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  • bjfcpainc bjfcpainc Sep 11, 2012 2:06 PM Flag

    PSEC Files 9.75 Million SPO With KeyBanc

    Isn't an equity distribution agreement different than an SPO? I thought this might be a private placement with Keybanc customers.

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    • If it is, they won't need to conduct an SPO. Maybe my terminology is wrong.
      They also filed to sell $6M in bonds and an undisclosed amount in Senior Notes.

      • 1 Reply to rlp2451
      • Standby Equity Distribution Agreements (I learned something today! These are fairly new and if they are successful, I can see more companies going this route.)

        The Standby Equity Distribution Agreement is a recently developed financing mechanism for publicly traded companies.

        The Standby Equity Distribution Agreement is a compelling alternative to the traditional equity private placement or secondary offering. Under the structure, your firm will receive a firm commitment to purchase an agreed dollar amount of the Company’s shares. The facility would be available up to 2 years, renewable thereafter. The program is entirely controlled by the Company (as opposed to the investor).

        The Standby Equity Distribution Agreement provides the Company with the right but not the obligation to draw down on the facility. In contrast to a traditional secondary, the Company would be able to raise capital at various "snap shots" or tranches (mini-secondaries) in the future, at prices the Company deems appropriate. This is a significant improvement in flexibility compared to a debt or convertible structure in which price/conversion is controlled by the investor.

        Benefits of a Standby Equity Distribuion Agreement:

        Control
        Under a Standby Equity Distribution Agemment, your Company retains at all times complete control over the amount and the timing of each draw down (mini-secondary) on the Standby Agreement

        Company can ask buyer to buy shares at any time, regardless of market conditions.

        Company has the right to sell shares and buyer has the obligation to buy shares

        Total Flexibility tailored made structure to match a company's unique financial needs

        Standby Equity Distribution Agreement can be executed in virtually all market conditions

        Company can set a minimum acceptable price

        Less Dilution
        A company can raise more capital for less shares over a period of price strength

        No Overhang - shares are issued as the company determines, no uncertainty regarding dilution
        Certainty

        Company is not committed to sell any shares.
        Buyer remains commited for the full 2 year period of the Standby Agreement

        Firm Commitment - eliminates financing uncertainty so management can focus on its business
        Lower cost - Significantly lower cost funding mechanism than other traditional financing structures.

        Speed
        Company can take instant advantage of a favorable stock price / chart
        Less implementation risk

        Significantly reduces time to market compared with other forms of financing
        Market Timing
        Once the Standby Equity Distribution Agreement has been registered with the SEC, the company is in a position to take advantage of periods of price strength by immediately executing a draw down on the Standby Agreement, instead of incurring the risk of losing a favourable market window to raise capital given the much longer time it takes to organize a secondary offering.

        No Short Selling or Hedging by Buyer

        Buyer and its affiliates shall covenant not to cause or engage in, in any manner whatsoever, any direct or indirect short selling or hedging of the securities of a partner company. Buyer and its affiliates shall represent and warrant to the partner company that at no time in the past has Buyer or any of its affiliates caused or engaged in, in any manner whatsoever, any direct or indirect short selling or hedging of the securities of a partner company.

 
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