UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
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Securities Exchange Act of 1934
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Item 1.01. Entry into a Material Definitive Agreement.
On May 23, 2024 (the “Closing Date”), Palmer Square Capital BDC Inc. (the “Company”) completed a $400.5 million term debt securitization (the “CLO Transaction”), also known as a collateralized loan obligation, in connection with which a wholly-owned indirect subsidiary of the Company issued the Notes (as defined below). The CLO Transaction functions as a source of long-term balance sheet financing for a portion of the Company’s portfolio investments and, as a result, the Notes issued in connection with the CLO Transaction are subject to the Company’s regulatory asset coverage requirement.
The notes offered in the CLO Transaction were issued by Palmer Square BDC CLO 1, Ltd. (the “Issuer”), an exempted company incorporated with limited liability under the laws of the Cayman Islands and a wholly-owned indirect subsidiary of the Company, and consist of (i) $232 million of AAA Class A Notes due 2037, which bear interest at the forward-looking term rate based on the secured overnight financing rate (“Term SOFR”) plus 1.60% (the “Class A Notes”); (ii) $58 million of AA Class B-1 Notes due 2037, which bear interest at Term SOFR plus 2.15% (the “Class B-1 Notes”); and (iii) $10 million of AA Class B-2 Notes due 2037, which bear interest at a fixed rate of 6.33% (the “Class B-2 Notes” and, together with the Class A Notes and the Class B-1 Notes, the “Secured Notes”). Additionally, on the Closing Date the Issuer issued $100.5 million of Subordinated Notes due 2037 (the “Subordinated Notes”), which do not bear interest but are entitled to all of the principal and interest payments made on the loan portfolio held by the Issuer, net of interest and principal payments distributed to the holders of the Secured Notes. The Secured Notes together with the Subordinated Notes are collectively referred to herein as the “Notes.”
On the Closing Date and in connection with the CLO Transaction, the Issuer and the Company entered into a note purchase agreement (the “Purchase Agreement”) with BofA Securities, Inc., as the initial purchaser (the “Initial Purchaser”), pursuant to which the Initial Purchaser purchased the Secured Notes issued pursuant to an indenture as part of the CLO Transaction. The Company acquired all of the Subordinated Notes issued in the CLO Transaction.
The CLO Transaction is backed by a diversified portfolio of senior secured loans or participation interests therein with the potential for investment in second lien loans or participation interests therein, corporate bonds or loans made to a debtor-in-possession pursuant to Section 364 of the Bankruptcy Code having the priority allowed by either Section 364(c) or 364(d) of the Bankruptcy Code and fully secured by senior liens or participation interests therein, which is managed by the Company as collateral manager pursuant to a collateral management agreement entered into with the Issuer on the Closing Date (the “Collateral Management Agreement”). The Company has agreed to irrevocably waive all collateral management fees payable to it so long as it is the collateral manager under the Collateral Management Agreement. The Notes are scheduled to mature on July 15, 2037; however, the Notes may be redeemed by the Issuer, at the written direction of (i) a majority of the Subordinated Notes (with the consent of the Company, in the case of the Secured Notes) or (ii) the Company, in each case, on any business day on or after July 15, 2026.
The Secured Notes are the secured obligations of the Issuer, the Subordinated Notes are the unsecured obligations of the Issuer, and the indenture governing the Notes include customary covenants and events of default. The Notes have not been, and will not be, registered under the Securities Act of 1933, as amended, or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from registration.
The descriptions of the documentation related to the CLO Transaction contained in this Current Report on Form 8-K do not purport to be complete and are qualified in their entirety by reference to the underlying agreements, attached hereto as Exhibits 10.1, 10.2 and 10.3, incorporated into this Current Report on Form 8-K by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Palmer Square Capital BDC Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PALMER SQUARE CAPITAL BDC INC. | ||
| Date: May 23, 2024 | By: | /s/ Jeffrey D. Fox |
| Name: | Jeffrey D. Fox | |
| Title: | Chief Financial Officer | |
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