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Radian Offers 6.625% $525 Million Senior Unsecured Notes

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Radian Group Inc. (RDN - Free Report) announced the pricing of $525 million aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 6.625% and are scheduled to mature on Mar 15, 2025. This is an increase from $400 million announced initially.

The aforementioned senior notes will pay interest on a semi-annual basis on Mar 15 and Sep 15.

The company plans to deploy the net proceeds for general corporate purposes, which may include future contributions to its insurance subsidiaries.

The company displayed prudence by issuing senior notes amid a low interest rate environment to procure funds and enhance financial flexibility without affecting liquidity. As of Mar 31, 2020 Radian Group had $648 million liquidity.

By capitalizing on the low interest rate environment, the company is also attempting to reduce its interest burden, thus facilitating margin expansion. Also, the company’s operational strength should enable it to service debt uninterruptedly, thereby maintaining the stock’s creditworthiness.

However, with the new issuance, interest expense will increase. But we still believe that the company is in a strong position to clear debts, banking on operational efficiencies, largely driven by organic growth.

As of Mar 31, 2020, total debt of the company was about $1.1 billion, up 3.9% from 2019 end. The debt-to-capital ratio on Mar 31, 2020 was 21.5%, up 130 basis points sequentially and better than the industry average. The company has been effectively trying to lower its debt level over the last few years and thus its debt to capital has been improving. The latest offering will increase the debt-to-capital ratio by 890 basis points.

The firm’s times interest earned ratio has been improving over the years. The improvement in this ratio indicates that the firm will be able to meet current obligations in the near future without any difficulties. At a time when every entity is looking forward to preserve liquidity amid uncertainty as a result of the COVID-19 outbreak, an improving ratio is reassuring for investors.

Shares of this Zacks Rank #4 (Sell) mortgage insurer have lost 45.2% year to date compared with the industry’s decline of 31.7%.

Stocks to Consider

Some better-ranked stocks from the same space are EverQuote Inc (EVER - Free Report) , James River Group Holdings Ltd (JRVR - Free Report) and Kemper Corporation (KMPR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EverQuote surpassed estimates in each of the last four quarters, with the average positive surprise being 86.67%.

James River Group surpassed estimates in three of the last four quarters, with the average positive surprise being 7.31%.

Kemper surpassed estimates in the last four quarters, with the average positive surprise being 16.25%.

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