Eagle Point gets ‘lowest cost of funds’ ever from recent notes issue

By Devika Patel

Knoxville, Tenn., May 17 – Eagle Point Credit Co. Inc. gained the lowest cost of funds it has ever achieved in its recent offering of 6.6875% notes due 2028, the proceeds of which will be used to repay the company’s $60 million of 7% notes due 2020.

“In April, we closed on an offering of our new 6 11/16% 10-year ECCX notes,” chief executive officer Thomas P. Majewski said on the company’s first quarter ended March 31 earnings conference call on Thursday.

“These new X notes are over seven years longer than the Z notes they replace and were 31.25 basis points less expensive.

“In fact, the new notes represent the lowest cost of funds that the company has ever obtained.

“These savings will fall directly to [Eagle Point Credit’s] bottom line,” Majewski said.

The funds from the new X notes will be used to buy back the company’s $60 million of 7% ECCZ notes due 2020.

“We’ll utilize the proceeds from the ECCX offering to effectively refinance our 7% ECCZ notes next week, which will then extend the weighted average maturity of our preferred stock and unsecured notes outstanding over eight years,” Majewski said.

“Importantly, all of our financing is fixed-rate, which provides us with certainty and cost visibility, which is particularly important in a rising-rate environment,” Majewski said.

The company’s top financial officer gave a few more details about the new issue and refinancing.

“Subsequent to quarter-end, the company announced a closed and underwritten public offering of 6.6875% unsecured notes due 2028, resulting in net proceeds to the company of approximately $65 million inclusive of the partial exercise of the greenshoe,” chief operating officer and chief financial officer Kenneth Onorio added on the call.

“The company also announced it will redeem 100%, or $60 million aggregate principal amount, of its 7% 2020 ECCZ notes on May 24, effectively conducting a refinancing by using the vast majority of ECCX proceeds to fully redeem the ECCZ notes,” Onorio said.

On April 17, Eagle Point priced an upsized $60 million of 6.6875% $25-par notes due April 30, 2028 with a $9 million over-allotment option.

The deal was upsized from $50 million and settled on April 24 and the greenshoe was partially exercised for $65 million in net proceeds.

The notes may be redeemed in whole or in part beginning April 30, 2021.

The notes are listed on the New York Stock Exchange under the ticker “ECCX.”

Proceeds will be used to redeem the company’s notes due 2020. Remaining proceeds will be used to acquire investments, to make distributions to the company’s stockholders and for general working capital purposes.

Ladenburg Thalmann & Co. Inc. was the lead bookrunner for the offering. B. Riley FBR, Inc. and Oppenheimer & Co. Inc. were joint bookrunners. BB&T Capital Markets, Incapital LLC and National Securities Corp. were lead managers.

On April 24, the company said it will redeem its $59,998,750 principal amount of 7% notes due 2020 on May 24 at a redemption price of $25 plus accrued interest to but excluding the redemption date.

The company said in April that the redemption is expected to result in interest savings and also to accelerate the amortization of the remaining deferred issuance costs related to the issue of the notes, resulting in an increase in related non-cash expense in the period the notes are redeemed.

The paying agent is American Stock Transfer & Trust Co., LLC (800 937-5449).

The notes became redeemable Dec. 31, 2017 at par. The company can also redeem the notes if it fails to maintain asset coverage of at least 300%.

Eagle Point is a Greenwich, Conn.-based externally managed, non-diversified closed-end management investment company.

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