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Borrowings
 6 Months Ended
Mar. 31, 2023
Debt Disclosure [Abstract]  
Borrowings

Note 5. Borrowings

 

As a BDC, we are generally only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200% after giving effect to such leverage. The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed borrowing.

 

However, in March 2018, the Small Business Credit Availability Act modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from 200% to 150%, if certain requirements under the 1940 Act are met. Under the 1940 Act, we are allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when a quorum is present, approve a proposal to do so. If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the 1940 Act allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of such approval. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. 

 

As of March 31, 2023 and September 30, 2022, the Company’s asset coverage was 266.3% and 255.0%, respectively, after giving effect to leverage and therefore the Company’s asset coverage was greater than 200%, the minimum asset coverage requirement applicable presently to the Company under the 1940 Act. No approval was obtained and the Company is still subject to the 200% requirement.

 

The Company’s outstanding debt excluding debt issuance costs as of March 31, 2023 and September 30, 2022 was as follows (dollars in thousands):

 

   March 31, 2023   September 30, 2022 
   Aggregate
Principal
Available		   Principal
Amount
Outstanding		   Carrying
Value		   Fair
Value		   Aggregate
Principal
Available		   Principal
Amount
Outstanding		   Carrying
Value		   Fair
Value		 
2023 Notes  $
-
   $
-
   $
-
   $
-
   $22,522   $22,522   $22,483   $22,378 
2028 Notes   57,500    57,500    55,635    50,393    57,500    57,500    55,480    50,255 
Revolving Credit Facility   50,000    23,242    23,242    23,242    
      -
    
-
    
-
    
-
 
Total debt  $107,500   $80,742   $78,877   $73,635   $80,022   $80,022   $77,963   $72,633 

 

Credit Facility

 

On December 15, 2022, the Company entered into a 3 year $50 million revolving credit facility (the “Credit Facility”) with Woodforest National Bank (“Woodforest’). Woodforest is the administrative agent, sole bookrunner and sole lead arranger.

 

Under the Credit Facility, the Company is required to comply with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including, without limitation, covenants related to: (a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on certain investments, (c) limitations on certain restricted payments, (d) maintaining a certain minimum stockholders’ equity, (e) maintaining a ratio of total assets to total indebtedness of the Company and its consolidated subsidiaries (subject to certain exceptions) of not less than 2.0:1.0, (f) limitations on pledging certain unencumbered assets, and (g) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and certain of its subsidiaries. These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility. Amounts available to borrow under the Credit Facility (and the incurrence of certain other permitted debt) are also subject to compliance with a borrowing base that applies different advance rates to different types of assets (based on their value as determined pursuant to the Credit Facility) that are pledged as collateral. As of March 31, 2023, the Company was in compliance in all material respects with the terms of the Credit Facility.

 

As of March 31, 2023 and September 30, 2022, there was $23.2 million and $0 million outstanding respectively under the Credit Facility.

 

Outstanding loans under the Credit Facility bear a monthly interest rate at Term SOFR + 2.90%. The Company is also subject to a commitment fee of 0.25%, which shall accrue on the actual daily amount of the undrawn portion of the revolving credit.

 

On January 17, 2023, the Company borrowed $23.2 million under the Credit Facility and used these proceeds to redeem $22,521,800 in aggregate principal amount of the issued and outstanding 2023 Notes, comprising all issued and outstanding 2023 Notes. The 2023 Notes were redeemed at 100% of their principal amount, plus accrued and unpaid interest thereon from September 30, 2022 through, but excluding January 17, 2023 (the “Redemption Date”).

 

Unsecured Notes

 

2023 Notes

 

On March 18, 2013, the Company issued $60.0 million in aggregate principal amount of 6.125% unsecured notes that mature on March 30, 2023 (the “2023 Notes”). On March 26, 2013, the Company closed an additional $3.5 million in aggregate principal amount of the 2023 Notes, pursuant to the partial exercise of the underwriters’ option to purchase additional notes. As of March 30, 2016, the 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option. The 2023 Notes bore interest at a rate of 6.125% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, beginning June 30, 2013.

 

On December 12, 2016, the Company entered into an “At-The-Market” (“ATM”) debt distribution agreement with FBR Capital Markets & Co., through which the Company could offer for sale, from time to time, up to $40.0 million in aggregate principal amount of the 2023 Notes. The Company sold 1,573,872 of the 2023 Notes at an average price of $25.03 per note, and raised $38.6 million in net proceeds, through the ATM debt distribution agreement.

