| Item 1.01 | Entry into Material Definitive Agreements. |
On February 22, 2024 (the “Closing Date”), PennantPark Floating Rate Capital Ltd. (the “Company”) completed a $350.55 million term debt securitization transaction (the “CLO Transaction”), also known as a collateralized loan obligation transaction, which is a form of secured financing incurred by the Company. The secured notes and subordinated notes issued in the CLO Transaction and the secured loan borrowed in the CLO Transaction were issued and incurred by the Company’s consolidated subsidiary, PennantPark CLO VIII, LLC, a Delaware limited liability company (the “Issuer”), and are backed by a portfolio of collateral obligations consisting of middle market loans and participation interests in middle market loans as well as by other assets of the Issuer.
The CLO Transaction was executed by (A) the issuance of the following classes of notes pursuant to an indenture dated as of the Closing Date (the “Indenture”), by and among the Issuers and Wilmington Trust, National Association: (i) $139.5 million of AAA(sf) Class A-1 Notes, which bear interest at the three-month secured overnight financing rate published by the Federal Reserve Bank of New York (“SOFR”) plus 2.30%, (ii) $14 million of AAA(sf) Class A-2 Notes, which bear interest at three-month SOFR plus 2.70%, (iii) $24.5 million of AA(sf) Class B Notes, which bear interest at three-month SOFR plus 2.90%, (iv) $28 million of A(sf) Class C Notes, which bear interest at three-month SOFR plus 3.90%, (v) $21 million of BBB-(sf) Class D Notes, which bear interest at three-month SOFR plus 5.90%, (together, the “Secured Notes”), and (vi) $63.55 million of subordinated notes (“Subordinated Notes”) and (B) the borrowing by the Issuers of $60.0 million under AAA(sf) Class A-1 floating rate loans (the “Class A-1 Loans” and together with the Secured Notes and Subordinated Notes, the “Debt”), which bear interest at three-month SOFR plus 2.30%, under a credit agreement (the “Credit Agreement”), dated as of the Closing Date, by and among the Issuer, as borrower, various financial institutions, as lenders, and Wilmington Trust, National Association, as collateral agent and as loan agent. The Class A-1 Loans and the Secured Notes are secured by the middle market loans, participation interests in middle market loans and other assets of the Issuer. The Debt is scheduled to mature on April 18, 2036. All of the Secured Notes were privately placed on behalf of the Issuer by GreensLedge Capital Markets LLC.
As part of the CLO Transaction, the Company entered into a master loan sale agreement with the Issuer and PennantPark Floating Rate Funding I, LLC, a wholly-owned subsidiary of the Company (the “Financing Subsidiary”), dated as of the Closing Date, which provided for the sale and contribution of approximately $265.03 million par amount of middle market loans, and closing date participation interests in middle market loans, from the Company and from the Company via the Financing Subsidiary, as applicable, to the Issuer on the Closing Date and for future sales and contributions, as applicable, from the Company to the Issuer on an ongoing basis. Such loans and closing date participation interests constituted the initial portfolio of assets securing the Class A-1 Loans and the Secured Notes. The Company made customary representations, warranties, and covenants to the Issuer under the applicable agreement.
Through no later than April 18, 2028, a portion of the proceeds received by the Issuer from the loans securing the Class A-1 Loans and the Secured Notes may be used by the Issuer to purchase additional middle market loans under the direction of PennantPark Investment Advisers, LLC (“PennantPark”), the Company’s investment adviser, in its capacity as collateral manager for the Issuer and in accordance with the requirements of the Issuer’s indenture and collateral management agreement with PennantPark and the Company’s investing strategy and ability to originate eligible middle market loans.
The Class A-1 Loans and the Secured Notes are the secured obligations of the Issuer, and the Indenture and the Credit Agreement include customary covenants and events of default. The Secured Notes and the Subordinated Notes have not been registered under the Securities Act of 1933, as amended, or any state securities (e.g., “blue sky”) laws, and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or pursuant to an applicable exemption from such registration. PennantPark will serve as collateral manager for the Issuer under a collateral management agreement dated as of the Closing Date. PennantPark is entitled to receive fees for providing these services. PennantPark has irrevocably waived its right to receive such fees for so long as it serves as collateral manager for the Issuer.
The proceeds of the issuance and incurrence of the Debt, net of certain fees, will be used to repay a portion of the Company’s $386.0 million secured credit facility.
The above descriptions of the documentation related to the CLO Transaction and other arrangements entered into on or prior to the Closing Date contained in this Current Report on Form 8-K do not purport to be complete and are qualified in their entirety by reference to the underlying agreements attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4.
| Item 2.03 | Creation of a Direct Financial Obligation. |
The information set forth under Item 1.01 above is incorporated by reference into this Item 2.03.
