UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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| Item 1.01 | Entry into a Material Definitive Agreement |
Revolving Loan Agreement
On February 15, 2024, CNL Strategic Capital B, Inc. (“Borrower”), a wholly-owned subsidiary of CNL Strategic Capital, LLC (referred to herein as “we”, “us”, “our” or the “Company”) and Valley National Bank, a Tennessee banking corporation, (referred to as “Valley National Bank”) entered into a Loan and Security Agreement (the “Loan Agreement”) for a fifty million dollar ($50.0 million) revolving line of credit (the “Line of Credit”). Unless extended, the Line of Credit has a maturity date of February 15, 2025. In connection with the Line of Credit, the Borrower paid a total commitment fee to Valley National Bank of one hundred and twenty-five thousand dollars ($125,000) plus Valley National Bank expenses associated with the Line of Credit. The Borrower is required to pay interest on any borrowed amounts under the Line of Credit at a rate per year equal to the 1-Month Term secured overnight financing rate (“SOFR”) plus 2.75%. Interest payments are due on the first calendar day of the month in arrears. Furthermore, the Borrower is required to pay a quarterly unused borrowing fee at an annual rate of fifteen hundredths of one percent (0.15%) on the difference between (i) total Line of Credit amount and (ii) the aggregate average daily balance of outstanding borrowings under the Line of Credit during such quarter. The Borrower may prepay, without penalty, all or any part of the borrowings under the Loan Agreement at any time and such borrowings are required to be repaid within one hundred and eighty (180) days of the borrowing date. Under the Loan Agreement, the Company is required to comply with certain covenants including the requirement to provide certain financial and compliance reports to Valley National Bank and restrictions on incurring certain levels of additional debt by the Company.
On February 15, 2024, the Company entered into a Guaranty agreement to act as a guarantor of the Borrower’s outstanding borrowings under the Loan Agreement (the “Guaranty Agreement”). On February 15, 2024, the Borrower and the Company also entered into a pledge and assignment of bank and deposit accounts (“Pledge Agreement”) in favor of Valley National Bank. Under the Pledge Agreement, the Company is required to maintain accounts with Valley National Bank, including to contribute proceeds from the Company’s offering, as a pledge of collateral to pay down the outstanding debt to the extent there are any borrowings outstanding under the Loan Agreement. The foregoing descriptions of the Loan Agreement, the Guaranty Agreement, the Escrow Amendment, and the Pledge Agreement in this Item 1.01 do not purport to be complete in scope and are qualified in their entirety by the full text of such agreements included as exhibits and incorporated by reference herein.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item 1.01 regarding the Loan Agreement, the Guaranty Agreement, and the Pledge Agreement with Valley National Bank is incorporated by reference into this Item 2.03.
| Item 8.01 | Other Events. |
Determination of Net Asset Value for Outstanding Shares for the month ended January 31, 2024
On February 16, 2024, the board of directors (the “Board”) determined the Company’s net asset value per share for each share class in a manner consistent with the Company’s valuation policy, as described under “Determination of Net Asset Value” in this Prospectus. This table provides the Company’s aggregate net asset value and net asset value per share for its Class FA, Class A, Class T, Class D, Class I, and Class S shares as of January 31, 2024 (in thousands, except per share data):
Month Ended January 31, 2024 |
Class FA |
Class A |
Class T |
Class D |
Class I |
Class S |
Total |
| Net Asset Value | $153,262 | $180,901 | $89,064 | $88,101 | $419,927 | $65,132 | $996,387 |
| Number of Outstanding Shares | 4,179 | 5,394 | 2,651 | 2,648 | 12,342 | 1,748 | 28,962 |
| Net Asset Value, Per Share | $36.67 | $33.54 | $33.60 | $33.28 | $34.02 | $37.26 | |
| Net Asset Value, Per Share Prior Month | $36.67 | $33.57 | $33.64 | $33.31 | $34.06 | $37.25 | |
| Increase/Decrease in Net Asset Value, Per Share from Prior Month | $0.0 | ($0.03) | ($0.04) | ($0.03) | ($0.04) | $0.01 |
The change in the Company’s net asset value per share for each applicable share class for the month ended January 31, 2024 was primarily driven by the increases in the fair value of six out of thirteen of the Company’s portfolio company investments. The fair value of six of the Company’s portfolio company investments decreased during the same period. The fair value of one of the Company’s portfolio company investments did not change. As of January 31, 2024, the Company had total assets of approximately $1.01 billion.