 

On March 10, 2018, the Company redeemed $13.0 million in aggregate principal amount of the 2023 Notes. On December 31, 2018, the Company redeemed $12.0 million in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

 

On December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of the 2023 Notes to the NASDAQ Global Market. The listing and trading of the 2023 Notes on the NYSE ceased at the close of trading on December 31, 2020. Effective January 4, 2021, the 2023 Notes began trading on the NASDAQ Global Market under the trading symbol “PFXNL.”

 

On November 15, 2021, the Company caused notices to be issued to the holders of the 2023 Notes regarding the Company’s exercise of its option to redeem $55,325,000 in aggregate principal amount of the issued and outstanding 2023 Notes on December 16, 2021. On December 16, 2021, the Company redeemed $55,325,000 in aggregate principal amount of the issued and outstanding 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

 

On December 15, 2022, the Company caused notices to be issued to the holders of its 2023 Notes regarding the Company’s exercise of its option to redeem $22,521,800 in aggregate principal amount of issued and outstanding 2023 Notes, comprising all issued and outstanding 2023 Notes, at a price equal to 100% of the principal amount of the 2023 Notes, plus accrued and unpaid interest thereon from September 30, 2022, through, but excluding, January 17, 2023 in accordance with the terms of the indenture governing the 2023 Notes. The redemption was completed on January 17, 2023. The Company funded the redemption of the 2023 Notes with loans obtained under the Credit Facility.

 

2028 Notes

 

On November 9, 2021, the Company entered into an underwriting agreement, by and between the Company and Oppenheimer & Co. Inc., as representative of the several underwriters, in connection with the issuance and sale (the “Offering”) of $57,500,000 (including the underwriters’ option to purchase up to $7,500,000 aggregate principal amount) in aggregate principal amount of its 5.25% Notes that mature on November 1, 2028 (the “2028 Notes” and collectively with the 2023 Notes, the “Notes”). The Offering occurred on November 15, 2021, pursuant to the Company’s effective shelf registration statement on Form N-2 previously filed with the SEC. Effective November 16, 2021, the 2028 Notes began trading on the NASDAQ Global Market under the trading symbol “PFXNZ.”

 

On November 15, 2021, the Company and U.S. Bank National Association, as trustee, entered into a Fourth Supplemental Indenture to its base Indenture, dated February 7, 2012, between the Company and the Trustee. The Fourth Supplemental Indenture relates to the Offering of the 2028 Notes.

 

Fair Value of Debt Obligations

 

The fair values of our debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Notes, which are publicly traded, is based upon closing market quotes as of the measurement date. As of March 31, 2023 and September 30, 2022, the Notes would be deemed to be Level 1 in the fair value hierarchy, as defined in Note 4. As of March 31, 2023, the Credit Facility would be deemed to be Level 3 in the fair value hierarchy, as defined in Note 4.

 

Debt issuance costs related to the Notes are reported on the Consolidated Statements of Assets and Liabilities as a direct deduction from the face amount of the Notes. As of March 31, 2023 and September 30, 2022, debt issuance costs related to the Notes were as follows (dollars in thousands):

 

   March 31, 2023   September 30, 2022 
   2023 Notes   2028 Notes   Total   2023 Notes   2028 Notes   Total 
Total debt issuance costs  $20   $1,937   $1,957   $3,102   $2,311   $5,413 
Amortized debt issuance costs   20    72    92    3,063    291    3,354 
Unamortized debt issuance costs  $
-
   $1,865   $1,865   $39   $2,020   $2,059 

 

For the three and six months ended March 31, 2023 and 2022, the components of interest expense, amortized debt issuance costs, weighted average stated interest rate and weighted average outstanding debt balance for the Notes were as follows (dollars in thousands):

 

   For the Three Months Ended March 31,   For the Six Months Ended March 31, 
   2023   2022   2023   2022 
2023 Notes Interest  $65   $345   $820   $1,060 
2028 Notes Interest   779    755    1,124    1,486 
Credit facility interest   353    
-
    353    
-
 
Amortization of debt issuance costs   101    121    204    163 
Total  $1,298   $1,221   $2,501   $2,709 
Weighted average stated interest rate   6.0%   6.2%   5.7%   6.0%
Weighted average outstanding balance  $80,606   $80,022   $80,311   $90,863 

 

For the three and six months ended March 31, 2023, Interest and financing expenses on the Consolidated Statements of Operations includes $85,532 and $113,963, respectively, for amortization of deferred financing costs pertaining to the credit facility. For the three and six months ended March 31, 2022, Interest and financing expenses on the Consolidated Statements of Operations includes $0 and $0, respectively, for amortization of deferred financing costs pertaining to the credit facility.