Radian Group Inc. provided an update on the strategic review and planned restructuring of its services segment aimed at repositioning the business for sustained profitability by focusing on core products and services.
The company has committed to a restructuring plan and expects to incur pretax charges of approximately $12 million in the third quarter, including about $5 million in cash. Additional pretax charges of approximately $8 million, including about $7 million in cash, are expected to be recognized within the next 12 months.
The total charges of about $20 million are expected to consist of approximately $8 million in asset impairments, $7 million in employee severance and benefit costs, $3 million in facility and lease termination costs, and about $2 million in contract termination and other restructuring costs.
As part of the restructuring plan, Radian has eliminated the position of president of its services business, so Jeff Tennyson is stepping down from the role effective immediately. He will assist with the management transition through Nov. 11.
Radian also provided an update on certain strategic actions undertaken to boost the company's financial position and improve its debt maturity profile.
The company has entered into a three-year, $225 million unsecured revolving credit facility with a panel of banks led by Royal Bank of Canada and U.S. Bank. Borrowings under the facility may be used for working capital and general corporate purposes, including capital contributions to Radian's insurance and reinsurance units and growth initiatives. The facility can be increased up to a total of $300 million during the term of the agreement.
In September, Radian closed a public offering of $450 million of 4.500% senior notes due 2024. It also announced early tender results and upsized its tender offers to purchase for cash a portion of its 5.500% senior notes due 2019, its 5.250% senior notes due 2020, and its 7.000% senior notes due 2021. These transactions are expected to reduce the company's annual cash interest by nearly $4.3 million and extend the weighted average maturity of its outstanding debt by about two years. Radian has no material debt maturities prior to June 2019.