In a move to expand its capital base, XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT), a closed-end investment company, has issued and sold 400,000 shares of its 6.95% Series II 2029 Convertible Preferred Shares, according to a recent SEC filing. The transaction took place on Monday, generating approximately $9.3 million in net proceeds before expenses.
The newly issued shares, which have a liquidation preference of $25.00 each, were sold to unnamed purchasers at a price of $23.25 per share. This sale is part of a larger agreement that was previously disclosed on June 10, 2024, which allows for the issuance and sale of up to 1,800,000 shares of the Series II 2029 Convertible Preferred Shares. The agreement, set to last until December 10, 2025, is exempt from registration under Section 4(a)(2) of the Securities Act of 1933.
Following this latest issuance, the total number of Series II 2029 Convertible Preferred Shares outstanding for XAI Octagon Floating Rate & Alternative Income Trust stands at 1,600,000. The trust's decision to issue these shares is part of a strategic effort to raise capital, potentially for further investment opportunities or to strengthen its financial position.
The Series II 2029 Convertible Preferred Shares are described in detail in the Trust's Form 8-K filed on June 14, 2024, along with the full text of the Statement of Preferences of Term Preferred Shares filed as Exhibit 3.1. Additionally, the Purchase Agreement was provided as Exhibit 10.1 to the Trust's Form 8-K filed on the same date.
The transaction was carried out by the Trust's Secretary and Chief Legal Officer, Benjamin D. McCulloch, who signed the SEC filing on Wednesday. The Trust is headquartered in Chicago, Illinois, and operates under the Delaware jurisdiction. It is listed on the New York Stock Exchange with the ticker symbol XFLT for its common shares and XFLTPRA for its 6.50% Series 2026 Term Preferred Shares. The information in this article is based on a press release statement.
In other recent news, XAI Octagon Floating Rate & Alternative Income Trust has issued and sold 400,000 shares of its 6.95% Series II 2029 Convertible Preferred Shares. The shares were sold at a price of $23.25 per share, generating net proceeds of approximately $9.3 million before expenses. This move is part of an agreement made between XAI Octagon Trust, Eagle Point Credit Management LLC, and the purchasers, allowing for the sale of up to 1,800,000 of these shares by December 10, 2025.
Following this transaction, the Trust now has 1,200,000 Series II 2029 Convertible Preferred Shares issued and outstanding. These convertible preferred shares were first detailed in an 8-K filing by the Trust on June 14, 2024.
The issuance of these convertible preferred shares is a strategic move by XAI Octagon Floating Rate & Alternative Income Trust to raise capital. This capital infusion could potentially be used to invest in additional credit opportunities or for other corporate purposes. The recent developments have been based on a press release statement.
InvestingPro Insights
XAI Octagon Floating Rate & Alternative Income Trust's (NYSE: XFLT) recent issuance of convertible preferred shares aligns with its attractive dividend profile. According to InvestingPro data, XFLT boasts a substantial dividend yield of 14.91%, with the last ex-dividend date on September 17, 2024. This high yield is consistent with an InvestingPro Tip highlighting that XFLT "pays a significant dividend to shareholders."
The trust's strategy of raising capital through preferred share issuance may be influenced by its market position. With a market capitalization of $399.35 million, XFLT is operating in a niche segment of the investment trust market. Another InvestingPro Tip notes that the stock "generally trades with low price volatility," which could appeal to income-focused investors seeking stability alongside high yields.
For those interested in a deeper analysis, InvestingPro offers additional tips and metrics that could provide further context to XFLT's financial strategy and market performance.
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