Fifth Street Finance Raises $87 Million For MM Lending

Today Fifth Street Finance, a lower middle market business development corporation (BDC), has hoisted itself squarely into the proper middle market with a secondary offering worth $87.8 million. The official press release is below. I caught three quick questions with with Fifth Street’s CEO Len Tannenbaum on the offering and his outlook for middle market lending.

What will you use the proceeds of your offering for?

We’ve use $16 million of it to pay down debt and the balance to fund the equity for our potential SBA (Small Business Administration) facility. We applied for our SBA license in November and are entering the end of the approval process. We hope to receive the license in the fall. The license requires $75 million of capital to get $150 million of leverage. So to fund that, we raised the equity.

We’re still working on a large multi-year credit line to add to that. It’ll be a combination of new credit and new equity. We’re working with two large banks but one is more likely than the other to come through. We haven’t closed that yet, but expect to have our credit situation solved in the next 69 to 90 days, as well as our license. Right now our portfolio is $300 million; this will take it to $600 million.

What if the license doesn’t come through?

We’ll just invest the capital.

What are you seeing in your competitive landscape as far as deals go?

We have the opportunity to add to our roster of sponsors. The other opportunity for us to to add real “A-grade” players to our team from good competitors who are exiting the market. That talent pool that we can pick off from now that we have capital will quickly enhance Fifth Street’s roster. The ability for us to get to $2 billion in there.

Here is the full press release:
Fifth Street Finance Corp. (NYSE:FSC) today announced that it has completed a public offering of 9,487,500 shares of common stock, which included the underwriters’ full exercise of their option to purchase up to 1,237,500 shares of common stock, at a price of $9.25 per share, raising approximately $87.8 million in gross proceeds. All shares were offered by Fifth Street Finance Corp. Wells Fargo Securities, LLC and UBS Investment Bank served as joint book-running managers for the offering and Stifel, Nicolaus & Company, Incorporated served as a joint lead manager.
Fifth Street Finance Corp. intends to use $16.5 million of the net proceeds from the offering to repay its outstanding borrowings under its credit facility with Bank of Montreal, and will use substantially all of the remaining net proceeds to make investments in small and mid-sized companies (including investments made through its small business investment company subsidiary to the extent that it receives a small business investment company license from the Small Business Administration) in accordance with its investment objective and strategies, pay its operating expenses and dividends to its stockholders and for general corporate purposes.
About Fifth Street Finance Corp.
Fifth Street Finance Corp. is a specialty finance company that lends to and invests in small and mid-sized companies in connection with an investment by private equity sponsors. Fifth Street Finance Corp.’s investment objective is to maximize its portfolio’s total return by generating current income from its debt investments and capital appreciation from its equity investments.
The Fifth Street Finance Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5525
Forward-Looking Statements
This press release may contain certain forward-looking statements, including statements with regard to the future performance of Fifth Street Finance Corp. Words such as “believes,” “expects,” “projects,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and these factors are identified from time to time in our filings with the Securities and Exchange Commission. Fifth Street Finance Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.