HTGC: The BDC - which just adopted the higher leverage limit - filed a Prospectus to issue a Baby Bond with a 15 year maturity. All other details not yet known. More to follow.
CSWC: The BDC - shortly after issuing its first Baby Bond - is now raising up to an additional $50mn through B. Riley through direct placement. The unsecured debt placed in December 2017 raised $57.5mn. The ticker is CSWCL. Since June of this year, CSWC has raised another $11.9mn in direct placements. The debt has traded as high as $26.00. We get the impression there's a good chance the BDC may be able to place the entire $50mn covered by this Prospectus by the end of this year. Just one more example of increasing supply and demand for BDC unsecured debt in the markets.
PSEC: Here is a link to PSEC's SEC filings which includes both a Prospectus for a series of InterNotes offerings settling on September 13 and the draft Prospectus for another round trading on September 17. Nonetheless, the amounts raised remain small and rates unchanged. The PSEC debt offering machine continues to grind out new debt capital as before.
HTGC: Shortly after asking S&P to cease rating its debt (which had dropped to BB+) HTGC receives an investment grade rating from Canadian group DBRS,Inc. See also the full length BDCR article on the subject: https://bit.ly/2O5VMER
MRCC: All the key details of MRCC's first Baby Bond are now set. The yield is below 6.0%: pretty good for a mid sized BDC but only a 5 year maturity, redeemable in two years.
MRCC: Another BDC taps the debt markets to take advantage of the higher leverage allowed under the Small Business Credit Availability Act. Only announced so far is the maturity (2023); the ticker (MRCCL) and the rating from Egan-Jones (A-). Much more to follow including analysis from the BDC Reporter.
NMFC: In a press release, NMFC reported $115mn was raised in total, thanks to underwriters exercise of their overallotment.
PSEC: A new prospectus has been filed by PSEC for the just completed issuance of three different tranches (with different maturity dates) of Inter Notes. As usual, the interest rates range between 5.0% and 6.0% and the maturities between 5 and 10 years. Also as usual of late the amounts raised through the Inter Notes is very small on the scale of PSEC's balance sheet: around $2mn. Since May 11, 2018 PSEC has issued Inter Notes generating $28.2mn in net debt capital but on August 8 called in 2020 Inter Notes with a face value of $26.8mn. Moreover, the BDC also recently announced its intention to redeem $150mn of its 2019 unsecured debt. The BDC Reporter is a little confused by all the moving parts in PSEC's liability management but expect to get a clearer picture once the year end financial statements are published later today (August 28) after the close.
SAR: The BDC raised $35mn from issuing its second Baby Bond and is paying an interest rate of 6.25%. The Notes can be redeemed from August 31, 2021. The BDC Reporter is impressed that SAR was able to borrow - despite promising to further leverage up its balance sheet - 0.5% lower than the yield on its earlier Baby Bond (ticker SAB). Nonetheless, questions remain about how much of the extra income generated will trickle down to shareholders, especially as the Investment Advisor has not offered any fee concession on what is already a full freight charging fund. See our 8/21/2018 article below.
PSEC: The BDC filed a notice of its intention to redeem the $300mn issue of unsecured Notes due in July 2019 as of September 26,2018. Earlier PSEC had made an offer for half the debt outstanding at a slight premium. Now the rest of the debt will be repaid. The source of the funds is not known but could be from asset sales or by drawing on the underutilized Revolver.
SAR: Saratoga Investment is to issue a second Baby Bond. In advance of getting all the details, we analyze and discuss risk and return. BDC Reporter article.
PSEC: The BDC issues the Preliminary Prospectus for yet another issue of multiple Inter Notes at different maturities and pricing. The amounts to be raised are not yet given but the stated interest rates seem to be the same as the prior couple of issues. This seems to be a zero sum game at this point, given that the prospectus also reveals $27mn in Inter Notes were recently "called in" as well. This seems like another day at the PSEC debt factory.
