Business development company Great Elm Capital (GECC) has announced a new issue of baby bonds.
The company intends to use the proceeds to redeem their 6.50% baby bonds (GECCN) which has a maturity in 2024.
The registration statement for the new issue is here. The new issue, which has not priced, will trade under the ticker GECCZ and will have a maturity date in 2028.
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I was looking tonight at the companies that Tim posted in Headlines of interest. I then started doing a little research and ran across BDC Buzz’s recent series of articles updating quarterly performance of BDC’s he follows.
He mentions Runway as one he doesn’t follow because of low liquidity but on the others he gives a well thought out analysis of how he rates them.
He also lists 3 points that investors new to BDC’s should follow.
His talk reminded me of the time I invested in PSEC not knowing about outside management and the outsize fees they collect and how the window decorations look good if management doesn’t markdown assets that have realized and unrealized losses. Also being aware of how much leverage these companies can use leading to higher risk. A lot of reasons to take a lower return by investing in the preferred instead of the common.
As 2WR alluded to, you might want to see how the BDC offering a preferred is doing before investing.
WALTHAM, Mass., Aug. 08, 2023 (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 6.50% Notes due 2024 (CUSIP No. 390320 505; NASDAQ: GECCN) (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 Third Supplemental Indenture, dated as of June 19, 2019, by and between the Company and the Trustee. The Company will redeem all of the issued and outstanding Notes on September 7, 2023 (the “Redemption Date”), subject to the condition precedent that the Company closes its public offering of 8.75% Notes due 2028 with sufficient proceeds to pay the redemption price for the Notes, plus accrued and unpaid interest, if any, to, but excluding the Redemption Date, on the Redemption Date. The Notes will be redeemed at 100% of their principal amount, plus accrued and unpaid interest thereon from June 30, 2023, through, but excluding, the Redemption Date. Questions relating to the notice of redemption should be directed to Equiniti Trust Company, LLC via telephone at 1 (800) 937–5449.
WALTHAM, Mass., Aug. 08, 2023 (GLOBE NEWSWIRE) — Great Elm Capital Corp. (GECC) announced today the pricing of its underwritten public offering of $40,000,000 aggregate principal amount of its 8.75% notes due 2028 (the “Notes”), which will result in net proceeds to the Company of approximately $38.2 million after payment of underwriting discounts and commissions and estimated offering expenses payable by the Company.
The Notes will mature on September 30, 2028, and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after September 30, 2025. The Company has also granted the underwriters a 30-day option to purchase up to an additional $6,000,000 aggregate principal amount of Notes to cover over-allotments, if any.
The closing of the transaction is subject to customary closing conditions, and the Notes are expected to be delivered on or about August 16, 2023. The Notes are expected to be listed on The Nasdaq Global Market under the trading symbol “GECCZ,” and to trade thereon within 30 days from the original issue date.
The Company intends to use the net proceeds from the offering, along with cash on hand, to redeem all of its outstanding 6.50% notes due 2024 and to pay related fees and expenses and for general corporate purposes. The Company may also elect to (i) redeem a portion of its outstanding 6.75% notes due 2025, (ii) redeem a portion of its outstanding 5.875% notes due 2026 or (iii) repay all or a portion of its borrowings outstanding under the Loan, Guarantee and Security Agreement, as amended, with City National Bank with proceeds of this offering.
With 3-Month Treasuries risk free 5.4% rate I wonder what interest there will be in this baby-bond. It appears the risk return differential has not caught up to many micro cap companies which are always at risk due to there small capitalization.
This issue has been in the works since at least June…. I suspect Mr Market has been mean to them and that’s been a cause for the delay…. They had a decent (for them) quarter, so maybe there’s finally a sign of viable turnaround…
https://www.sec.gov/ix?doc=/Archives/edgar/data/1675033/000113322823004571/gecc-html6661_n2a.htm
2wr–yes I suspect the new coupon will be way, way above the maturing issues.