Just noticed a filing by CLO owner OFS Credit Company (OCCI) today announcing their sales of common shares through a standing ‘at the market’ share sales program. Of course OFS credit is one of a number of companies dedicated to investing in CLO’s (collateralized loan obligations).
These ‘at the market’ programs are a staple for the CLO owning companies. They continually sell common shares, through a plan which is filed with the SEC prior to any share sales. In the case of OFS Credit they started with a plan to sell up to $25 million in shares on 1/24.2020 which has now been amended a number of times to now stand at $70 million. On one hand folks may refer to this as a ‘Ponzi’ scheme as they sell more shares and pay huge dividends–on the other hand it is publicly known and it is completely legal.
Since the start of the ‘at the market’ program on 1/24/2020 the company has sold about 2.5 million shares for proceeds of about $36 million.
I hold a position in one of the company’s term preferred issues–and these ‘at the market’ programs are music to my ears. The company has to maintain a 200% asset coverage of their senior securities (preferreds) so the more common shares they sell the happier I am as it builds safety for senior security holders.
As of 4/30/2022 the company had a coverage ratio of 261%.
The announcement of an increase in the at the market program and programs sales can be seen here.
6 thoughts on “OFS Credit Company Just Keeps on Selling Common Shares”
Its comforting to know we have the S.E.C. to protect investors and be on the outlook for SCAMS…LOL!
OT: some companies also have ATM offerings of preferred stock. I am not a fan. These are dilutive.
Also, IMHO, if you buy a preferred security trading below par in the hope it will go up, it’s all that much harder for the gap to par to close if somebody big is selling against you. It can seem more like owning a closed end fund with a perpetual NAV discount instead of a preferred issue. Been there, done that.
Just my opinion.
Bear–yes you are correct–I think Oxford Lane and Eagle Point have done atm’s with preferreds. So one should stick mostly to the term preferreds on these company’s
I once owned Jernigan preferred B, which I had forgotten about. Jernigan was a hybrid REIT, in both self-storage finance and ownership. To your point on term preferreds, The B was a perpetual issue.
A recent Google discloses that they were selling B preferreds in 2018 in their ATM program at a below par price, $23.07. While I liked the coupon, the price never seemed to go anywhere. Then I found out about the ATM.
Jernigan went private in 2020, but by late 2021, they were not denying that they might go public again. Lather, rinse, repeat.
Just my opinion.
Gary–I had noticed that the per share NAV has slipped a fair amount. The coverage ratio has trended down as well although at 261% remains plenty adequate.