PennantPark Streamlines Securitization, Enhancing Financial Flexibility
PennantPark Floating Rate Capital Ltd. Achieves Key Securitization Reset
MIAMI BEACH, Fla. — PennantPark Floating Rate Capital Ltd. (the “Company”) (NYSE: PFLT) has announced an impressive achievement with its joint venture, PennantPark Senior Secured Loan Fund I LLC (“PSSL”). Through its subsidiary, PennantPark CLO VI, LLC, the company successfully completed the reset of a $315.8 million debt securitization, stretching across a four-year reinvestment period and a twelve-year final maturity.
Understanding the Debt Structure
In this intricate securitization, the structured debt includes several classes, providing clarity on how the funds are allocated. The following is a breakdown:
Debt Class Breakdown
The securitized debt features various classes with distinct characteristics, as outlined below:
- A-R Loans: Totaling $228 million, this class represents 72.2% of the capital structure with a coupon rate of 3 Mo SOFR + 1.85% and an expected rating of A-.
- B-R Loans: Contributing $18 million or 5.7% to the structure, B-R Loans carry a coupon rate of 3 Mo SOFR + 4.50% with a BBB- rating.
- C-R Loans: Similarly $18 million, these loans are expected to be retained, rated at BB- and categorized as Retained.
- Subordinated Notes: With $51.8 million, these notes represent 16.4% of the structure and offer no defined coupon or rating.
Remarks from Leadership
Arthur Penn, the Chief Executive Officer, expressed optimism about the securitization's impact on the Company’s financial strategy: “This reset of the PSSL securitization exemplifies the strength of our operational platform, especially during challenging market conditions. We expect a significant reduction in our cost of capital, enabling us to seize growth opportunities.”
Enhancing Growth Opportunities
With a solid foundation of roughly $850 million in available capital between PennantPark and PSSL, the company is poised to invest in a promising range of middle market loans, further enhancing its earnings momentum.
Future of PSSL in the Market
PSSL plans to maintain ownership of the Subordinated Notes and Class C-R Loans through its consolidation strategy. This approach will extend the maturity of both replacement and existing debt up to April 2037 while ensuring 100% funding at close.
Efforts in Asset Performance Retention
PSSL will adopt a retention strategy to maintain exposure to the performance of the securitized assets, reinforcing its commitment to investor confidence and market stability.
PennantPark's Investment Strategy
PennantPark Floating Rate Capital Ltd. is primarily focused on U.S. middle market private companies through various investment strategies, revolving around floating rate senior secured loans. The company remains vigilant in exploring equity investments as opportunities arise, catering to diverse financial needs.
Partnership with Kemper Corporation
PSSL operates as a joint venture with a subsidiary of Kemper Corporation, primarily investing in middle market companies facing below-investment-grade debt challenges.
PennantPark Investment Advisers Overview
PennantPark Investment Advisers, LLC, is renowned for its middle market credit platform, managing nearly $10 billion in investable capital. Since its inception, PennantPark has facilitated access to a variety of financing solutions tailored to private equity firms and other middle market borrowers.
Frequently Asked Questions
What is PennantPark Floating Rate Capital Ltd.?
It is a business development company focused on investing in U.S. middle market private companies through floating rate loans.
What was the aim of the recent securitization reset?
The reset aimed to lower the cost of financing and enhance the company's financial flexibility during market volatility.
What types of loans does PennantPark primarily invest in?
PennantPark primarily invests in floating rate senior secured loans, including first and second lien secured debt and subordinated debt.
What is the significance of the Class A-R Loans?
Class A-R Loans represent the largest portion of the debt structure, crucial for maintaining capital flow and financial stability.
How does PennantPark’s strategy support its investments?
PennantPark’s strategy focuses on scalability and efficient long-term financing to drive attractive returns and sustain earnings growth.
CONTACT:
Richard T. Allorto, Jr.
PennantPark Floating Rate Capital Ltd.
(212) 905-1000
www.pennantpark.com
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