NMFC: The larger BDC has received shareholder approval to "leverage up" its portfolio. To take advantage of the higher borrowing capacity, NMFC issued another Convertible debt offering, which was priced at 5.75% and matures in 2023. All further details are in the link to the SEC filing. Unlike GAIN - also seeking to leverage up but has to pay off its existing Term Preferred before - NMFC is set to embark on growing its unsecured debt. That , in turn, will likely result in an increase in secured debt facilities and eventually higher assets and total debt outstanding. By our calculation, this offering gets NMFC only third of the way to its likely goal of 1.5x debt to equity (its new Convertible lender is requiring a 1.65x maximum but we're assuming the envelope won't be pushed more than 1.5x). NMFC is ahead - for better or worse because this is a BDC with much off balance sheet debt already and a history of being fully invested - in what will be a crowded field of BDCs seeking to amp up leverage and portfolio assets.
GAIN: In an expected move, GAIN moved to restructure and expand the liability side of its balance sheet. The BDC has received Board approval to increase leverage as allowed under the Small Business credit Availability Act, but has to contend with 3 Term Preferreds which do not allow asset coverage of debt to be below 200%. This requires GAIN to repay all existing Term Preferreds with new issues without that restriction. This is the first move, which will allow the payoff of two existing Term Preferreds (B&C). The final Term Preferred is not redeemable till September 30, 2018 but will be repaid shortly thereafter. In the case of this new Term Preferred (Series E), GAIN managed to snag a decent rate of 6.375% - slightly lower than the issues being retired (albeit at the cost of early refinancing) - and a 7 year term. Nonetheless, we still question if the income to be received from the assets purchased with this debt capital - when all the other associated costs are included (most notably the Management and Incentive Fee) will result in any incremental income per share for shareholders. That's partly because - even though GAIN lends out at an average yield of 12% -a good portion of its investments are in the form of non income producing equity. For shareholders this might mean no increase in earnings but the POSSIBILITY of greater capital gains when those equity investments hit pay dirt. Or higher losses as equity is typically higher risk than debt...
GAIN: Following the issuance of a new Term Preferred, without the restrictive covenant requiring asset coverage of at least 200%, GAIN is repaying two existing Term Preferreds (B & C) which have that restriction. The monies needed will come from the new Term Preferred E and from its Revolver. We expect a new Term Preferred issuance and the redemption of the remaining Term Preferred with the 200% limit when the issue comes up for early redemption at the end of September 2018. We might even get a shareholder vote to accelerate the timeline for higher leverage (otherwise set for April 2019), although GAIN is some way off being able to deploy that much capital.
PSEC: The BDC issued approx $2mn in new InterNotes, with maturities between 2023 and 2028. Interest rates range between 5.0%-6.0%. The BDC Reporter adds: The PSEC debt issuing machine continues to issue new InterNotes in small amounts but on the same terms as in prior weeks.
TCAP: With the July 24, 2018 vote by TCAP shareholders to become externally managed by Barings, LLC, the two existing Baby Bonds of the BDC (TCCA and TCCB) will shortly be redeemed.
WHF: The BDC raises unsecured debt to repay its just called Baby Bond. The BDC Reporter has an in-depth look at the issue and the wider implications for WHF and the sector.
PSEC: The BDC Reporter discusses the latest InterNotes issued by PSEC and explains how the BDC could get caught in a liquidity crisis because of its liability management. In-depth article by BDCR.
NMFC: The BDC raised $50mn in 2023 unsecured notes from an institutional investor at 5.36%, which included two special covenants. Also its Revolver was amended to allow a 1.5x debt to equity. The BDC Reporter adds: After receiving shareholder approval to adopt the higher leverage allowed under the Small Business Credit Availability Act, NMFC is adding unsecured debt to an already leveraged balance sheet. In this case, NMFC is adding 5 year unsecured debt at the sort of rate you'd expect for a $2bn BDC. However, the conditions required by the institutional investor are a reminder that creditors have justifiable concerns. Here are the two main conditions: "a requirement that the Company not exceed a debt-to-equity ratio of 1.65 to 1.00 at the time of incurring additional indebtedness and a requirement that the Company not exceed a secured debt ratio of 0.70 to 1.00 at any time". No word on how the rating agencies are treating this new debt as yet.
