XAI Octagon Floating Rate Trust Secures $73 Million Investment
XAI Octagon Floating Rate & Alternative Income Trust Secures Major Investment
In an impressive move to bolster its income-generating capabilities, XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) has successfully negotiated a significant private placement worth $73 million. This strategic initiative aims to enhance the Trust's ability to provide a strong total return, focusing on income generation that spans various stages of the credit cycle.
Details of the Preferred Shares Offering
The Trust has reached an agreement with select institutional investors for the purchase of 7,300,000 shares of its 5.92% Series A Mandatory Redeemable Preferred Shares due on January 31, 2031. Each share carries a liquidation preference of $10.00. The anticipated net proceeds from this sale are expected to be approximately $71.5 million, once expenses are accounted for. These transactions are set to be completed in multiple closings on or before December 18, 2025.
Dividend Structure and Redemption Terms
Investors in the Mandatory Redeemable Preferred Shares will benefit from a quarterly dividend set at a fixed annual rate of 5.92%. This translates to an annual payment of $0.5920 per share. Importantly, the Trust is obligated to redeem all outstanding shares on the predetermined Term Redemption Date, ensuring investors are compensated with their liquidation preference, along with any accrued but unpaid dividends.
Flexibility in Redemption
Beginning with the first issuance of the Mandatory Redeemable Preferred Shares, the Trust retains the option to redeem these shares in full or in part at its discretion. This redemption will be conducted using legally available funds, and the price will be determined based on the liquidation preference, plus any unpaid accumulated dividends.
Purpose of the Funds
The net proceeds from this preferred share offering are earmarked for refinancing existing leverage as well as for general corporate purposes, aiding the Trust in maintaining and enhancing its investment strategies.
Regulatory Compliance and Issuance Details
The Mandatory Redeemable Preferred Shares will not be listed on any public exchange. They may only be transferred under specific exemptions outlined in the Securities Act of 1933 or other appropriate conditions. The closing of this transaction is contingent upon fulfilling all legal documentation requirements and standard closing conditions.
Upcoming Financial Reporting
Further detailed information about the Mandatory Redeemable Preferred Shares will be made available in a Current Report on Form 8-K, which will be submitted to the U.S. Securities and Exchange Commission (SEC). This report will provide additional insights for potential and existing investors.
About XAI Investments
XA Investments LLC, based in Chicago, proudly serves as the investment adviser for the Trust. Founded in 2016 by XMS Capital Partners, XAI manages two listed closed-end funds as well as an interval fund. Its commitment is to create diverse investment strategies that meet institutional client needs and support retail investors looking for superior alternatives.
Investment Strategies and Philosophy
XAI is passionate about bringing innovative investment opportunities to the public, especially within the realm of alternative strategies. They provide individual investors access to top-tier, institutional quality managers, enhancing their investment portfolios significantly.
About XMS Capital Partners
XMS Capital Partners is a global financial services firm established in 2006, specializing in M&A, corporate advisory services, and asset management. With offices in prominent cities such as Chicago and London, they are dedicated to offering tailored financial solutions to their clients.
About Octagon Credit Investors
Octagon Credit Investors, serving as the investment sub-adviser to the Trust, has over 30 years of experience in managing corporate credit investments, focusing on below-investment grade assets. Their strategic, disciplined approach is aimed at uncovering promising opportunities within leveraged loans, high yield bonds, and structured credit sectors.
Frequently Asked Questions
What is the purpose of the $73 million investment?
The investment aims to enhance income generation and refinance existing leverage for the Trust.
How do the Mandatory Redeemable Preferred Shares work?
The shares offer a fixed annual dividend of 5.92% and must be redeemed by January 31, 2031, at par value plus any accrued dividends.
Who acted as the placement agent for the offering?
Moelis & Company LLC served as the exclusive placement agent for this offering.
Will the Mandatory Redeemable Preferred Shares be listed on an exchange?
No, these shares will not be listed on any public exchange and can only be transferred under certain exemptions.
What is the role of XA Investments?
XA Investments serves as the investment adviser to the Trust, managing its investment strategies and ensuring goals are met efficiently.
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