Radian Announces Further Actions to Strengthen Capital Structure

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.