Horizon Technology pays off term loan facility with Fortress Credit

By Susanna Moon

Chicago, June 17 – Horizon Technology Finance Corp. said it retired its term loan credit facility with Fortress Credit Co. LLC, an affiliate of Fortress Investment Group LLC.

As a result of the termination and prepayment of the term loan, Horizon expects to reduce its quarterly interest expense by about $300,000, or $0.03 per share, beginning with the third quarter of 2014, according to a company press release.

Horizon maintains borrowing capacity under its $50 million revolving credit facility with Key Equipment Finance Inc., which contains an accordion feature that allows boosting total loan commitments up to $150 million, the release noted.

The Key facility has an interest rate of 4%, compared with a rate of 7% for the term loan.

Horizon said it has no outstanding borrowings under the Key facility but expects to draw from the Key facility by the end of the second quarter.

Horizon said it expects to record a one-time interest expense charge of $1.9 million for the quarter ended June 30. These nonrecurring expenses consist of a non-cash expense of $1.1 million from the acceleration of unamortized debt issuance costs and a cash expense of $800,000 for a prepayment fee.

The non-recurring expenses will be partially offset by a reduction of about $700,000 of incentive fees that would otherwise have been due to the company’s adviser in the second quarter if the term loan had not been terminated.

“Horizon made the strategic decision to prepay the term loan facility in order to significantly reduce its future interest expense and better align Horizon’s total borrowing commitments with its current equity base,” Christopher M. Mathieu, the company’s senior vice president and chief financial officer, said in the press release.

“The termination of the term loan facility is expected to result in an effective interest rate on Horizon’s borrowings for the second half of 2014 of approximately 6.2%, as compared to an effective interest rate of approximately 6.9% for the first half of 2014.”

Farmington, Conn.-based Horizon is a specialty finance company that lends to and invests in development-stage companies in the technology, life science, clean-tech and health care information and services industries.

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