Gladstone Capital Revises Investment Objectives, Strategies
Gladstone Capital Corporation announced revisions to its investment objectives and strategies, which will go into effect on or about January 1, 2013. All of the company’s current portfolio investments fit within the scope of the revised objectives and strategies of the company and no changes will need to be made to the current portfolio as a result of the revision.
The revised investment objectives and strategies that were approved by the board of directors of the company at a regularly scheduled meeting of the board of directors held on October 10, 2012 are as follows:
To achieve and grow current income by investing in debt securities of established businesses that the company believes will provide stable earnings and cash flow to pay expenses, make principal and interest payments on its outstanding indebtedness and make distributions to stockholders that grow over time.
To provide stockholders with long-term capital appreciation in the value of the company’s assets by investing in equity securities of established businesses that it believes can grow over time to permit the company to sell its equity investments for capital gains.
To achieve its objectives, the company seeks to invest in several categories of debt and equity securities, with each investment generally ranging from $5 million to $30 million, although investment size may vary, depending upon its total assets or available capital at the time of investment.
In general, the company’s investments in debt securities have a term of no more than seven years, accrue interest at variable rates (based on LIBOR) and, to a lesser extent, at fixed rates. The company seeks debt instruments that pay interest monthly or, at a minimum, quarterly, have a success fee or deferred interest provision and are primarily interest only with all principal and any accrued but unpaid interest due at maturity. Generally, success fees accrue at a set rate and are contractually due upon a change of control in the business. Some debt securities have deferred interest whereby some portion of the interest payment is added to the principal balance so that the interest is paid, together with the principal, at maturity. This form of deferred interest is often called “paid in kind” (PIK).
Gladstone’s investments typically take the following forms: Senior debt securities, senior subordinated debt securities, junior subordinated debt securities and preferred and common equity.
Portfolio Company Characteristics
Gladstone seeks to invest in businesses with all or some of the following characteristics: Value-and-Income Orientation and Positive Cash Flow, Experienced Management, Strong Competitive Position in an Industry and Liquidation Value of Assets.
“We believe that the revisions to the investment objectives and strategies of the company will allow us greater flexibility in growing our portfolio and maintaining our commitment of value to our shareholders,” said David Gladstone, the company’s CEO Officer.
To read Gladstone’s complete news release, click here.