8-K: Carlyle Credit Income Fund Announces $18.6 Million Private Placement of Convertible Preferred Shares

Carlyle Credit Income Fund (CCIF) has secured $18.6 million through a private placement of its 7.50% Series C Convertible Preferred Shares due 2030.

Summary

• Carlyle Credit Income Fund (CCIF) has entered into a purchase agreement for the issuance and sale of approximately 20,000 shares of its 7.50% Series C Convertible Preferred Shares due 2030.
• The liquidation preference is $1,000.00 per share, and the shares were sold at a price of $930.00 each.
• The Fund expects to receive net proceeds of approximately $18.6 million before expenses.
• The Convertible Preferred Shares pay a quarterly dividend at a fixed annual rate of 7.50% of the liquidation preference, or $75.00 per share, per year.
• The Fund is required to redeem all outstanding Convertible Preferred Shares on January 31, 2030, at the liquidation preference plus accumulated but unpaid dividends.
• The Fund has the option to redeem the Convertible Preferred Shares, in whole or in part, starting July 31, 2025.
• Holders have the right to convert their shares into common shares starting six months after the issuance date, with the conversion price based on the greater of the market price or the Fund's most recently reported net asset value per Common Share.
• The Convertible Preferred Shares will not be listed on any exchange and may not be transferred without the consent of the Fund.
• The Fund intends to use the net proceeds from the offerings to acquire investments, make distributions to shareholders, and for general working capital purposes.

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The announcement is a routine capital raising activity, and the terms of the offering appear reasonable. The fund is securing additional capital for investment, which could benefit shareholders.

Positives

• The issuance provides Carlyle Credit Income Fund with $18.6 million in net proceeds to acquire investments, make distributions to shareholders, and for general working capital purposes.
• The fixed 7.50% dividend rate on the Convertible Preferred Shares offers a predictable income stream for investors.
• The conversion feature provides potential upside for investors if the Fund's common share price appreciates.
• The mandatory redemption date of January 31, 2030, provides a defined exit strategy for investors.

Negatives

• The Convertible Preferred Shares are not listed on any exchange, limiting liquidity for investors.
• Transfer of the shares requires the consent of the Fund, further restricting liquidity.
• The conversion price is based on the greater of market price or net asset value, which could limit the potential upside if the market price is below the net asset value.
• The Fund has the option to redeem the shares starting July 31, 2025, which could limit the duration of the investment for holders.

Risks

• The Fund's ability to pay dividends and redeem the Convertible Preferred Shares is dependent on its financial performance and the availability of legally available funds.
• The value of the Fund's investments may fluctuate, impacting its ability to meet its obligations.
• Changes in interest rates and market conditions could negatively impact the Fund's performance.
• The Fund's reliance on external management by Carlyle Global Credit Investment Management L.L.C. introduces potential conflicts of interest.

Future Outlook

The Fund intends to use the net proceeds from the offerings to acquire investments in accordance with its investment objectives and strategies, to make distributions to its shareholders, and for general working capital purposes.

Industry Context

This announcement reflects a common strategy for closed-end funds to raise capital through preferred share offerings. The proceeds are typically used to leverage the fund's investment portfolio and potentially enhance returns. The convertible feature adds an element of potential upside for investors, aligning their interests with the fund's performance.

Comparison to Industry Standards

• Other closed-end funds, such as those managed by BlackRock or Nuveen, frequently issue preferred shares with similar features, including fixed dividend rates, redemption provisions, and conversion options.
• The 7.50% dividend rate is within the typical range for preferred shares issued by closed-end funds, although the specific rate depends on market conditions and the fund's credit profile.
• The conversion feature is a common element designed to attract investors who seek potential capital appreciation in addition to income.
• The restrictions on transferability are also typical for privately placed securities, reflecting the limited liquidity of these investments.

Stakeholder Impact

• Shareholders may benefit from the Fund's increased investment capacity and potential for enhanced returns.
• The issuance of preferred shares could dilute the value of existing common shares.
• The fixed dividend rate on the preferred shares provides a predictable income stream for preferred shareholders.
• The Fund's investment activities will impact the companies and industries in which it invests.

Next Steps

• The offering is expected to close on or about January 31, 2025, subject to customary closing conditions.
• The Fund will file a Current Report on Form 8-K with the SEC providing additional information regarding the Convertible Preferred Shares.

Key Dates