WHF: In an SEC filing WHF announced all $30mn of its Baby Bond with the ticker WHFBL would be redeemed on August 9, 2018. The BDC Reporter adds: In the BDC Fixed Income Table we'd rated the chances of WHF paying off its Baby Bond early as High given that the no redemption period was long past and the BDC can probably refinance the unsecured notes at 0.5% or more cheaper. Nonetheless, with all the BDC talk about higher leverage, we wondered if WHF might hold onto the Baby Bond, which does not mature till July 2020 a wee longer. WHF has not yet opined on whether it intends to increase its leverage so we are in the dark about plans for long term leverage of the balance sheet. Anyway, this news was a shock to WHFBL's stock price, which dropped over $0.30 in the seconds after the announcement. With WHFBL's departure, the BDC Reporter's universe of Fixed Income issues (not all are Baby Bonds) will drop back to 37 from August 9.
PSEC: The BDC filed a prospectus regarding the issuance of unsecured "Inter Notes" with 5, 8 and 10 year maturities. The BDC Reporter adds: Yet another insight into market rates for unsecured debt from an investment grade BDC with a following amongst retail debt investors. 5 year money is at 5.0%, 8 year money (a rarely used length) is at 5.75% and 10 years at 6.0%. Add a 0.25% per annum placement cost to those numbers. Smaller BDCs which are trying to take advantage of the higher leverage rules allowed by the Small Business Credit Availability Act are likely to have to pay a premium of 1.0% or more greater than PSEC. Issues are likely to be for 5 years (the preferred maturity) and cost all-in (including transaction costs) 6.25%-7.5% in most cases. That's a pretty good rate for debt investors, less exciting for BDC shareholders who will struggle for much in the way of accretive earnings and (as always) great for External Managers who maintain unchanged fees tied to asset size and earnings.
PSEC: Continuing a dizzying series of issues and repayments PSEC issued 2023 unsecured notes with a yield of 5.0% and 2025 Notes at 5.5%. The BDC Reporter adds: Worth reading for all the latest developments in the business.
CMFN: Issues its first Baby Bond in preparation for amping up portfolio size and leverage next year thanks to the Small Business Credit Availability Act. See BDCR article.
PSEC: The BDC priced $70mn of Senior Notes with a yield of 5.875%.Placed institutionally with no early redemption. Fungible with total offering of $325mn.
GSBD: The BDC is issuing $40mn of 2022 Convertible Notes, adding on to an issue privately placed in 2016. The yield is 4.5%.
GSBD: Different rating groups are giving different ratings. Fitch gave Goldman an investment grade rating despite its intention to leverage up the balance sheet. S&P did not and shortly afterwards GSBD - without public notice to our knowledge - asked S&P to withdraw its rating.
PSEC: The BDC announced that about half of its $300mn 2019 Unsecured Notes will be tendered for early payoff. See our prior article on the subject.
TSLX: The BDC issued another round for $50mn of its Convertible Notes due 2022 and with a rate of 4.5%. This joins an earlier $115mn raise of the same Notes, issued in February 2017.
PSEC: Notes maturing in 2023 are yielding 4.750% and in 2025 5.250%. The former debt is less expensive than what PSEC pays to borrow under a Secured Revolver when unused fees are considered.
5/21/2018: Weeks after S&P downgraded AINV from investment grade, Fitch begins to follows a similar path. The catalyst here was AINV's announcement of its intention to ramp up leverage to 1.4x. to 1.0x, from 0.7x currently. Article worth reading for specific comments about AINV's poor credit track record; frequent strategic changes and oil and gas exposure. Missing - as usual - is mention of the fact that AINV's largest investment Merx Aviation (18% of total assets) is already highly leveraged in its own right, making "effective leverage" higher than meets the eye. Still, Fitch is pleased the importance of Merx will eventually be diluted by all the new loans being brought on, and seems impressed with MidCap Financial as a source for the new assets.A final determination about whether AINV loses its investment grade rating awaits a BDC sector-wide review. Not good news for AINV, but hardly surprising.
