Smallish business development company (BDC) has announced pricing for a new issue of baby bonds. The new issue prices at 8.125% and proceeds will be used to call the 6.75% baby bonds (GECCM) on 10/12/2024—these notes have a maturity on 1/31/2025.
The pricing term sheet is here.
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I usually stick with the larger BDCs with known successful management teams. I had large positions in ARCC and TSLX common and the latter is gone with the former much reduced in size as I sold covered calls against them. Seems to have been a good move to reduce since their prices have drifted down of late.
I have the MAIN 6.95% maturing ’29 and 6.50% maturing ’27 in a larger than normal allocation for me – these have appreciated nicely since I purchased (purchase price was 100.54 and 100.13, respectively). Also have a smaller position in the BBDC 7.000% maturing ’29 (bought for 99.52). Both of these seem secure for now.
I always stayed away from this BDC as it only is capitalized at $103M and even a hiccup could throw it off center. There are way too many BDC BB’s to overload that sector into your portfolio….Anyway it’s Debt/assets is
55% so room to finance through borrowing and it’s interest coverage ratio to pay debt is a healthy 1.9X….Equity side is suspect @ $50 stock down to $10 with a 14% Dividend…..give me a break please it’s paying out more in earnings to dividends than it can support?
They are issuing 8.125% notes to redeem 6.75% notes?
Practically speaking what they are really doing is funding the maturation of GECCM which is due 1/31/25. They have announced the call I suspect so they will not have an increased amount of debt outstanding for the short period of time in between the new issue’s dated date and GECCM’s maturity date. That’s also why it’s a contingent call that will only happen if/when the new issue settles. Seems a bit odd but understandable… I know GECC has been making progress as a company but at first blush, 8.125% doesn’t seem enough yield imho
I think you are right, 2WR
Calling a little early and making the contingent play gives them a little wiggle room if something stumbles. Looks like a prudent move.
It’s always interesting to think through the financial gymnastics a company’s treasurer and CFO are going through with new issues. Usually pretty straight forward, but sometimes they get to be kinda complicated (and they have to stick the landing).
I think the First Call Date and Maturity Date might be reversed in the table above.
Thanks Steve–you always catch my errors
Thanks again-corrected
Great Elm Capital Corp. Announces Conditional Redemption of 6.75% Notes due 2025
Provided by GlobeNewswire
Sep 12, 2024 5:00pm
PALM BEACH GARDENS, Fla., Sept. 12, 2024 (GLOBE NEWSWIRE) — Great Elm Capital Corp. (the “Company” or “GECC”) (NASDAQ: GECC) announced today that it has caused notices to be issued to the holders of its 6.75% Notes due 2025 (CUSIP No. 390320 406; NASDAQ: GECCM) (the “Notes”) regarding the Company’s exercise of its conditional option to redeem, in whole, the issued and outstanding Notes, pursuant to Section 1104 of the Indenture, dated as of September 18, 2017, by and between the Company and Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC), as trustee (the “Trustee”), and Section 1.01(h) of the Second Supplemental Indenture, dated as of January 19, 2018, by and between the Company and the Trustee. The Company will redeem all of the issued and outstanding Notes on October 12, 2024 (the “Redemption Date”), subject to the condition precedent that the Company closes its public offering of 8.125% Notes due 2029 (the “2029 Notes Offering”). At the Company’s discretion, the Redemption Date may be delayed until such time (including more than 60 days after the date hereof) as the 2029 Notes Offering has been completed, or the redemption of the Notes may not occur and the notices to the holder of the Notes may be rescinded if the 2029 Notes Offering is not completed by the Redemption Date or by the date to which the Redemption Date is delayed. The Notes will be redeemed at 100% of their principal amount, plus accrued and unpaid interest thereon from September 30, 2024, through, but excluding, the Redemption Date (the “Redemption Price”). Questions relating to the notice of redemption should be directed to Equiniti Trust Company, LLC via telephone at 1 (800) 937–5449.