TICC Capital, a business development company, has issued a $225 million CLO, its first, through a special purpose vehicle in which a wholly owned subsidiary owns all of the equity.
In a statement released today, TICC said the senior notes, which have an initial face value of $110.25 million and are expected to be rated 'AAA' by Standard & Poor’s and 'Aaa' by Moody’s Investors Service, were priced at three-month Libor plus 225 basis points. The senior notes will have a stated maturity date of July 25, 2021 and will be subject to a three-year non-call period. The CLO will have a three-year reinvestment period.
TICC expects the transaction to close Aug 10.
The business development company primarily lends to technology-related companies, but it also invests in the junior capital of CLOs. Last year, TICC acquired approximately $36.6 million of securities in 17 different CLO vehicles, at a deep discount, on the secondary market, according to its latest annual report. As of Dec. 31, the asset class represented approximately 24% of its total portfolio on a fair value basis.
“Due to the dramatic events in the credit markets over the past three years, we have identified what we believe are compelling investment opportunities in the CLO sector,” the company said in the regulatory filing. “We believe that this asset class continues to present investment opportunities for attractive risk-adjusted returns and we continue to review other CLO tranches.”
In a telephone interview, chief financial officer Patrick Conroy described these earlier purchases of CLO debt and equity as “passive investments.”
Conroy said this is the first time TICC has sponsored a CLO, consolidating the deal on its balance sheet. He described the transaction as “the opportunity to borrow (approximately) $101 million at a highly attractive rate and allow us to continue to make loans.”
Some of TICC’s existing portfolio holdings will be used as collateral for the CLO, and the BDC will look to invest the proceeds from the sale of the senior securities while retaining an interest in the collateral via its holdings of subordinated notes of the CLO.