HTGC: Following Hercules Capital’s (HTGC) issuance of a new $75mn Baby Bond, S&P Global Ratings assigned a BBB- rating. The BDC Reporter provides additional details.
HTGC: The BDC announced $75mn was raised by issuing a new 2025 Baby Bond with the ticker HCXZ. We were wondering how the new debt would be priced. Here’s our answer.
HTGC: The BDC filed an amendment to its draft Prospectus for the additional issuance of Unsecured Notes. Included in the new version was an important change to events of default and recent business updates.
OFS raises its first Baby Bond. We look at the economics both from a shareholder and debt holder perspective and find the numbers don't add up for either. An in-depth and exclusive article by the BDC Reporter.
OFS: The BDC announced it is in the midst of issuing Unsecured Notes due 2025. The ticker will be OFSL. Proceeds from the new debt - whose size and terms are not yet set- will be used to repay all or some of the $38.2mn in Revolver debt outstanding.
TCAP/TCBB/TCCA: As part of Triangle Capital's sale of its assets and addition of a new Investment Advisor, the BDC has announced its intention to redeem both its Baby Bonds (TCCA and TCCB) 30 days after shareholder approval is received for the new deal.
TICC/TICCL: As part of a name change, TICC Capital will be changing the ticker symbol of its public debt from TICCL to OXSQL. The change will occur March 23 and reflected in the BDC Fixed Income Table then.
KCAP/KAP: KCAP Financial - in its 10-K and in the attached Conference Call - announced its intention to redeem $20mn of $27mn still outstanding of the Baby Bond with the ticker KAP. The discussion on the subject is in the Q&A section. KCAP has arranged a $50mn Revolver, secured by loans on its balance sheet and is using essentially most of the immediately available proceeds to repay all but $7mn owed on the KAP notes, due in 2019. The rest cannot be far behind. We have updated the Fixed Income Table with the news.
ARCC/AFC: The rating agency affirmed Ares Capital's current investment grade rating of BBB. The BDC Reporter adds: Fitch spends some time in the accompanying press release giving its non-controversial views of how the BDC sector is performing, its 2018 outlook before getting round to a mostly positive-all-around report on ARCC. We mostly noted this Fitch quote: "Fitch continues to believe that Ares has the strongest capital structure in the BDC space, with unsecured debt accounting for 78.7% of total debt outstanding, at par, at Dec. 31, 2017, as the company has continued to opportunistically access the capital markets for term financing." The only publicly traded ARCC debt is the 2047 issue with the ticker AFC, which is trading at a premium to par despite higher rates and ever present risk of redemption. AFC yields 6.7% for investment grade risk - if Fitch is to be believed - but with the prospect that ARCC could - with short notice - yank both that yield and cause any recent buyer a small short term loss if the BDC calls in the issue, the oldest denizen amongst the BDC Baby Bonds.
MAIN/MSCA: One month before the earliest redemption date for Main Street Capital's Baby Bond with the ticker MSCA, the BDC has announced its intention to fully redeem the debt early at its earliest opportunity: April 1 of this year. MSCA's final maturity is 2023 and the coupon 6.125%. All outstanding Notes will be repaid on April 1 with a settlement the next day. MAIN claims the redemption of the high priced Baby Bond by using its Revolver will eventually save the BDC $2.7mn in annual interest expense - thanks to the differential in borrowing costs - but will cause a Realized Loss of $1.5mn in the IIQ 2018 due to the write-off of unamortized financing costs 5 years in advance. The BDC Reporter adds: We had a projection for early redemption of MSCA of HIGH so we were not taken aback. With its ever improving performance MAIN is likely able to borrow from the unsecured debt markets at a rate below 5.0%. We would not be surprised to see the still growing BDC issue new Unsecured Notes before long. The question mark is whether the debt will be in retail investor friendly Baby Bond form, with a public ticker. We have updated the BDC Fixed Income Table with the new information and will remove MSCA on April 1. There are now 4 Fixed Income issues subject to full or partial redemptions amongst the 37 issues we track.
