DEF 14A: Carlyle Secured Lending Seeks Stockholder Approval to Issue Shares Below NAV

Carlyle Secured Lending is asking stockholders to approve a proposal allowing the company to issue shares of common stock below the current net asset value per share.

Summary

• Carlyle Secured Lending, Inc. is seeking stockholder approval to authorize the company to sell or issue shares of common stock below the then-current net asset value (NAV) per share.
• The proposal aims to provide the company with flexibility to raise capital, repay debt, build its investment portfolio, and comply with regulatory requirements.
• The Board of Directors unanimously recommends voting FOR the proposal, believing it is in the best interest of the company and its stockholders.
• The authorization, if approved on June 6, 2024, would be effective for 12 months, expiring on June 6, 2025.
• The maximum number of shares salable below NAV is limited to 25% of the company's outstanding shares immediately prior to each sale.
• Approval requires the affirmative vote of a majority of outstanding shares and a majority of shares not held by affiliated persons.
• The company's shares have traded both above and below NAV in the past, and future trading prices are uncertain.
• Issuing shares below NAV could dilute existing stockholders' NAV per share and voting power.
• The company has retained D.F. King & Co., Inc. to assist in the solicitation of proxies at an estimated cost of $87,000.
• Broadridge Investor Communications Solutions, Inc. has also been retained to assist in the distribution of proxy materials and the solicitation and tabulation of proxies at an estimated cost of $195,000 plus reasonable out-of-pocket expenses.

Sentiment

Score: 6

Explanation: The document is neutral in tone, presenting both the potential benefits and risks of the proposed share issuance. The Board's recommendation is positive, but the disclosure of potential dilution tempers the overall sentiment.

Positives

• The proposal provides the company with greater financial flexibility to manage its debt-to-equity ratio and comply with regulatory requirements.
• It allows the company to access capital markets to pursue attractive investment and acquisition opportunities, especially during volatile periods.
• Issuing additional shares may increase the company's market capitalization and liquidity, making it more attractive to a wider range of investors.
• A larger asset base could reduce overall expenses per share by spreading fixed costs.
• The company believes that favorable investment opportunities to invest at attractive risk-adjusted returns, including opportunities to make acquisitions of other companies or investment portfolios at attractive values, may be created during periods of market disruption and volatility.

Negatives

• Issuing shares below NAV will result in immediate dilution to existing stockholders on a per-share basis.
• Existing stockholders who do not participate in an offering below NAV will experience a decrease in their NAV per share and a disproportionately greater decrease in their participation in the company's earnings and assets and their voting power.
• The costs of any offering of shares below the then-current NAV will be borne by all of the company's stockholders regardless of whether they purchase additional shares in the offering.

Risks

• The proposal could lead to dilution of existing stockholders' NAV per share and voting power.
• Market conditions may not improve, and the company may not be able to deploy capital effectively even with the additional flexibility.
• There is no guarantee that the company's shares will trade at, above, or below NAV in the future.
• Stockholders will have no subscription, preferential or preemptive rights to shares authorized for issuance, and thus any future issuance of shares at a price below NAV per share would dilute a stockholders holdings of shares as a percentage of shares outstanding to the extent the stockholder does not purchase sufficient shares in the offering or otherwise to maintain the stockholders percentage interest.

Future Outlook

The company seeks the flexibility to issue shares below NAV in the next 12 months to raise capital, repay debt, and pursue investment opportunities, but there are no immediate plans to do so.

Management Comments

• The Board of Directors, including independent directors, believes the proposal is in the best interests of the company and its stockholders.
• Justin V. Plouffe, President and Chief Executive Officer, thanks stockholders for their continued support.

Industry Context

As a Business Development Company (BDC) and a Regulated Investment Company (RIC), Carlyle Secured Lending operates under specific regulatory constraints that influence its capital-raising strategies.

Comparison to Industry Standards

• Many BDCs seek similar authorizations to issue shares below NAV to manage capital structures and pursue investment opportunities.
• Other BDCs, such as Ares Capital Corporation and Main Street Capital, have utilized similar strategies to raise capital and grow their portfolios.
• The 25% limit on shares issuable below NAV is a common safeguard to protect existing shareholders from excessive dilution.

Stakeholder Impact

• Existing stockholders may experience dilution of their NAV per share and voting power if the proposal is approved and shares are issued below NAV.
• The company believes that the proposal will benefit stakeholders by providing greater financial flexibility and enabling the company to pursue attractive investment opportunities.
• The company's employees and investment adviser may benefit from the company's increased financial flexibility and ability to grow its portfolio.

Next Steps

• Stockholders are urged to vote on the Share Issuance Proposal.
• The company will hold a Special Meeting of Stockholders on June 6, 2024, to vote on the proposal.
• The Board will review and approve any specific issuance of shares below NAV at the time of sale.

Key Dates

Keywords

share issuance, net asset value, NAV, proxy statement, stockholder approval, Carlyle Secured Lending, common stock, dilution, investment company, BDC