8-K/A: Carlyle Credit Income Fund Announces Private Placement of Convertible Preferred Shares

Carlyle Credit Income Fund has entered into a purchase agreement for the private placement of approximately 20,000 shares of its 7.50% Series C Convertible Preferred Shares due January 2030.

Summary

• Carlyle Credit Income Fund (CCIF) announced a private placement of approximately 20,000 shares of its 7.50% Series C Convertible Preferred Shares due January 2030.
• The shares have a liquidation preference of $1,000.00 per share.
• The Fund expects to receive net proceeds of approximately $18.6 million before expenses from the sale.
• The offering is expected to close on January 31, 2025, subject to customary closing conditions.
• 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 a price equal to the liquidation preference plus accumulated but unpaid dividends.
• The Fund has the option to redeem the Convertible Preferred Shares in whole or in part at any time on or after 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 to acquire investments, make distributions to shareholders, and for general working capital purposes.

Sentiment

Score: 7

Explanation: The announcement is fairly standard for a capital raise. The terms seem reasonable, and the intended use of proceeds is aligned with the Fund's objectives. The lack of exchange listing is a minor drawback, but overall, the sentiment is moderately positive.

Positives

• The private placement provides Carlyle Credit Income Fund with $18.6 million in net proceeds for investment and operational purposes.
• The 7.50% fixed annual dividend rate on the Convertible Preferred Shares offers a predictable income stream for investors.
• The conversion option provides holders with potential upside linked to the Fund's common share performance.
• The Fund's intention to use proceeds for investments aligns with its stated objectives and strategies.

Negatives

• The Convertible Preferred Shares are not listed on any exchange, limiting liquidity for investors.
• Transfer of the shares requires the Fund's consent, further restricting liquidity.
• The conversion price is based on the greater of market price or net asset value, which could limit the attractiveness of the conversion option if the market price is below net asset value.
• The dividend rate is subject to adjustment under certain circumstances.

Risks

• The Fund's ability to redeem the Convertible Preferred Shares on the Term Redemption Date depends on the availability of legally available funds.
• Failure to maintain asset coverage of at least 200% could trigger mandatory redemption of Preferred Shares.
• The Fund's investment performance and ability to generate income are subject to market risks and other factors.
• The forward-looking statements in the press release are subject to risks and uncertainties that could cause actual results to differ materially.

Future Outlook

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

Industry Context

This announcement is typical for closed-end funds seeking to raise capital to invest in their target assets, in this case, primarily equity and junior debt tranches of collateralized loan obligations (CLOs). The use of preferred shares is a common strategy to leverage the fund's capital base.

Comparison to Industry Standards

• Other closed-end funds that invest in CLOs, such as Eagle Point Credit Company (ECC) and Oxford Lane Capital Corp. (OCSL), also utilize preferred shares as part of their capital structure.
• The dividend rate of 7.50% is within the typical range for preferred shares issued by similar funds, but the specific rate depends on market conditions and the creditworthiness of the issuer.
• The conversion feature adds a layer of complexity and potential upside for investors compared to non-convertible preferred shares.
• The lack of exchange listing for the Convertible Preferred Shares is a notable difference compared to some other preferred share offerings in the closed-end fund space.

Stakeholder Impact

• Shareholders may benefit from the Fund's increased investment capacity and potential for higher returns.
• The issuance of preferred shares could dilute the value of existing common shares.
• The Fund's employees and management will be responsible for deploying the new capital effectively.
• The Fund's investment strategy and performance will impact its relationships with creditors and other stakeholders.

Next Steps

• The offering is expected to close on or about January 31, 2025, subject to the satisfaction of 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