Business development company Capital Southwest amended and restated its senior secured revolving credit facility, increasing commitments from $210 million to $270 million. The financing was led by ING Capital and provided by a diversified group of nine lenders.
The amendment also included an expansion of the accordion feature to $350 million to accommodate the company’s future growth. As of quarter end on September 30, 2018, Capital Southwest had $127 million outstanding on the credit facility.
The facility’s revolving period was extended from November 16, 2020 to December 21, 2022, with the final maturity extended from November 16, 2021 to December 21, 2023.
The pricing on the facility was reduced from LIBOR plus 3.00% to LIBOR plus 2.50%, subject to certain conditions as outlined in the amended and restated credit agreement.
The amendment reduced the minimum asset coverage with respect to senior securities representing indebtedness from 200% to 150% after the date on which such minimum asset coverage is permitted to be reduced by the company under applicable law.
“We are extremely pleased with the outcome of our amendment negotiations with our bank group. The resulting amendment provides a credit facility offering both flexibility and competitive pricing which enhances our ability to grow the investment portfolio and continue to deliver attractive risk adjusted returns and sustainable dividends for our shareholders,” said Michael Sarner, Capital Southwest chief financial officer. “We achieved flexibility on the asset coverage ratio, allowing us to increase our target leverage to a more appropriate level given our focus on 1st lien investments, while being mindful of our board of directors’ policy of a 166% asset coverage ratio, or 1.5-to-1 debt-to-equity limitation. We were also able to meaningfully reduce our cost of capital, which all things equal, allows us to take less risk at the asset level. We are truly appreciative of our partnership with ING and the participant bank group in closing this important amendment for Capital Southwest.”