Great Elm Capital Corp. Announces Conditional Redemption of 6.75% Notes due 2025

Rhea-AI Summary

Great Elm Capital Corp. (GECC) has announced a conditional redemption of its 6.75% Notes due 2025. The redemption is set for October 12, 2024, contingent on the successful closing of GECC's public offering of 8.125% Notes due 2029. The 2025 Notes will be redeemed at 100% of their principal amount, plus accrued and unpaid interest from September 30, 2024, through the Redemption Date.

GECC reserves the right to delay the Redemption Date or cancel the redemption if the 2029 Notes Offering is not completed as planned. This move suggests GECC is restructuring its debt, potentially to take advantage of more favorable terms or to extend its debt maturity profile.

Positive

• Potential improvement in debt structure through new 8.125% Notes due 2029 offering
• Full redemption of existing 6.75% Notes due 2025 at par value, avoiding any premium payments

Negative

• Increase in interest rate from 6.75% to 8.125% on new notes, potentially raising borrowing costs
• Redemption is conditional, creating uncertainty for current noteholders

Insights

Financial Analyst

Great Elm Capital Corp's announcement to redeem its 6.75% Notes due 2025 is a significant move that could reshape its debt structure. The conditional redemption, contingent on the successful completion of a new 8.125% Notes due 2029 offering, suggests a strategic shift in the company's financing approach. This maneuver, if executed, would extend GECC's debt maturity profile by four years, potentially providing more financial flexibility.

However, investors should note the higher interest rate of 8.125% on the new notes compared to the 6.75% on the existing ones. This increase of 137.5 basis points in interest expense could impact GECC's profitability and cash flows negatively. The market's reaction to this news will likely depend on how investors perceive the trade-off between extended maturity and increased interest costs.

It's important to monitor the success of the 2029 Notes Offering, as it directly affects the redemption of the 2025 Notes. If the new offering fails, GECC may have to reconsider its debt management strategy, potentially leading to market uncertainty about the company's financial position.

Market Research Analyst

The conditional redemption announcement by Great Elm Capital Corp. signals a proactive approach to debt management, which could be viewed positively by the market. However, the success of this strategy hinges on investor appetite for the new 8.125% Notes due 2029. The higher yield might attract income-focused investors, potentially ensuring a successful offering.

From a broader perspective, this move reflects the current interest rate environment. The company's decision to issue higher-yielding notes suggests an expectation of continued high interest rates in the medium term. This aligns with recent market sentiments and could be seen as a prudent, albeit costly, hedge against future rate hikes.

Investors should pay close attention to the market's reception of the new notes offering. A successful issuance could boost confidence in GECC's financial management and potentially support its stock price. Conversely, any difficulties in placing the new notes might raise concerns about the company's ability to refinance its debt effectively, possibly leading to negative market reactions.

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.

About Great Elm Capital Corp.

GECC is an externally managed business development company that seeks to generate both current income and capital appreciation through debt and income generating equity investments, including investments in specialty finance businesses.

Cautionary Statement Regarding Forward-Looking Statements

Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are: conditions in the credit markets, fluctuations in interest rates, inflationary pressure, the price of GECC common stock and the performance of GECC’s portfolio and investment manager. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Media & Investor Contact:

Investor Relations
investorrelations@greatelmcap.com

FAQ

When will GECC redeem its 6.75% Notes due 2025?

GECC plans to redeem the 6.75% Notes due 2025 on October 12, 2024, subject to the successful completion of its 8.125% Notes due 2029 offering.

What is the redemption price for GECC's 6.75% Notes due 2025?

The redemption price is 100% of the principal amount, plus accrued and unpaid interest from September 30, 2024, through the Redemption Date.

Can GECC delay or cancel the redemption of its 6.75% Notes due 2025?

Yes, GECC can delay the Redemption Date or cancel the redemption if the 8.125% Notes due 2029 offering is not completed as planned.

What is the CUSIP number for GECC's 6.75% Notes due 2025?

The CUSIP number for GECC's 6.75% Notes due 2025 is 390320 406.