XAI Octagon Floating Rate & Alternative Income Trust Announces Private Placement of $73 Million of Mandatory Redeemable Preferred Shares

Rhea-AI Summary

XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) has secured an agreement with institutional investors for a $73 million private placement of Series A Mandatory Redeemable Preferred Shares. The Trust expects to receive approximately $71.5 million in net proceeds from the sale.

The preferred shares, due January 31, 2031, will pay quarterly dividends at a fixed annual rate of 5.92% ($0.5920 per share). The shares must be redeemed at their $10.00 liquidation preference plus accumulated unpaid dividends on the Term Redemption Date. The Trust maintains the option to redeem shares earlier, subject to a make-whole premium.

The proceeds will be used to refinance existing leverage and for general corporate purposes. The transaction is expected to close by December 18, 2025, subject to standard closing conditions.

Positive

• Secured $71.5 million in net proceeds to refinance existing leverage
• Fixed dividend rate of 5.92% provides stable income stream
• Extended debt maturity profile to January 2031

Negative

• Additional leverage could increase financial risk
• Shares are not listed on any exchange, limiting liquidity
• Mandatory redemption requirement in 2031 creates future capital obligation

Insights

Fixed Income Investment Analyst

XFLT secures $73M through preferred shares offering at 5.92% fixed rate to refinance existing debt, optimizing its capital structure.

XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) has arranged a $73 million private placement of mandatory redeemable preferred shares with institutional investors, expecting to receive $71.5 million in net proceeds before expenses. This strategic financing move reveals important implications for the closed-end fund's capital structure and investor positioning.

The 5.92% fixed annual dividend rate on these preferred shares appears reasonably priced in the current interest rate environment for a term extending to January 2031. This creates a predictable expense structure for the Trust while providing it with substantial capital. The mandatory redemption feature on January 31, 2031, establishes a clear timeline for this leverage component.

What's particularly notable is how XFLT is using these proceeds to refinance existing leverage. This suggests management is opportunistically restructuring its debt profile, potentially to lock in more favorable terms or extend duration. For a fund focused on floating rate and alternative income investments, maintaining an optimal leverage profile is crucial to maximizing the spread between investment returns and borrowing costs.

The inclusion of a make-whole premium in the early redemption option protects investors from call risk while giving XFLT flexibility if market conditions change. This structure demonstrates sophisticated liability management, balancing the interests of both the Trust and its preferred shareholders. The private placement approach, rather than a public offering, likely allowed for more efficient execution and potentially better terms.

CHICAGO, Oct. 01, 2025 (GLOBE NEWSWIRE) -- XAI Octagon Floating Rate & Alternative Income Trust (the “Trust”) (NYSE: XFLT), a diversified, closed-end management investment company with an investment objective to seek attractive total return with an emphasis on income generation across multiple stages of the credit cycle, has reached an agreement with certain institutional investors for the purchase and sale of 7,300,000 shares of the Trust’s 5.92% Series A Mandatory Redeemable Preferred Shares due January 31, 2031 (the “Mandatory Redeemable Preferred Shares”), liquidation preference $10.00 per share. The Trust expects to receive net proceeds (before expenses) from the sale of the Mandatory Redeemable Preferred Shares of approximately $71.5 million. The investors have agreed to purchase the Mandatory Redeemable Preferred Shares, at one or more closings on or before December 18, 2025.

The Mandatory Redeemable Preferred Shares pay a quarterly dividend at a fixed annual rate of 5.92% of the liquidation preference, or $0.5920 per share, per year.

The Trust will be required to redeem, out of funds legally available therefor, all outstanding Mandatory Redeemable Preferred Shares on January 31, 2031, or the “Term Redemption Date,” at a price equal to the liquidation preference plus an amount equal to accumulated but unpaid dividends and distributions, if any, on such shares (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the Term Redemption Date.

Moelis & Company LLC acted as the exclusive placement agent for the offering.

At any time on or after the first issuance of Mandatory Redeemable Preferred Shares, at the Trust’s sole option, the Trust may redeem, from time to time, the Mandatory Redeemable Preferred Shares in whole or in part, out of funds legally available for such redemption, at a price per share equal to the sum of the liquidation preference, subject to payment of a make-whole premium, plus an amount equal to accumulated but unpaid dividends, if any, on such shares (whether or not earned or declared, but excluding interest on such dividends) to, but excluding, the date fixed for such redemption.

