Newcastle Sets Large Secondary Offering (NCT)

Newcastle Investment Corporation (NYSE: NCT) is getting clobbered on news of a secondary offering.  The company now plans to sell some 16.5 million shares of common stock in a public secondary offering of its shares.

As far as the use of net proceeds, that is for the company to invest in excess mortgage servicing rights and for other general corporate purposes.  Those general purposes were noted as including “the repurchase of indebtedness issued by its collateralized debt obligations, as well as investments in real estate securities and/or other real estate related assets.”

Credit Suisse and Citigroup are the joint book-running managers for the offering. The company intends to grant the underwriters an option to purchase up to an additional 2.47 million shares of common stock for 30 days after the offering.

Shares are down 5% at $6.17 in the after-hours and the 52-week trading range is $3.56 to $6.75.

Newcastle Investment operates as a real estate investment and finance company which invests in and manages a portfolio consisting primarily of real estate securities.

We would note that the company recently paid out a $0.20 per share quarterly dividend just last week and that payout fluctuates from quarter to quarter as follows:

• March 22, 2012 0.20 Dividend
• December 28, 2011 0.15 Dividend
• September 29, 2011 0.15 Dividend
• June 30, 2011 0.10 Dividend

The yield at the current payout based upon the closing bell price of $6.48 comes to a whopping 12.3%.  The $107 million or so from the offering based upon the closing price compares to a market cap of $681 million before the impact of this offering.

JON C. OGG