making investment decisions.