Net proceeds will be used to refinance existing leverage and for general corporate purposes.

The Mandatory Redeemable Preferred Shares will not be listed on any exchange and may only be transferred under an exemption to the Securities Act of 1933 or certain other circumstances.

Closing of this transaction is subject to completion of legal documentation and other standard closing conditions.

Additional information regarding the Mandatory Redeemable Preferred Shares will be included in a Current Report on Form 8-K to be filed with the U.S. Securities and Exchange Commission (“SEC”).

The Mandatory Redeemable Preferred Shares are being issued in reliance upon an exemption from registration under the Securities Act of 1933 (the “Securities Act”) and have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy the Mandatory Redeemable Preferred Shares, nor shall there be any sale of Mandatory Redeemable Preferred Shares in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction.

About XA Investments   

XA Investments LLC (“XAI”) serves as the Trust’s investment adviser. XAI is a Chicago-based firm founded by XMS Capital Partners in 2016. XAI serves as the investment adviser for two listed closed-end funds and an interval closed-end fund. The listed closed-end funds, the XAI Octagon Floating Rate & Alternative Income Trust and XAI Madison Equity Premium Income Fund both trade on the New York Stock Exchange and the interval fund, Octagon XAI CLO Income Fund is available via direct subscription and through select broker/dealers and wealth management platforms.

In addition to investment advisory services, the firm also provides investment fund structuring and consulting services focused on registered closed-end funds to meet institutional client needs. XAI offers custom product build and consulting services, including development and market research, sales, marketing, and fund management.

XAI believes that the investing public can benefit from new vehicles to access a broad range of alternative investment strategies and managers. XAI provides individual investors with access to institutional-caliber alternative managers. For more information, please visit www.xainvestments.com.

About XMS Capital Partners

XMS Capital Partners, LLC, established in 2006, is a global, independent, financial services firm providing M&A, corporate advisory and asset management services to clients. It has offices in Chicago, Boston and London. For more information, please visit www.xmscapital.com.

About Octagon Credit Investors

Octagon Credit Investors, LLC (“Octagon”) serves as the Trust’s investment sub-adviser. Octagon is a 30+ year old, $33.0B below-investment grade corporate credit investment adviser focused on leveraged loan, high yield bond and structured credit (CLO debt and equity) investments. Through fundamental credit analysis and active portfolio management, Octagon’s investment team identifies attractive relative value opportunities across below-investment grade asset classes, sectors and issuers. Octagon’s investment philosophy and methodology encourage and rely upon dynamic internal communication to manage portfolio risk. Over its history, the firm has applied a disciplined, repeatable and scalable approach in its effort to generate attractive risk-adjusted returns for its investors. For more information, please visit www.octagoncredit.com.

XAI does not provide tax advice; please consult a professional tax advisor regarding your specific tax situation. Income may be subject to state and local taxes, as well as the federal alternative minimum tax.

Investors should consider the investment objectives and policies, risk considerations, charges and expenses of the Trust carefully before investing. For more information on the Trust, please visit the Trust’s webpage at www.xainvestments.com.

This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

NOT FDIC INSURED        NO BANK GUARANTEE        MAY LOSE VALUE

Media Contact:

Kimberly Flynn, President
XA Investments LLC
Phone: 888-903-3358
Email: kflynn@XAInvestments.com
www.xainvestments.com

FAQ

What is the size of XFLT's new preferred share offering?

XFLT is offering 7.3 million shares of Series A Mandatory Redeemable Preferred Shares, totaling $73 million with net proceeds of approximately $71.5 million.

What is the dividend rate for XFLT's new preferred shares?

The preferred shares pay quarterly dividends at a fixed annual rate of 5.92%, or $0.5920 per share per year.

When do XFLT's new preferred shares mature?

The Mandatory Redeemable Preferred Shares are due on January 31, 2031, when XFLT must redeem them at the liquidation preference plus accumulated unpaid dividends.

How will XFLT use the proceeds from the preferred share offering?

XFLT will use the proceeds to refinance existing leverage and for general corporate purposes.

Can XFLT redeem these preferred shares early?

Yes, XFLT has the option to redeem the shares early, in whole or in part, subject to payment of a make-whole premium plus accumulated unpaid dividends.