Public Offering Price Adjustment
On February 16, 2024, the Board approved the new per share public offering price for each share class in the Company’s offering. The new public offering prices will be effective as of February 27, 2024 and will be used for the Company’s next monthly closing for subscriptions on February 29, 2024. The purchase price for Class A, Class T, Class D, and Class I shares purchased under our distribution reinvestment plan will be equal to the net asset value per share for each share class as of January 31, 2024. The following table provides the new public offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in this offering:
Class A |
Class T |
Class D |
Class I | |
| Public Offering Price, Per Share | $36.66 | $35.28 | $33.28 | $34.02 |
| Selling Commissions, Per Share | $2.20 | $1.06 | ||
| Dealer Manager Fees, Per Share | $0.92 | $0.62 |
We have also posted this information on our website at www.cnlstrategiccapital.com. A subscriber may also obtain this information by calling us by telephone at (866) 650-0650.
Declaration of Distributions
On February 16, 2024, the Board declared cash distributions on the outstanding shares of all classes of our common shares based on a monthly record date, as set forth below:
| Distribution Record Date | Distribution Payment Date |
Declared Distribution Per Share for Each Share Class | |||||
| Class FA | Class A | Class T | Class D | Class I | Class S | ||
| March 26, 2024 | March 27, 2024 | $0.104167 | $0.104167 | $0.083333 | $0.093750 | $0.104167 | $0.104167 |
Return Information
The following table illustrates year-to-date (“YTD”), trailing 12 months (“1-Year Return”), 3-Year Return, 5-year Return, Average Annual Return (“AAR”) Since Inception, and cumulative total returns through January 31, 2024 (“Cumulative Total Return”), with and without upfront sales load, as applicable:
| YTD Return(1) | 1-Year Return(2) | 3-Year Return(3) | 5-Year Return(4) |
AAR Since Inception(5) | Cumulative Total Return(5) | Cumulative Return Period | |
| Class FA (no sales load) | 0.3% | 7.3% | 33.2% | 67.1% | 14.3% | 85.3% | February 7, 2018 – January 31, 2024 |
| Class FA (with sales load) | -6.2% | 0.4% | 24.5% | 56.2% | 12.2% | 73.2% | February 7, 2018 – January 31, 2024 |
| Class A (no sales load) | 0.2% | 6.2% | 28.9% | 57.3% | 12.4% | 72.3% | April 10, 2018 – January 31, 2024 |
| Class A (with sales load) | -8.3% | -2.8% | 17.9% | 43.9% | 9.9% | 57.6% | April 10, 2018 – January 31, 2024 |
| Class I | 0.2% | 6.3% | 29.2% | 58.5% | 12.8% | 74.1% | April 10, 2018 – January 31, 2024 |
| Class T (no sales load) | 0.1% | 5.6% | 26.6% | 50.5% | 10.9% | 62.3% | May 25, 2018 – January 31, 2024 |
| Class T (with sales load) | -4.6% | 0.6% | 20.6% | 43.3% | 9.6% | 54.6% | May 25, 2018 – January 31, 2024 |
| Class D | 0.2% | 6.2% | 28.9% | 54.7% | 11.4% | 63.9% | June 26, 2018 – January 31, 2024 |
| Class S (no sales load) | 0.3% | 7.8% | 35.6% | N/A | 14.7% | 56.5% | March 31, 2020 – January 31, 2024 |
| Class S (with sales load) | -3.2% | 4.0% | 30.9% | N/A | 13.3% | 51.0% | March 31, 2020 – January 31, 2024 |
(1) For the period from January 1, 2024 through January 31, 2024.
(2) For the period from February 1, 2023 through January 31, 2024.
(3) For the period from February 1, 2021 through January 31, 2024.
(4) For the period from February 1, 2019 through January 31, 2024.
(5) For the period from the date the first share was issued for each respective share class through January 31, 2024. The AAR Since Inception is calculated by taking the Cumulative Total Return and dividing it by the return period.
