Fifth Street Finance Corp. (FSC) announced the pricing of its public offering of $159.8 million aggregate principal amount of 15.5 million shares of its common stock at a price of $10.31 per share. All the shares were offered by Fifth Street. Moreover, the company has given underwriters an option to purchase upto an additional 2,325,000 shares of common stock.
JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), The Goldman Sachs Group, Inc. (GS), Wells Fargo Securities, Barclays and Deutsche Bank Securities are serving as lead book-running managers for the offering.
The offering, which is expected to close on Sep 26, 2013, is subject to certain customary closing conditions. The latest capital raising initiative will help the company reduce its total debt burden under credit facilities to some extent. Further, the proceeds can be used for general corporate purposes.
As of Jun 30, 2013, Fifth Street had $216.0 million of borrowings outstanding under credit facilities, $115.0 million of convertible notes payable, $161.3 million of unsecured notes payable and unfunded commitments of $147.5 million.
Despite a sluggish economic recovery, Fifth Street recorded a rise in investment income in third-quarter fiscal 2013. Moreover, net asset value per share stood at $9.90 as of Jun 30, 2013, as compared with $9.85 in the prior-year period.
In spite of the volatile capital markets affecting valuations of the investment portfolio in the quarter, the overall underlying performance of Fifth Street’s portfolio companies continue to remain a positive. Management not only anticipates an improvement in the portfolio along with an economic recovery but also expects to post a better book value. Moreover, the recent capital raising will help Fifth Street enhance capital ratios and therefore pursue growth and acquisition opportunities.
Though the improved portfolio performance is expected to continue with the economic recovery, we believe the low interest rate environment and global cues might act as headwinds in the upcoming quarters. Currently, Fifth Street carries a Zacks Rank #5 (Strong Sell).