NEWT/NEWTI: Newtek's newest Baby Bond with the ticker NEWTI is trading in the public markets for the first time and closed 2/23/2018 at $25.15. The 2025 Unsecured Note has a yield of 6.25%.
FDUS: Not unexpectedly FDUS announced that the underwriters of its recent Baby Bond issue (FDUSL) exercised their overallotment option, giving the BDC $6.5mn of extra proceeds. The BDC Reporter adds: FDUSL is trading at $25.30. See the Fixed Income Table for details.
NEWT/NEWTL: NEWT officially names March 21, 2018 as the redemption date for the 2021 Unsecured Note with the ticker NEWTL. The Baby Bond was just replaced with a new offering - due in 2023- and with the ticker NEWTI. BDC REPORTER ADDS: With NEWTL's imminent departure, the BDC Fixed Income Universe - already impacted by the redemption announcements for HTGX and MCV - will grow smaller. Moreover, with NEWTL gone, there will be only 2 public BDC issues with rates at 7.0% or higher. In this case, NEWTL's 7.0% coupon was replaced with NEWTI's 6.125%.
HTGC: Redeeming $100mn of 2024 Baby Bond due 2024 with ticker HTGX. Partial Redemption to Save Approximately $6.6 Million, or $0.08 per Share, in Annual Interest and Fee Expenses, says BDC. About $150mn of HTGX will remain unredeemed but the press release says HTGC will be calling in more during 2018. We first wrote about the proposed gradual redemption of HTGX on October 24, 2017: http://bit.ly/2BKLRRE
NEWT/NEWTI/NEWTL: The BDC announced the issuance of $50mn in new Unsecured Notes with a maturity of 2023 and a coupon of 6.25%. The ticker will be NEWTI. The proceeds will be used to redeem the 2021 Notes with the ticker NEWTL. The new Notes can be prepaid from March 2020.
NMFC: The BDC raised $90mn in Unsecured Notes to add to the $145mn issued previously. The prior Notes had maturities in 2021 and 2022 and this latest batch in 2023. The rate is 4.87%. The debt was institutionally placed and will not be publicly traded. The BDC Reporter adds: NMFC has never had a public Baby Bond issue, preferring to place its debt with institutions. This rate is very competitive for a 5 year borrowing The proceeds will pay down the Revolver and may cause the BDC's interest expense to increase in the IQ 2018 as a result. Still, the differential between secured Revolving debt and fixed Unsecured Notes is narrowing fast. At September 30, 2017 the BDC's Revolvers were costing about 3.5% (plus unused line fees). If the Fed does what is expected to rates, the cost may be 4.5% or higher by the end of 2018. This is a form of insurance against higher rates and allows the BDC greater covenant flexibility.
MCC/MCV: The BDC announced in an SEC filing of its intention to redeem $13mn of its outstanding $103mn of 2023 MCV debt on March 10, 2018. The BDC Reporter adds: This seems to be part of a new strategy by some BDCs whose bonds are in their redeemable period: redeem in fits and starts. Hercules Capital (HTGC) is also paying off its HTGX Baby Bond in pieces. Not good for investor uncertainty but provides the BDC with flexibility and the means to affect earnings when desired.
FDUS: For months there have been indications FDUS might break out of its reliance for long term financing on the SBIC and issue its first Baby Bond. Now the BDC has raised $43.5mn with a 2023 Baby Bond with a coupon of 5.875%. The BDC Reporter adds: With the SBIC in a non-cooperative mood and FDUS still in growth mode in its lower middle market debt and equity niche, this was a predictable and predicted move. The rate achieved is not as good as borrowing from the SBA but competitive - and more reliable - than borrowing from the banks. Given that spread compression is occuring in the FDUS lower middle market, and the BDC's fee structure is high, there will be little accretion to earnings from borrowing in this fashion, but does diversify capital sources. At September 30, 2017 ALL the BDC's $212mn in borrowings were from the SBA. The average cost of that capital was 3.6%. Moreover, FDUS has a long-in-the-tooth SBIC exposure and has to redeem older debentures constantly in the years ahead.