BDC OFS Capital Corporation Announces New Baby Bond

OFS Credit (OFS) has announced a new offering of baby bonds–what the heck might as well have everyone clamoring for some cheap money.

The company already has 2 baby bond issues outstanding which can be seen here. The outstanding issues have coupons of 6.25% and 6.50% respectively.

The company expects to have a leverage ratio of 204% after this offering. On 5/3/2019 the company changed their coverage ratio requirement from 200% to the new minimum level of 150%.

The planned ticker for the new baby bond is OFSSI. There will not be any OTC Grey market ticker, but one may be able to buy early by contacting the ‘bond desk’ of their respective broker once the CUSIP is known.

The preliminary prospectus can be read here.

9 thoughts on “BDC OFS Capital Corporation Announces New Baby Bond”

  1. Business Wire October 09, 2019 03:45:00 PM ET

    CHICAGO–(BUSINESS WIRE)– OFS Capital Corporation (the “Company”) (Nasdaq: OFS) announced today that it has priced a registered public offering of $50,000,000 aggregate principal amount of its 5.95% notes due 2026 (the “Notes”) which will result in net proceeds to the Company of approximately $48,137,500 (or approximately $55,403,125 if the underwriters fully exercise the overallotment option described below) based on a public offering price of 100% of the aggregate principal amount of the Notes, after deducting payment of underwriting discounts and commissions and estimated offering expenses payable by the Company.

    The Notes will mature on October 31, 2026 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 October 31, 2021. The Notes will bear interest at a rate of 5.95% per year, payable quarterly on January 31, April 30, July 31 and October 31 of each year, beginning on January 31, 2020. The Notes have received a private rating of “BBB+”* from Egan-Jones Ratings Company. The Company has also granted the underwriters a 30-day option to purchase an additional $7,500,000 aggregate principal amount of Notes to cover overallotments, if any.

    The offering is subject to customary closing conditions and is expected to close on October 15, 2019. The Company has submitted an application for the Notes to be listed and trade on The Nasdaq Global Select Market under the trading symbol “OFSSI”. If approved for listing, the Company expects the Notes to begin trading within 30 days from the original issue date.

    The Company intends to use the net proceeds of the offering to fund investments in debt and equity securities in accordance with its investment objective and for other general corporate purposes. The Company also intends to use a portion of the net proceeds from the offering to repay outstanding indebtedness under its revolving credit facility. As of October 7, 2019, the Company had $45.8 million of indebtedness outstanding under the credit facility.

  2. I keep waiting for ABR to offer a new preferred and call its A, B, and C issues. Can you think of any reason why they haven’t done so yet?

    1. No idea. Some companies are not calling their expensive bonds. I sold last year MFO (callable since 4/15/2017).
      How on earth is it still around when they can refinance it maybe 100bps lower?

      1. I’d guess it has to do with them not wanting to pay the Underwriting fee but part of it just might be laziness.

        1. The way I understand it, the underwriting discount is usually about 3% so it would take them 3 years to recover that expense if they refi’d at a 1% lower rate.

          The reason I suspect some laziness is because I know people who should refi their mortgage but never do, and it drives me mad.

          1. Good point. The big boys, the IG-rated bunch, they can profitably refi on very small interest rate differences but not so the small fish.

            The smaller companies, all-in, can be paying 5% of the sum raised toward underwriting discounts and other refi costs. Gives the investor a bit more cushion on call risk.

            NLY put out a F2F issue a few months back at 6.75%. ABR would, I think, be looking at a higher rate, plus that 5% refi cost. m-REITS are very good with figures (they better be!) so I doubt they’ve forgotten about the outstanding issues.

            Selfishly, I hope they do forget. I continue to hold notwithstanding the call risk.

          2. Jacob – Though issuers do take into account the underwriting discount when figuring their actual cost of issuance, I don’t think they think of it in the same way you do regarding years to recover expense a 1% lower rate. I’m not an accountant, but in general, I think they get to amortized the issuance costs over the life of the loan though I don’t know exactly how that’s calculated on a perpetual…. What that means for many issuers is that from an accounting point of view, a refinancing that saves them money shows up as costing them in the first year because they then have to write off the remaining cost of issuance of the refunded issue in the year they issue the refinancing… Maybe someone here with an accounting background can confirm this…. Someone? Anyone? Buehler???

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