DEF: Franklin BSP Capital Corporation Seeks Stockholder Approval for Below NAV Share Issuance at 2025 Annual Meeting

Franklin BSP Capital Corporation is asking stockholders to approve the potential issuance of up to 25% of its common stock below net asset value (NAV) at the upcoming annual meeting on June 6, 2025.

Summary

• Franklin BSP Capital Corporation (FBCC) is holding its 2025 Annual Meeting of Stockholders virtually on June 6, 2025.
• Stockholders will vote on the election of directors and a proposal to authorize the company to sell up to 25% of its common stock below its net asset value (NAV) per share.
• The record date for determining stockholders eligible to vote is April 7, 2025.
• As of the record date, there were approximately 136,195,754 shares of common stock and 77,500 shares of Series A preferred stock outstanding.
• The board of directors recommends voting for the election of the director nominees and for the authorization to sell shares below NAV.
• The company is seeking authorization to sell shares below NAV to maintain access to capital, especially during volatile market conditions.
• As of December 31, 2024, the company had $1.4 billion in borrowings outstanding on its credit facilities and $698.4 million outstanding on its unsecured notes.
• The company has met its asset coverage and RIC distribution requirements.
• Any sale of Common Stock at a price below NAV will result in an immediate dilution to existing common stockholders.

Sentiment

Score: 6

Explanation: The document is neutral in tone, primarily presenting information about the upcoming annual meeting and proposals for stockholder vote. The potential dilution from selling shares below NAV is a concern, but the company emphasizes the need for flexibility in accessing capital.

Positives

• The company is seeking flexibility to access capital markets, which could allow it to take advantage of attractive investment opportunities.
• The company has met its asset coverage and RIC distribution requirements.
• The board of directors has a process for overseeing risk management, including through the Audit Committee, Nominating and Corporate Governance Committee, and Compensation Committee.
• The company has co-investment relief from the SEC, allowing it to co-invest with affiliates under certain conditions.

Negatives

• Selling shares below NAV would dilute the value of existing shares.
• There is no maximum discount on the amount of dilution of NAV that may be incurred in connection with this proposal.
• If current stockholders of the company do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then -current NAV, their voting power will be diluted.

Risks

• Disruptions, uncertainty, and volatility in the capital markets could limit access to capital.
• An unfavorable shift in market dynamics or underperforming assets could lower the determination of fair value and therefore proportionately increase the value of balance sheet debt compared to assets.
• Exceeding the approximate 2:1 debt to equity ratio could have severe negative consequences for a BDC, including the inability to pay dividends, breach of debt covenants and failure to qualify for tax treatment as a RIC.

Future Outlook

The company seeks stockholder approval to maintain flexibility for future sales of common stock, which typically must be undertaken quickly, to grow over time and to continue to pay dividends to stockholders.

Management Comments

• Richard J. Byrne, Chairman and Chief Executive Officer, will report on the progress of the Company and answer stockholders questions at the Annual Meeting.
• The Board believes it is in the best interests of stockholders to allow the Company flexibility to issue its Common Stock at a price below NAV in certain instances.

Industry Context

BDCs like Franklin BSP Capital Corporation seek to obtain approval to issue shares of Common Stock at a price below the current NAV in order to maintain consistent access to capital.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards.
• However, it mentions that BDCs must maintain an asset coverage ratio of at least 150%, which is a regulatory requirement under the 1940 Act.
• The document also mentions that the company intends to elect to be treated as a regulated investment company (RIC) under the Internal Revenue Code, which requires meeting certain source of income and asset diversification requirements.

Related Party Transactions

• The company has an Investment Advisory Agreement with Franklin BSP Capital Adviser L.L.C., under which the Adviser manages the day-to-day operations and provides investment advisory services.
• The company pays the Adviser a base management fee and an incentive fee.
• The company has an Administration Agreement with BSP, under which the Administrator provides office facilities and administrative services.
• The company has co-investment relief from the SEC, allowing it to co-invest with affiliates under certain conditions.

Stakeholder Impact

• Approval of the proposal to sell shares below NAV could dilute the value of existing stockholders' shares.
• However, the company argues that maintaining access to capital is important for the long-term benefit of all stakeholders, including stockholders.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold its Annual Meeting of Stockholders on June 6, 2025.
• The Board of Directors will consider the outcome of the vote on the proposal to sell shares below NAV and make decisions accordingly.

Key Dates

Keywords

proxy statement, annual meeting, below NAV, stock issuance, directors, Franklin BSP Capital Corporation, FBCC, stockholders, NAV, dilution