DEF 14A: Franklin BSP Capital Corporation to Hold Virtual Annual Meeting, Seeks Approval for Stock Issuance Below NAV

Franklin BSP Capital Corporation will hold its 2024 Annual Meeting of Stockholders virtually on June 7, 2024, seeking stockholder approval to elect directors and authorize the issuance of common stock below net asset value (NAV).

Summary

• Franklin BSP Capital Corporation (FBCC) is holding its 2024 Annual Meeting of Stockholders virtually on June 7, 2024, at 11 a.m. Eastern Time.
• Stockholders will vote on the election of one director to the Board of Directors, and holders of preferred stock will vote separately to elect one director.
• A key proposal is to authorize the company to sell or issue up to 25% of its outstanding common stock at a price below the then-current net asset value (NAV) per share, subject to Board approval.
• The Board of Directors recommends voting FOR the election of Richard J. Byrne and Lee S. Hillman as directors.
• The Board also recommends voting FOR the authorization to sell shares below NAV.
• The record date for determining stockholders eligible to vote is April 4, 2024.
• As of the record date, there were approximately 136,328,054 shares of common stock and 77,500 shares of Series A preferred stock outstanding and entitled to vote.
• Broadridge Investor Communication Solutions, Inc. has been retained to aid in the solicitation of proxies for a fee of approximately $550,000, plus reimbursement for certain costs and out-of-pocket expenses.
• The company is seeking authorization to issue shares below NAV to maintain financial flexibility and access capital, especially during volatile market conditions.
• The company had $322.0 million in borrowings outstanding on its credit facilities and $0 outstanding on its unsecured notes as of December 31, 2023.
• The company has met its asset coverage and RIC distribution requirements.

Sentiment

Score: 6

Explanation: The document is primarily informational, outlining routine corporate governance matters and a proposal to authorize the issuance of common stock below NAV. While the potential dilution from issuing shares below NAV is a concern, the company presents it as a necessary measure for financial flexibility.

Positives

• The company is taking proactive steps to ensure access to capital by seeking authorization to issue shares below NAV.
• The Board of Directors is actively involved in overseeing risk management.
• The company has established an Audit Committee, a Nominating and Corporate Governance Committee, and a Compensation Committee.
• The company has met its asset coverage and RIC distribution requirements.

Negatives

• Issuing shares below NAV will result in immediate dilution to existing stockholders.
• There is no maximum discount on the amount of dilution of NAV that may be incurred in connection with this proposal.
• The amount of dilution of NAV that may be incurred could be substantial.

Risks

• Market volatility could impact the company's ability to access capital on favorable terms.
• 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.
• Failure to obtain stockholder approval for the proposal to issue shares below NAV could limit the company's financial flexibility.
• The company's ability to grow over time and to continue to pay dividends to stockholders could be adversely affected if the Company were unable to access the capital markets as attractive investment opportunities arise.

Future Outlook

The company seeks to maintain financial flexibility and access capital to pursue investment opportunities and continue paying dividends to stockholders.

Management Comments

• Richard J. Byrne, Chairman and CEO, invites stockholders to attend the virtual Annual Meeting and report on the progress of the Company.
• The Board of Directors believes that the combined role of chairman and chief executive officer, together with our independent directors, is in our best interest because it provides the appropriate balance between strategic development and independent oversight of management.

Industry Context

Business Development Companies (BDCs) often seek authorization to issue shares below NAV to maintain access to capital, particularly during periods of market volatility. This is a common practice in the BDC industry to manage asset coverage ratios and fund investment activities.

Comparison to Industry Standards

• Other BDCs, such as Ares Capital Corporation (ARCC) and Main Street Capital Corporation (MAIN), also periodically seek stockholder approval to issue shares below NAV.
• This practice allows BDCs to maintain financial flexibility and capitalize on investment opportunities even when their stock price trades below NAV.
• The specific terms and conditions of such authorizations can vary among BDCs, but the underlying rationale is generally consistent.

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 Benefit Street Partners L.L.C., under which the Administrator provides office facilities and administrative services.
• The SEC staff has granted affiliates of our Adviser exemptive relief that allows us to enter into certain negotiated co-investment transactions alongside other funds managed by the Adviser or its affiliates.

Stakeholder Impact

• Stockholders may experience dilution if the company issues shares below NAV.
• The company's ability to access capital and pursue investment opportunities could impact its long-term performance and dividend payments.
• Employees of the Adviser and Administrator may be affected by changes in the company's operations and financial performance.

Next Steps

• Stockholders should review the proxy materials and vote on the proposals.
• The company will hold its Annual Meeting on June 7, 2024, to conduct the business outlined in the proxy statement.
• The Board of Directors will consider the outcome of the vote on the proposal to issue shares below NAV and make decisions accordingly.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Stockholders, Board of Directors, Common Stock, Preferred Stock, NAV, Director Election, Franklin BSP Capital Corporation, Share Issuance