DALLAS - Capital Southwest (NASDAQ:CSWC) Corporation (NASDAQ:CSWC), a Dallas-based middle market lending firm, announced today the launch of a public offering of unsecured convertible notes due in 2029. The offering is being managed by Oppenheimer & Co. as the sole book-running manager.
The notes, which are to mature in 2029 unless converted, redeemed, or repurchased before that date, will accrue interest payable quarterly in arrears. Capital Southwest will have the option to settle conversions of the notes in cash, shares of its common stock, or a combination of both, at its discretion. Specific terms, including the interest rate and initial conversion rate, will be determined at the time of the offering’s pricing.
Capital Southwest intends to use the net proceeds from this offering to redeem its 4.50% Notes due 2026, repay a portion of the outstanding indebtedness under its senior secured revolving credit facility with ING Capital LLC, and for general corporate purposes.
This offering is part of an automatic shelf registration statement filed with the Securities and Exchange Commission (SEC) on October 29, 2024, which became effective immediately. The preliminary prospectus supplement and accompanying prospectus will be available on the SEC's website.
Capital Southwest, with approximately $1.5 billion in investments at fair value as of September 30, 2024, focuses on supporting the growth of middle market businesses through a variety of investment strategies.
The announcement includes forward-looking statements regarding the proposed terms of the notes, the anticipated use of proceeds, and the potential impact on the company’s stock. These statements are subject to risks and uncertainties that could cause actual results to differ materially.
The information provided is based on a press release statement from Capital Southwest.
In other recent news, Capital Southwest Corporation has made significant updates to its "at-the-market" (ATM) offering program. The Dallas-based investment firm amended its equity distribution agreements, transitioning the program to a new shelf registration statement. This move allows the firm to sell shares of its common stock, with a potential to raise up to $1.0 billion. Furthermore, recent developments show a robust financial performance in the second quarter of fiscal year 2025, with pre-tax net investment income reaching $0.64 per share and a regular dividend declared at $0.58 per share. The firm's credit portfolio grew to $1.4 billion, predominantly backed by private equity firms, and raised $21 million through its ATM program. Despite a decrease in total investment income to $48.7 million, the company anticipates significant net portfolio growth in the upcoming quarters. These recent developments reflect Capital Southwest's disciplined investment strategy and potential for future growth.
InvestingPro Insights
Capital Southwest's latest move to offer convertible notes comes at a time when the company's financial metrics paint an interesting picture. According to InvestingPro data, CSWC boasts a market capitalization of $1.14 billion and a P/E ratio of 14.53, suggesting a relatively modest valuation compared to some peers in the financial sector.
The company's revenue growth has been robust, with a 27.41% increase over the last twelve months as of Q2 2025, reaching $195.06 million. This growth trajectory aligns well with Capital Southwest's strategy to support middle market businesses and potentially justifies the need for additional capital through the new note offering.
One of the most striking aspects of CSWC's profile is its dividend yield, which stands at an impressive 10.55%. This aligns with an InvestingPro Tip that highlights the company's significant dividend payments to shareholders. Moreover, Capital Southwest has maintained dividend payments for 42 consecutive years, demonstrating a strong commitment to returning value to investors.
However, investors should note that according to another InvestingPro Tip, four analysts have revised their earnings downwards for the upcoming period. This could indicate some caution regarding the company's near-term performance, which may be worth considering in light of the new debt issuance.
For those interested in a deeper dive into Capital Southwest's financials and prospects, InvestingPro offers additional tips and insights. In fact, there are 5 more InvestingPro Tips available for CSWC, which could provide valuable context for understanding the company's financial health and future outlook.
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