Great Elm Capital Corp. Prices Public Offering of $30,000,000 of 8.50% Notes Due 2029
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The announcement by Great Elm Capital Corp. regarding the pricing of its $30 million public offering of 8.50% notes due 2029 is a significant financial move that merits a closer examination. The interest rate of 8.50% is notably higher than the current average for corporate bonds, suggesting a premium to attract investors, potentially due to perceived risk or a higher than average market yield at the time of issuance.
The net proceeds of approximately $28.6 million, after accounting for underwriting discounts and commissions, indicate a relatively standard cost of capital for such transactions. However, the true cost for the company will also include the ongoing interest payments until maturity, which investors should weigh against the intended use of proceeds for assessing the potential impact on the company's financial health and growth prospects.
Moreover, the option for underwriters to purchase an additional $4.5 million in notes to cover over-allotments provides a cushion for the company, potentially reducing the risk of under-subscription. The flexibility for early redemption after 2026 also offers GECC the ability to refinance the debt should market conditions become more favorable, which is a common strategic move to manage long-term debt obligations and interest expenses.
The fixed income market, where such notes are traded, is sensitive to interest rate trends and economic outlooks. An 8.50% yield could be attractive in a high-interest-rate environment, or it could signal investor skepticism about the company's prospects or the broader market's stability.
For stakeholders, the key is to understand the demand for such a high-yield offering. If the offering is oversubscribed, it could indicate investor confidence in GECC's ability to manage its debt and generate sufficient returns. On the other hand, if the company struggles to attract investors, it might suggest market concerns about the company's future performance or creditworthiness.
It's also important to consider the broader market implications of GECC's offering. If other companies follow suit with similar high-yield offerings, it could signal a shift in the market's risk tolerance or a search for higher returns amidst a potential rise in interest rates. This could have a ripple effect across the corporate bond market, influencing yields and the cost of capital for other issuers.
From a legal perspective, the structuring of the notes offering by GECC is fairly standard, with underwriting discounts and commissions as well as an over-allotment option being common features. The legal intricacies of such offerings include ensuring compliance with securities laws, which dictate the disclosure requirements and registration processes.
The maturity date and the redemption options provided to GECC are also standard, yet they carry legal implications for both the company and the note holders. For instance, early redemption rights allow the company to manage its debt more actively, but also impose certain notice and procedural requirements that must be adhered to, failing which might lead to legal disputes.
Investors should be aware of the covenants and conditions tied to the notes, as these will define their rights and the company's obligations. Such terms are important in assessing the legal protections afforded to investors, which can influence the perceived risk and, consequently, the demand for the notes.
PALM BEACH GARDENS, Fla., April 09, 2024 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (the “Company” or “GECC”) (NASDAQ: GECC) announced today the pricing of its underwritten public offering of
The Notes will mature on April 30, 2029, 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 April 30, 2026. The Company has also granted the underwriters a 30-day option to purchase up to an additional
The closing of the transaction is subject to customary closing conditions, and the Notes are expected to be delivered on or about April 17, 2024. The Notes are expected to be listed on The Nasdaq Global Market under the trading symbol “GECCI,” and to trade thereon within 30 days from the original issue date.
The Company intends to use the net proceeds from the offering for general corporate purposes, including making investments consistent with its investment objectives, and may also elect to (i) redeem or repurchase a portion of its outstanding
Ladenburg Thalmann & Co. Inc., InspereX LLC, Janney Montgomery Scott LLC and Piper Sandler & Co. are acting as joint book-running managers for the offering.
This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities in this offering or any other securities nor will there be any sale of these securities or any other securities referred to in this press release in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such state or jurisdiction.
A registration statement relating to these securities is on file with and has been declared effective by the Securities and Exchange Commission (the “SEC”). The offering will be made only by means of a prospectus, copies of which may be obtained, when available, from:
Ladenburg Thalmann & Co. Inc.
640 5th Avenue, 4th Floor
New York, New York 10019
prospectus@ladenburg.com
Investors are advised to carefully consider the investment objectives, risks and charges and expenses of the Company before investing. The preliminary prospectus, dated April 9, 2024, which has been filed with the SEC, contains a description of these matters and other important information about the Company and should be read carefully before investing.
The information in this press release and the preliminary prospectus is not complete and may be changed.
About Great Elm Capital Corp.
GECC is an externally managed business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, 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 registration statement, its 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
What is the ticker symbol for Great Elm Capital Corp. mentioned in the press release?
What is the principal amount of the Notes offered by GECC?
When do the Notes mature?
Can the Notes be redeemed before maturity?
What is the net proceeds to GECC after the offering?
