Rithm Capital designates new 8.750% Series E preferred stock

Rithm Capital Corp. (RITM) has announced significant capital market activities, including the pricing of 8.750% Series E Preferred Stock to raise approximately $190 million and the establishment of a $750 million at-the-market equity offering program. These capital initiatives coincide with the company's strategic move to acquire Paramount Group, Inc. for $1.6 billion in an all-cash transaction, expected to close in Q4 2025, indicating a funded expansion strategy.

Analysis

Rithm Capital Corp. (RITM) is executing a significant strategic expansion funded by a multi-pronged capital raising strategy. The company is acquiring Paramount Group, Inc. in a substantial all-cash deal valued at approximately $1.6 billion, a major move for a firm with a $6.14 billion market capitalization. To finance this and other initiatives, Rithm has launched several capital market activities, including a $750 million at-the-market (ATM) equity program and the issuance of a new 8.750% Series E Fixed-Rate Cumulative Redeemable Preferred Stock. The initial public offering of this preferred stock is expected to generate approximately $190 million in gross proceeds. This new security offers a high fixed yield and ranks senior to common stock on dividends and liquidation, but is not redeemable by the company before November 2030, absent specific events. The combination of these actions indicates management's aggressive growth posture, leveraging a capital structure that now includes high-yield preferred equity alongside potential common stock issuance. The context provided by an InvestingPro analysis, suggesting the common stock is undervalued with a P/E ratio of 8.87, may underpin the rationale for pursuing such a large, potentially accretive acquisition, which is slated to close in the fourth quarter of 2025.

Key Decisions for Investors

• Investors in RITM common stock should weigh the potential for share dilution from the $750 million ATM program against the long-term accretive potential of the $1.6 billion Paramount Group acquisition, as successful integration will be critical for future value creation.
• Income-focused investors may find the new 8.750% Series E Preferred Stock attractive for its high, fixed cumulative yield, but should consider its subordination to all company debt and the lengthy non-callable period until late 2030.
• Holders of Paramount Group (PGRE) are presented with a clear exit through the $6.60 per share all-cash offer, and should evaluate the certainty of this price against the transaction's closing timeline in Q4 2025 and any associated market or deal risks.
• Given the scale of the acquisition and associated financing, a re-evaluation of Rithm's pro-forma leverage, balance sheet risk, and management's ability to execute on integrating a major acquisition is now a crucial step for any investment thesis.