8-K: Eagle Point Credit Company Announces 8.00% Series F Term Preferred Stock Offering

Eagle Point Credit Company Inc. has entered into an underwriting agreement for the issuance and sale of 1,400,000 shares of its 8.00% Series F Term Preferred Stock due 2029.

Summary

• Eagle Point Credit Company Inc. has agreed to sell 1,400,000 shares of its 8.00% Series F Term Preferred Stock due 2029.
• The offering is expected to close on January 18, 2024, subject to customary closing conditions.
• The underwriters have an option to purchase an additional 210,000 shares within 30 days of January 11, 2024.
• The Series F Term Preferred Stock is expected to be listed on the New York Stock Exchange under the symbol ECCF.
• The company has designated 3,000,000 shares of preferred stock as Series F Term Preferred Stock.
• Holders of the Series F Term Preferred Stock will receive a liquidation preference of $25 per share plus accumulated but unpaid dividends.
• The company intends to pay monthly dividends at a fixed annual rate of 8.00% of the liquidation preference, which is $2.00 per share per year.
• The company is required to redeem all outstanding shares of the Series F Term Preferred Stock on January 31, 2029, at the liquidation preference plus accumulated but unpaid dividends.
• The Series F Term Preferred Stock will rank senior to common stock and equal in priority with other series of preferred stock, but subordinate to the company's existing and future indebtedness.
• The company's management estimates the net asset value per share of common stock as of December 31, 2023, to be between $9.16 and $9.26.
• Management also estimates net investment income and realized gain/loss per share for the quarter ended December 31, 2023, to be between $0.31 and $0.35.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a standard capital raise with clear terms. The offering is expected to be well-received by income-seeking investors. However, there are some risks associated with preferred stock, such as subordination to debt and the board's discretion over dividends.

Positives

• The Series F Term Preferred Stock offers a fixed annual dividend rate of 8.00%.
• The stock has a defined mandatory redemption date of January 31, 2029, providing a clear exit strategy for investors.
• The stock ranks senior to common stock in priority of payment of dividends and distribution of assets.
• The company has provided an estimate of its net asset value and net investment income, offering transparency to investors.

Negatives

• The Series F Term Preferred Stock is subordinate to the company's existing and future indebtedness.
• The company's board of directors may determine not to pay dividends if it is not in the best interest of the company or if the company fails to maintain the required asset coverage.
• The dividend rate will only increase by 2% per annum if the company fails to redeem the stock on the mandatory redemption date or fails to pay a dividend on the payment date.

Risks

• The company's ability to pay dividends is subject to the board's discretion and the company's ability to maintain asset coverage.
• The company's failure to redeem the stock on the mandatory redemption date or pay dividends on time will only result in a 2% increase in the dividend rate.
• The Series F Term Preferred Stock is subordinate to the company's debt, which could impact recovery in the event of liquidation.
• The company's estimates of net asset value and net investment income are unaudited and may not be accurate.

Future Outlook

The company intends to list the Series F Term Preferred Stock on the NYSE and expects trading to begin within 30 days of the original issue date. The company also intends to pay monthly dividends on the stock.

Management Comments

• Management's unaudited estimate of the range of the net asset value per share of our common stock as of December 31, 2023 was between $9.16 and $9.26.
• Management's unaudited estimate of the range of our net investment income and realized gain/loss per share of our common stock for the quarter ended December 31, 2023 was between $0.31 and $0.35.

Industry Context

This announcement is typical for a closed-end investment company seeking to raise capital through the issuance of preferred stock. The terms of the offering, including the dividend rate and redemption date, are designed to attract income-seeking investors.

Comparison to Industry Standards

• The 8.00% dividend rate is competitive with other preferred stock offerings from similar closed-end funds.
• The mandatory redemption date provides a level of certainty not always present in preferred stock offerings.
• The liquidation preference of $25 per share is standard for preferred stock offerings.
• Comparable companies such as Oxford Lane Capital Corp. and OFS Credit Company also issue preferred stock with similar terms, though specific rates and dates may vary.

Stakeholder Impact

• Shareholders will see a potential dilution of their ownership if the underwriters exercise their option to purchase additional shares.
• Employees may benefit from the company's increased financial stability.
• Customers may not be directly impacted by this offering.
• Suppliers and creditors may see an improvement in the company's ability to meet its obligations.
• Preferred stock investors will receive a fixed dividend and a defined redemption date.

Next Steps

• The offering is expected to close on January 18, 2024.
• The Series F Term Preferred Stock is expected to be listed on the NYSE under the symbol ECCF within 30 days of the original issue date.
• The company will pay monthly dividends on the stock.

Key Dates

Keywords

preferred stock, term preferred stock, dividends, redemption, asset coverage, investment company, Eagle Point Credit Company, Series F Term Preferred Stock, NYSE, underwriting agreement