HomeNews UpdateSound Point Meridian Announces $100 Million Net Asset Value Credit Facility
Sound Point Meridian Announces $100 Million Net Asset Value Credit Facility
July 10, 2024
Sound Point Meridian Capital (NYSE: SPMC) has secured a $100 million revolving credit facility, up to $125 million, from Canadian Imperial Bank of Commerce (CIBC). This facility is secured by a first lien on substantially all of the Company’s assets, including eligible portfolio investments. The funds will be used for investing activities, working capital and general corporate purposes.
The loans bear interest at either the term SOFR plus a margin of 3.75% or an alternative base rate plus a margin of 2.75%. Initially, the loan must be taken at the term SOFR rate, but can be converted to the alternative rate under certain conditions. The credit facility expires on July 8, 2026 and can be extended for up to 364 days.
Positive
Sound Point Meridian Capital has secured a $100 million revolving credit facility with an option to increase to $125 million.
The credit facility is secured by a first priority lien on substantially all of the Company’s assets.
The funds can be used for investment activities, working capital and general corporate purposes.
Negative
The loans are subject to a significant interest rate spread of 3.75% for fixed-term SOFR and 2.75% for the alternative base rate.
The credit line is almost entirely secured by the company’s assets, which poses a risk if the company gets into financial difficulties.
Announcement from Sound Point Meridian Capital, Inc. 100 million US dollars revolving credit facility is a remarkable development. The use of a Net Asset Value (NAV) Credit facilities provide the company with flexibility in managing its liquidity. NAV credit facilities are typically used by investment companies to leverage their assets. This can increase returns but also carries a higher risk.
The interest rates associated with this facility are based on SOFR plus 3.75% or alternative base interest rate plus 2.75%. SOFR or Secured Overnight Financing Rate is a reference interest rate for dollar-denominated derivatives and loans that is considered a reliable measure of the daily cost of borrowing. Given the current interest rate development, these rates are in line with market expectations.
An important detail is that the system can be expanded to include 364 daysThis provides the company with the opportunity for longer-term liquidity support. However, the use of such borrowed funds for working capital or general purposes rather than specific high-return investments may raise questions about the company’s short-term cash flow needs.
From a retail investor’s perspective, this credit facility is a double-edged sword. It provides liquidity and the potential for higher investment returns, but it also increases leverage and the associated financial risk. Investors should pay attention to how effectively Sound Point deploys this capital and whether it translates into tangible returns.
Sound Point Meridian’s new 100 million US dollars Credit facility is in line with current trends in the investment management industry. Many investment firms use credit facilities to maximize the return on their portfolios. The possibility of increasing this facility to 125 million US dollars gives Sound Point additional scope to take advantage of attractive investment opportunities.
However, the key issue remains how exactly these funds are being used. If the borrowed funds are being used effectively to take advantage of high-yield investment opportunities, the company could experience significant growth. Conversely, if the funds are being used primarily to bolster working capital, this may indicate underlying cash flow pressures.
The secured nature of this credit line with senior interest in the Company’s assets provides some security to creditors, but also means that investors must be aware of the potential risks if the Company’s investments do not perform as expected. Overall, the effectiveness of this credit line will depend on Sound Point’s ability to generate returns in excess of the cost of borrowings.
Provides liquidity for investments, working capital and general corporate purposes
NEW YORK–(BUSINESS WIRE)– Sound Point Meridian Capital, Inc. (NYSE: SPMC), a closed-end investment company registered as an investment company under the Investment Company Act of 1940, as amended (the “Company”), today announced that it has 100 million US dollars “Net Asset Value” revolving credit facility with Canadian Imperial Bank of Commerce (“CIBC”) as lender and administrative agent, which may be increased up to 125 million US dollars pursuant to the terms of this credit facility (the “CIBC Credit Facility”). The CIBC Credit Facility is secured by a first priority perfected security interest in substantially all of the assets of the Company, including, without limitation, all of the Company’s permitted portfolio investments, subject to certain exceptions.
Borrowings under the CIBC Credit Facility may be used for the Company’s investing activities, working capital and general corporate purposes. Borrowings under the CIBC Credit Facility are financed at either (i) the term SOFR plus a margin of 3.75% per year, or (ii) the alternative base rate plus a margin of 2.75% per year. The Company can only borrow at the SOFR rate at the time of drawdown, but the loans can be converted to interest at the alternative base rate under certain conditions.
The term of the CIBC Credit Facility is July 8, 2026 and may be extended for an additional 364 days in accordance with its terms.
about the company
The Company is an externally managed, non-diversified closed-end investment company. The Company’s investment objective is to achieve high current income, with a secondary objective of achieving capital appreciation, by investing primarily in equity of third party collateralized loans (“CLOs”) and mezzanine tranches of predominantly US Dollar-denominated CLOs backed by corporate loans primarily issued to US Debtor. The company is externally managed and advised by Sound Point Meridian Management Company, LLC, a Delaware Limited liability company. The company’s public records are available free of charge by writing to the company at 375 Park Avenue, 34th floor. New York, New York 10152, Attention: Investor Relations, or by telephone at (833) 217-6665.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements included in this press release that are not historical facts may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the Company’s prospectus and other filings with the Securities Exchange Commission. The Company undertakes no obligation to update any forward-looking statements made herein. All forward-looking statements speak only as of the date of this press release.
NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
View original version on businesswire.com: https://www.businesswire.com/news/home/20240709388936/en/
Investor relations:
Garrett Edson – ICR; Julie Smith – Sound Point Capital
Sound Point Meridian Announces $100 Million Net Asset Value Credit Facility
Sound Point Meridian Capital (NYSE: SPMC) has secured a $100 million revolving credit facility, up to $125 million, from Canadian Imperial Bank of Commerce (CIBC). This facility is secured by a first lien on substantially all of the Company’s assets, including eligible portfolio investments. The funds will be used for investing activities, working capital and general corporate purposes.
The loans bear interest at either the term SOFR plus a margin of 3.75% or an alternative base rate plus a margin of 2.75%. Initially, the loan must be taken at the term SOFR rate, but can be converted to the alternative rate under certain conditions. The credit facility expires on July 8, 2026 and can be extended for up to 364 days.
Positive
Negative
Announcement from Sound Point Meridian Capital, Inc.100 million US dollars revolving credit facility is a remarkable development. The use of a Net Asset Value (NAV) Credit facilities provide the company with flexibility in managing its liquidity. NAV credit facilities are typically used by investment companies to leverage their assets. This can increase returns but also carries a higher risk.
The interest rates associated with this facility are based on SOFR plus 3.75% or alternative base interest rate plus 2.75%. SOFR or Secured Overnight Financing Rate is a reference interest rate for dollar-denominated derivatives and loans that is considered a reliable measure of the daily cost of borrowing. Given the current interest rate development, these rates are in line with market expectations.
An important detail is that the system can be expanded to include 364 daysThis provides the company with the opportunity for longer-term liquidity support. However, the use of such borrowed funds for working capital or general purposes rather than specific high-return investments may raise questions about the company’s short-term cash flow needs.
From a retail investor’s perspective, this credit facility is a double-edged sword. It provides liquidity and the potential for higher investment returns, but it also increases leverage and the associated financial risk. Investors should pay attention to how effectively Sound Point deploys this capital and whether it translates into tangible returns.
Sound Point Meridian’s new100 million US dollars Credit facility is in line with current trends in the investment management industry. Many investment firms use credit facilities to maximize the return on their portfolios. The possibility of increasing this facility to 125 million US dollars gives Sound Point additional scope to take advantage of attractive investment opportunities.
However, the key issue remains how exactly these funds are being used. If the borrowed funds are being used effectively to take advantage of high-yield investment opportunities, the company could experience significant growth. Conversely, if the funds are being used primarily to bolster working capital, this may indicate underlying cash flow pressures.
The secured nature of this credit line with senior interest in the Company’s assets provides some security to creditors, but also means that investors must be aware of the potential risks if the Company’s investments do not perform as expected. Overall, the effectiveness of this credit line will depend on Sound Point’s ability to generate returns in excess of the cost of borrowings.
Provides liquidity for investments, working capital and general corporate purposes
Borrowings under the CIBC Credit Facility may be used for the Company’s investing activities, working capital and general corporate purposes. Borrowings under the CIBC Credit Facility are financed at either (i) the term SOFR plus a margin of3.75% per year, or (ii) the alternative base rate plus a margin of 2.75% per year. The Company can only borrow at the SOFR rate at the time of drawdown, but the loans can be converted to interest at the alternative base rate under certain conditions.
The term of the CIBC Credit Facility is July 8, 2026 and may be extended for an additional 364 days in accordance with its terms.
about the company
The Company is an externally managed, non-diversified closed-end investment company. The Company’s investment objective is to achieve high current income, with a secondary objective of achieving capital appreciation, by investing primarily in equity of third party collateralized loans (“CLOs”) and mezzanine tranches of predominantlyUS Dollar-denominated CLOs backed by corporate loans primarily issued to US Debtor. The company is externally managed and advised by Sound Point Meridian Management Company, LLC, a Delaware Limited liability company. The company’s public records are available free of charge by writing to the company at 375 Park Avenue, 34th floor. New York, New York 10152, Attention: Investor Relations, or by telephone at (833) 217-6665.
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements included in this press release that are not historical facts may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the Company’s prospectus and other filings with the Securities Exchange Commission. The Company undertakes no obligation to update any forward-looking statements made herein. All forward-looking statements speak only as of the date of this press release.
NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
View original version on businesswire.com: https://www.businesswire.com/news/home/20240709388936/en/
Investor relations:
Garrett Edson – ICR; Julie Smith – Sound Point Capital
(833) 217-6665
[email protected]
www.soundpointmeridiancap.com
Source: Sound Point Meridian Capital, Inc.
FAQ
What is the amount of the credit facility secured by Sound Point Meridian Capital?
Sound Point Meridian Capital secured a $100 million credit facility, which can be increased to $125 million.
What is the interest rate on Sound Point Meridian Capital’s credit facility?
The interest rate corresponds to either the term SOFR plus a margin of 3.75% or an alternative base interest rate plus a margin of 2.75%.
What is the maturity date for the Sound Point Meridian Capital credit facility?
The credit facility has a term until July 8, 2026 and offers the option of an extension of up to 364 days.
What will the funds from the Sound Point Meridian Capital credit facility be used for?
The funds will be used for investment activities, working capital and general corporate purposes.
Which bank provides the credit facility to Sound Point Meridian Capital?
The credit facility is provided by the Canadian Imperial Bank of Commerce (CIBC).
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