Radian Raises $689 Million in Expanded Sale of Stock, Notes

(Updates totals starting in first paragraph.)

Feb. 27 (Bloomberg) -- Radian Group Inc. raised $689.3 million as the company sold more stock and senior notes than planned to boost capital at the money-losing mortgage insurer.

Radian sold 39.1 million shares for $8 apiece, compared with the closing price of $8.15 on Feb. 25, before the company announced it was offering as sharers. The Philadelphia-based company also sold $400 million of convertible notes, Radian said today in a statement. The $689.3 million sum accounts for commission and expenses.

Chief Executive Officer S.A. Ibrahim has helped Radian navigate a housing slump that’s led to losses in five of the past six years, as capital shortfalls pushed rivals from the business. Radian’s stock more than doubled in the past 12 months as the housing market improved and Ibrahim benefited from reinsurance deals and investment gains.

“We’ve been and will continue to evaluate opportunities for improving our capital and liquidity positions on terms that are favorable and acceptable to us,” Ibrahim said on a Feb. 11 conference call with analysts. “Capital and liquidity have been a critical factor for us.”

The 39.1 million share figure includes an initial total of 34 million, plus an additional 5.1 million shares, reflecting additional demand. The company Feb. 25 it would sell as many as 34.5 million shares and up to $230 million in notes.

Radian shares rose 2 cents to $8.45 at the close in New York, after rallying 3.4 percent yesterday. Credit-default swaps showed that investor confidence is improving.

Contracts protecting against Radian’s default for five years decreased 0.2 percentage point to 1.5 percent upfront at 4:19 p.m. according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. That’s in addition to 5 percent a year, meaning it would cost $150,000 initially and $500,000 annually to protect $10 million of Radian’s debt.

Credit Swaps

The swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.

Radian reported a net loss of $177.3 million in the fourth quarter. The mortgage guarantor lost $451.5 million in 2012. Mounting losses forced rivals including PMI Group Inc. and Triad Guaranty Inc. from the business. Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs.

Morgan Stanley and Goldman Sachs Group Inc. led the offerings. The underwriters have the option to buy an additional 5.1 million shares and $50 million in notes.

The senior notes are due in 2019 and pay interest at a rate of 2.25 percent a year. They are convertible “upon specified events and during specified periods” at an initial rate of about $10.60 per share.

--With assistance from Madhura Karnik in New York. Editors: Dan Reichl, Dan Kraut