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PHILADELPHIA-RAIT Financial Trust has begun a private offering of $275 million in senior unsecured convertible notes due in 2027 to qualified institutional buyers. It will grant the initial purchaser an option to buy an additional $50 million to cover any over allotments.

According to a company statement, the locally based financial REIT will use the proceeds to repurchase up to $75 million of its common shares. Any balance will be applied to general purposes, “principally investment in its targeted asset classes.”

This January, RAIT raised in excess of $365 million from the sale of common stock at $34 per share on the NYSE. Shares of RAS hit a 52-week high of $38.25 this Feb. 7, fell to $26.10 per share on April 11, and inched up to $26.44 per share in early April 12 trading.

In an April 11 SEC filing, the company described risks beyond those delineated in its previous annual report. They are related to the US residential mortgage market, including subprime sectors. “The realizable value of some of our investments, and our ability to finance those investments at acceptable rates, or at all, may be affected by factors in the residential mortgage market and are beyond our control,” the filing states.

Among the risks spelled out in the SEC document is a direct investment, through CDOs that invest in TruPS, “in one issuer whose business is primarily origination of subprime mortgages. We also hold interests in a private partnership that has invested in CDO equity and debt securities which are partly backed by collateral issued by subprime mortgage originators.”

The filing concludes, “If companies in which we invest are themselves directly or indirectly invested in US residential mortgage loans and are thereby exposed to changes in the value of residential mortgage loans, the value of our investment in those companies may be temporarily or permanently impaired by movements in the market for residential loans or securities backed by those loans.”

RAIT was formed in December 2006 through a merger of RAIT Investment Trust and Taberna Realty Finance Trust. Betsey Cohen, chairman of the former RAIT, is chairman, and Daniel Cohen, chairman of the former Taberna, is CEO. The 52-week low of $24.81 per share of RAS stock occurred on May 17, 2006, prior to the merger.

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