DEF: 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 below net asset value (NAV) for the next 12 months, aiming to enhance financial flexibility and capitalize on market opportunities.

Summary

• Carlyle Secured Lending, Inc. is holding a special meeting of stockholders on June 9, 2025, to vote on a proposal that would authorize the company to issue shares of common stock below the then-current net asset value (NAV) per share.
• The authorization, if approved, would be effective for 12 months following stockholder approval.
• The company believes this flexibility is important to maintain access to capital, repay debt, build its investment portfolio, and comply with regulatory requirements and debt facility covenants.
• The proposal limits the maximum number of shares salable below NAV to 25% of the company's outstanding shares immediately prior to each sale.
• The Board of Directors unanimously recommends that stockholders vote FOR the proposal.
• As of April 7, 2025, the record date for the meeting, there were 72,902,981 shares of common stock outstanding and entitled to vote.
• The company has retained D.F. King & Co., Inc. to assist in the solicitation of proxies at an estimated cost of approximately $87,000.
• Broadridge Investor Communications Solutions, Inc. is also assisting with the distribution of proxy materials and tabulation of proxies at an estimated cost of approximately $86,000 plus expenses.

Sentiment

Score: 6

Explanation: The document is neutral to slightly positive. While it acknowledges the potential dilution from issuing shares below NAV, it emphasizes the benefits of increased financial flexibility and potential investment opportunities. The Board's unanimous recommendation to vote FOR the proposal also contributes to the positive sentiment.

Positives

• Issuing shares below NAV could provide financial flexibility to comply with regulatory requirements and debt facility covenants.
• It could provide access to capital markets to pursue attractive investment and acquisition opportunities.
• It could improve capital resources to enable the company to compete more effectively for high-quality investment opportunities.
• A larger market capitalization may make the shares more attractive to a larger number of investors who have limitations of the size of companies in which they invest.
• A larger number of shares outstanding may increase the company's trading volume, which could decrease the volatility in the secondary market price of its shares.
• An offering that increases the company's total assets may reduce its overall expenses per share due to the spreading of fixed expenses over a larger asset base.

Negatives

• Selling shares below NAV would result in immediate dilution to existing stockholders on a per share basis.
• Stockholders will have no subscription, preferential or preemptive rights to shares authorized for issuance.
• The proceeds from the issuance of additional shares of the company's common stock will increase the management fees that the company pays to Carlyle Global Credit Investment Management L.L.C.

Risks

• The market price for shares may decline.
• There is no assurance that stockholders will realize the benefits discussed in the proxy statement.
• Disruptions in the capital markets may increase the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets.
• Periods of disruption and volatility may also adversely affect the company's access to sufficient debt and equity capital in order to take advantage of attractive opportunities that are created during these periods.
• The debt capital that will be available, if any, may be at a higher cost and on less favorable terms and conditions in the future.

Future Outlook

The company seeks the flexibility to issue shares below NAV in the next 12 months to raise capital for various corporate purposes, including repaying debt, building its investment portfolio, and complying with regulatory requirements.

Management Comments

• Our Board of Directors unanimously recommends that you vote FOR the proposal.
• The Board believes that having the flexibility for the Company to sell its Shares below NAV in certain instances is in the Company's best interests and the best interests of its stockholders.

Industry Context

As a BDC and a regulated investment company (RIC), Carlyle Secured Lending operates under specific regulatory constraints, including the 150% asset coverage ratio requirement under the 1940 Act. The ability to issue shares below NAV provides a tool to manage capital structure and respond to market volatility, a common consideration for BDCs.

Comparison to Industry Standards

• Many BDCs seek similar authorizations to issue shares below NAV to manage capital and respond to market conditions.
• The 25% limit on shares issuable below NAV is a common restriction to protect existing shareholders from excessive dilution.
• Other BDCs, such as Ares Capital Corporation and Main Street Capital, have also utilized similar strategies to raise capital and manage their balance sheets.

Stakeholder Impact

• Existing stockholders may experience dilution if shares are issued below NAV.
• The company aims to enhance its financial flexibility and pursue investment opportunities, potentially benefiting all stakeholders in the long term.
• Increased management fees to Carlyle Global Credit Investment Management L.L.C. due to the issuance of additional shares.

Next Steps

• Stockholders to vote on the Share Issuance Proposal at the Special Meeting on June 9, 2025.
• If approved, the company will have the authority to issue shares below NAV for the next 12 months, subject to certain conditions.
• The Board will determine the terms of any such sales at the time of sale.

Key Dates

Keywords

Share Issuance, Net Asset Value, NAV, Proxy Statement, Stockholder Meeting, Carlyle Secured Lending, CGBD, Dilution, Capital Raising, BDC