Total return is calculated for each share class as the change in the net asset value for such share class during the period and assuming all distributions are reinvested. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. For details regarding applicable sales load, please see the “Plan of Distribution” section in the Company’s Prospectus. Class I and Class D shares have no upfront sales load.
For the month to date period ended January 31, 2024, sources of declared distributions on a GAAP basis were as follows:
Month Ended January 31, 2024 | ||||||||
Amount (in 000s) | % of Total Distributions Declared | |||||||
| Net investment income1 | $ | 1,875 | 65.1 | % | ||||
| Distributions in excess of net investment income2 | 1,003 | 34.9 | % | |||||
| Total distributions declared | $ | 2,878 | 100.0 | % | ||||
Cash distributions net of distributions reinvested during the period presented were funded from the following sources:
Month Ended January 31, 2024 | ||||||||
Amount (in 000s) | % of Cash Distributions Net of Distributions Reinvested | |||||||
| Net investment income before expense support (reimbursement) | $ | 1,854 | 119.1 | % | ||||
| Expense support (reimbursement) | 21 | 1.3 | % | |||||
| Net investment income | $ | 1,875 | 120.4 | % | ||||
| Cash distributions net of distributions reinvested3 | $ | 1,557 | 100.0 | % | ||||
1 Net investment income includes expense support net due to the Manager and Sub-Manager of $21 for the month ended January 31, 2024.
2 Consists of distributions made from offering proceeds for the period presented.
3 For the month ended January 31, 2024, excludes $1,321 of distributions reinvested pursuant to our distribution reinvestment plan.
For the years ended December 31, 2023, 2022, 2021, 2020, 2019, and 2018 distributions were paid from multiple sources and these sources included net investment income before expense support of 76.9%, 76.3%, 65.2%, 42.3%, 61.7%, and 85.2%, reimbursable expense support of 0.0%, 0.0%, 0.0%, 33.2%, 23.5% and 11.1%, and offering proceeds of 23.1%, 23.7%, 34.8%, 24.5%, 14.8% and 3.7%, respectively. The Company will be required to repay expense support to the Manager and Sub-Manager in future periods which may reduce future income available for distributions, however, as of the date of this Current Report, management believes that reimbursement of all expense support is not probable under the terms of the Expense Support and Conditional Reimbursement Agreement. For additional information regarding sources of distributions, please see the annual and quarterly reports the Company files with the Securities and Exchange Commission.
We have also posted this information on our website at www.cnlstrategiccapital.com. A subscriber may also obtain this information by calling us by telephone at (866) 650-0650. The calculation of the Company’s net asset value is a calculation of fair value of the Company’s assets less the Company’s outstanding liabilities.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit Number | Description |
| 10.1 | Loan and Security Agreement dated February 15, 2024 by and between CNL Strategic Capital B, Inc. and Valley National Bank (Filed herewith.) |
| 10.2 | The Pledge and Assignment of Bank and Deposit Accounts Agreement dated February 15, 2024 by and between the Company and Valley National Bank (Filed herewith.) |
| 10.3 | Guaranty Agreement dated February 15, 2024 by and between the Company and Valley National Bank (Filed herewith.) |
Cautionary Note Regarding Forward-Looking Statements
Statements in this Current Report on Form 8-K, including intentions, beliefs, expectations or projections relating to the items described herein, are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on the beliefs and assumptions of the Company’s management and on the information currently available to management at the time of such statements. Forward-looking statements generally can be identified by the words “believes,” “expects,” “intends,” “plans,” “will,” “estimates” or similar expressions that indicate future events. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. Any forward-looking statement made by us in this Current Report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Important risks, uncertainties and factors that could cause actual results to differ materially from those in the forward-looking statements include the risks associated with the Company’s ability to pay distributions and the sources of such distribution payments, the Company’s ability to locate and make suitable investments, the economy and the broader financial markets, which may have a significant negative impact on the Company's (and its businesses) financial condition, results of operations, cash flows and net asset value per share and other risks described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and the other documents filed by the Company with the Securities and Exchange Commission.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: February 20, 2024 | CNL Strategic Capital, LLC a Delaware limited liability company | ||
| By: | /s/ Chirag J. Bhavsar | ||
Chirag J. Bhavsar Chief Executive Officer |