Great Elm Capital Corp. (NASDAQ:GECC), a financial investment firm, has successfully entered into a significant agreement, resulting in the issuance of $36 million in new debt securities, with an additional $5.4 million potentially available through an over-allotment option for underwriters. The transaction, which was completed on Thursday, involves the sale of 8.125% notes due to mature on December 31, 2029.
These newly issued notes, which commenced on the same day, will pay interest quarterly, starting December 31, 2024, at an annual rate of 8.125%. The notes are unsecured and rank equally with Great Elm Capital's other unsecured debt. The company has the option to redeem the notes in whole or in part after December 31, 2026, at the principal amount plus accrued interest.
The indenture, which governs the terms of the notes, includes specific covenants that the company must adhere to. These include compliance with certain sections of the Investment Company Act of 1940 and the provision of financial information in the event the company is no longer subject to Securities Exchange Act of 1934 reporting requirements. Additionally, the indenture restricts the company's ability to merge or transfer assets under certain conditions.
Great Elm Capital anticipates net proceeds of approximately $34.4 million from the offering, or roughly $39.6 million if the over-allotment option is fully exercised. The company plans to use these funds, along with its cash on hand, to redeem all of its outstanding 6.75% notes due in 2025.
The offering was made under a registration statement and related prospectus filed with the Securities and Exchange Commission. This strategic financial move, completed on Thursday, aligns with Great Elm Capital's broader capital management strategy.
In other recent news, Great Elm Capital Corp. has made a series of significant financial moves. The company plans to redeem all of its 6.75% Notes due 2025, contingent on the successful completion of its public offering of 8.12% Notes due 2029.
This redemption is part of a broader financial management strategy, aiming to restructure its debt under potentially more favorable terms with the new offering.
In addition, Great Elm Capital has launched a public offering of unsecured notes due in 2029, managed by Lucid (NASDAQ:LCID) Capital Markets, Janney Montgomery Scott, and Piper Sandler, among others. The company has also increased its stake in a joint venture focused on collateralized loan obligation entities, showing a deeper commitment to this market.
Regarding financial performance, Great Elm Capital reported a decrease in net asset value per share to $12.06 from $12.57 due to nonaccruals in two portfolio companies for the second quarter of 2024.
Despite this, the company expects to surpass first-half results in the second half of the year, anticipating increased income from its CLO-focused joint venture and other strategic investments.
InvestingPro Insights
Great Elm Capital Corp. (NASDAQ:GECC) has recently made a strategic move in the capital market, drawing attention to its financial health and potential for investor returns. According to InvestingPro data, the company boasts a market capitalization of approximately $104.6 million and an attractive P/E ratio of 8.2, signaling a potentially undervalued stock relative to earnings. Over the last twelve months leading up to Q2 2024, Great Elm Capital has seen a robust revenue growth of 20%, with a quarterly growth rate of 6.36%. These figures are indicative of the company's solid financial performance and its ability to generate income efficiently.
Investors might also find the company's dividend yield of 14.05% particularly compelling, especially given that Great Elm Capital has maintained dividend payments for 9 consecutive years. This consistency in rewarding shareholders is a testament to the company's financial stability and commitment to returning value to its investors. However, it's worth noting that the company's short-term obligations exceed its liquid assets, which is a factor that investors should consider when evaluating the risk associated with the investment.
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As of the latest data, InvestingPro has listed a total of 6 additional tips for GECC, providing investors with a deeper understanding of the company's financial nuances and investment potential.
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