PennantPark Floating Rate Capital Ltd Completes the Reset and Upsize of its $351.0 Million CLO I
Rhea-AI Summary
PennantPark Floating Rate Capital (NYSE: PFLT) has successfully completed the reset and upsize of its CLO I, a $351.0 million debt securitization. The refinancing optimizes financing costs and enhances PFLT's return profile. Key features include:
- Four-year reinvestment period and twelve-year final maturity
- Reduced cost of capital and increased CLO size
- PFLT retains Class D-R Notes and Subordinated Notes
- Debt maturity extended to July 2036
- 100% funding at closing
PennantPark manages approximately $2.8 billion in middle market CLO assets and $7.7 billion of investable capital overall. The company aims to continue growth with investor support.
Positive
- Successfully completed reset and upsize of CLO I to $351.0 million
- Reduced cost of capital through refinancing
- Increased CLO size due to strong investor demand
- Extended debt maturity to July 2036
- 100% funding achieved at closing
- Manages $2.8 billion in middle market CLO assets
Negative
- None.
Insights
PennantPark Floating Rate Capital 's successful reset and upsize of its CLO I to
Key points to consider:
- The new structure includes
$287 million in investment-grade rated notes, representing81.8% of the capital structure. - PFLT retains the Class D-R Notes and Subordinated Notes, maintaining skin in the game and aligning interests with investors.
- The extended maturity to July 2036 provides long-term stability to the financing structure.
- The upsizing of the CLO indicates strong investor demand and potential for growth in PFLT's underlying assets.
This transaction demonstrates PFLT's ability to access capital markets effectively and optimize its balance sheet. The reduced cost of capital could potentially lead to improved net interest margins and returns for shareholders. However, investors should monitor how effectively PFLT deploys this additional capital in the middle market lending space, as execution will be important for realizing the benefits of this refinancing.
The successful reset and upsize of PennantPark Floating Rate Capital's CLO I offers insights into the current state of the CLO market and middle market lending:
- Strong investor demand allowed for an increase in CLO size, suggesting continued appetite for structured credit products.
- The ability to reduce financing costs indicates a favorable pricing environment for high-quality CLO issuers.
- The
18.2% subordinated notes tranche, retained by PFLT, reflects a conservative approach to risk retention and alignment of interests.
PennantPark's growing CLO management business, now at
The transaction's success may encourage other BDCs and middle market lenders to explore similar refinancing opportunities, potentially leading to increased CLO issuance and competition in the space. Investors should watch for potential impacts on lending spreads and deal terms in the middle market as a result of optimized financing structures like this one.
MIAMI, July 26, 2024 (GLOBE NEWSWIRE) -- PennantPark Floating Rate Capital Ltd. (the “Company”) (NYSE: PFLT) today announced that PennantPark CLO I, Ltd (“CLO I”), a wholly-owned and consolidated subsidiary of the Company, has closed the refinancing and upsize of a four-year reinvestment period, twelve-year final maturity
The debt issued in the CLO (the “Debt”) is structured in the following manner:
| Class | Par Amount ($ in millions) | % of Capital Structure | Coupon | Expected Rating (S&P) | Issuance Price | ||||
| A-1-R Notes | $ | 203,000,000 | 57.8 | % | 3 Mo SOFR + | AAA | 100.0 | % | |
| A-2-R Notes | 10,500,000 | 3.0 | % | 3 Mo SOFR + | AAA | 100.0 | % | ||
| B-R Notes | 12,000,000 | 3.4 | % | 3 Mo SOFR + | AA | 100.0 | % | ||
| B-R Loans | 12,500,000 | 3.6 | % | 3 Mo SOFR + | AA | 100.0 | % | ||
| C-R Notes | 28,000,000 | 8.0 | % | 3 Mo SOFR + | A | 100.0 | % | ||
| D-R Notes | 21,000,000 | 6.0 | % | 3 Mo SOFR + | BBB- | 100.0 | % | ||
| Subordinated Notes | 64,000,000 | 18.2 | % | N/A | NR | N/A | |||
| Total | $ | 351,000,000 | |||||||
“We are pleased to have completed this reset which enables us to optimize financing costs in the current market and enhance our return profile, reinforcing our commitment to deliver sustained value for our investors,” said Arthur Penn, Chief Executive Officer of the Company. “Not only were we able to reduce our cost of capital but we also were able to increase the size of the CLO due to strong investor demand to better match the underlying growth in PFLT. PennantPark currently manages approximately
PFLT will continue to retain the Class D-R Notes and the Subordinated Notes through a consolidated subsidiary. The maturity of the replacement Debt is now extended to July 2036. The replacement Debt was
The notes offered as part of the term debt securitization have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state “blue sky” laws, and may not be offered or sold in the United States absent registration under Section 5 of the Securities Act or an applicable exemption from such registration requirements. The CLO is a form of secured financing incurred and consolidated by PFLT. This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of the notes in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
ABOUT PENNANTPARK FLOATING RATE CAPITAL LTD.
PennantPark Floating Rate Capital Ltd. is a business development company which primarily invests in U.S. middle market private companies in the form of floating rate senior secured loans, including first lien secured debt, second lien secured debt and subordinated debt. From time to time, the Company may also invest in equity investments. PennantPark Floating Rate Capital Ltd. is managed by PennantPark Investment Advisers, LLC.
ABOUT PENNANTPARK INVESTMENT ADVISERS, LLC
PennantPark is a leading middle market credit platform, managing approximately
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports PennantPark Floating Rate Capital Ltd. files under the Exchange Act. All statements other than statements of historical facts included in this press release are forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. PennantPark Floating Rate Capital Ltd. undertakes no duty to update any forward-looking statement made herein. You should not place undue influence on such forward-looking statements as such statements speak only as of the date on which they are made.
CONTACT:
Richard T. Allorto, Jr.
PennantPark Floating Rate Capital Ltd.
(212) 905-1000
www.pennantpark.com
FAQ
What is the new size of PennantPark Floating Rate Capital's CLO I after the reset?
How long is the reinvestment period and final maturity of PFLT's refinanced CLO?
What is the new maturity date for the replacement Debt in PFLT's CLO I?
How much does PennantPark manage in middle market CLO assets as of July 2024?
