PennantPark unit closes $316.7M CLO reset, cutting borrowing costs

PennantPark Floating Rate Capital Ltd. (NYSE: PFLT) announced that its unconsolidated joint venture, PennantPark Senior Secured Loan Fund I LLC, has closed a reset of a $316.7 million debt securitization through its subsidiary, PennantPark CLO II, Ltd.

The reset extends the maturity of the replacement debt to April 2038 and establishes a four-year reinvestment period with a twelve-year final maturity. According to the company, the transaction is expected to reduce the weighted average cost of capital from SOFR + 2.31% to SOFR + 1.82%.

The securitization is structured across several note classes. The largest tranche, the A-1-R2 Notes, totals $172.5 million, representing 54.5% of the capital structure, and carries a coupon of 3-month SOFR + 1.51% with an expected AAA rating from S&P. Other tranches include AAA-rated X Notes at SOFR + 1.05%, AA-rated B-R2 Notes at SOFR + 1.90%, A-rated C-R2 Notes at SOFR + 2.45%, BBB-rated D-R2 Notes at SOFR + 4.25%, and BB-rated E-R2 Notes at SOFR + 7.50%. Preferred Shares totaling $47.7 million make up 15% of the capital structure and carry no rating.

The replacement debt is expected to be approximately 100% funded at close. PennantPark Senior Secured Loan Fund I LLC will retain the Preferred Shares and Class E-R2 Notes through a consolidated subsidiary and continues to act as retention holder in the transaction.

Arthur Penn, Chief Executive Officer, said the reset "enables us to optimize financing costs in the current market." Penn added that PennantPark Investment Advisers, LLC currently manages approximately $4 billion in middle-market securitization assets.

GreensLedge Capital Markets LLC acted as placement agent on the transaction. PennantPark Senior Secured Loan Fund I LLC is a joint venture between PennantPark Floating Rate Capital Ltd. and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation (NYSE: KMPR).

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