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Borrowings | 9 Months Ended
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Jun. 30, 2024
Borrowings [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% of asset coverage, 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. No approval was requested or obtained and the Company is still subject to the 200% requirement. As of June 30, 2024 and September 30, 2023, the Company’s asset coverage was 277.8% and 270.7%, 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. The Company’s outstanding debt excluding debt issuance costs as of June 30, 2024 and September 30, 2023 were as follows (dollars in thousands):
|  | June 30, 2024 |  |  | September 30, 2023 |
|  | Aggregate Principal Available (1) |  |  | Principal Amount Outstanding |  |  | Carrying Value |  |  | Fair Value |  |  | Aggregate Principal Available (1) |  |  | Principal Amount Outstanding |  |  | Carrying Value |  |  | Fair Value |
2028 Notes |  | $ | 57,500 |  |  | $ | 57,500 |  |  | $ | 56,061 |  |  | $ | 51,957 |  |  | $ | 57,500 |  |  | $ | 57,500 |  |  | $ | 55,811 |  |  | $ | 49,105 |
2028 Promissory Note |  |  | 1,661 |  |  |  | 1,661 |  |  |  | 1,661 |  |  |  | 1,661 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Revolving Credit Facility |  |  | 34,927 |  |  |  | 27,573 |  |  |  | 27,573 |  |  |  | 27,573 |  |  |  | 21,558 |  |  |  | 28,442 |  |  |  | 28,442 |  |  |  | 28,442 |
Total debt |  | $ | 94,088 |  |  | $ | 86,734 |  |  | $ | 85,295 |  |  | $ | 81,191 |  |  | $ | 79,058 |  |  | $ | 85,942 |  |  | $ | 84,253 |  |  | $ | 77,547 |
(1) | For the 2028 Notes and 2028 Promissory Note, this represents the total principal amount and for the Revolving Credit Facility, this represents the undrawn principal amount.
Credit Facility On December 15, 2022, the Company entered into a 3 year $50.0 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 June 30, 2024, the Company was in compliance in all respects with the terms of the Credit Facility. As of June 30, 2024 and September 30, 2023, there was $27.6 million and $28.4 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 $22.6 million 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”). On February 21, 2024 (the “Effective Date”), in order to increase the size of the Credit Facility, the parties to the Credit Facility amended the terms of the Credit Facility, effective as of the Effective Date (the “Amendment”). The Amendment increased the principal amount of loan available under the Credit Facility by $12.5 million to $62.5 million. All other material terms of the Credit Facility remain unchanged. Unsecured Notes 2023 Notes On March 18, 2013, the Company issued $60.0 million in aggregate principal amount of 6.125% unsecured notes that matured 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” or 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. 2028 Promissory Note On May 2, 2024, the Company issued a 5.25% note due November 1, 2028 in the principal amount of $1,661,498 to National Security Insurance Company (the “2028 Promissory Note”). The financial terms of the note are substantially the same as 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 2028 Notes, which are publicly traded, is based upon closing market quotes as of the measurement date. As of June 30, 2024 and September 30, 2023, the Notes are deemed to be Level 1 in the fair value hierarchy, as defined in Note 4. As of June 30, 2024 and September 30, 2023, the 2028 Promissory Note is deemed to be Level 3 in the fair value hierarchy, as defined in Note 4. As of June 30, 2024 and September 30, 2023, the Credit Facility is deemed to be Level 3 in the fair value hierarchy, as defined in Note 4. Debt issuance costs related to the 2028 Notes are reported on the Consolidated Statements of Assets and Liabilities as a direct deduction from the face amount of and the 2028 Notes. As of June 30, 2024 and September 30, 2023, debt issuance costs related to the 2023 Notes and the 2028 Notes were as follows (dollars in thousands):
|  | For the nine months ended |  |  | For the year ended |
|  | June 30, 2024 |  |  | September 30, 2023 |
|  | 2023 Notes |  |  | 2028 Notes |  |  | Total |  |  | 2023 Notes |  |  | 2028 Notes |  |  | Total |
Total debt issuance costs at beginning of period |  | $ | - |  |  | $ | 1,689 |  |  | $ | 1,689 |  |  | $ | 39 |  |  | $ | 2,020 |  |  | $ | 2,059 |
Amortized debt issuance costs |  |  | - |  |  |  | 249 |  |  |  | 249 |  |  |  | 39 |  |  |  | 331 |  |  |  | 370 |
Unamortized debt issuance costs |  | $ | - |  |  | $ | 1,440 |  |  | $ | 1,440 |  |  | $ | - |  |  | $ | 1,689 |  |  | $ | 1,689 |
For the three and nine months ended June 30, 2024 and 2023, the components of interest expense, amortized debt issuance costs, amortized deferred financing costs, weighted average stated interest rate and weighted average outstanding debt balance for the 2023 Notes, the 2028 Notes and the Credit Facility were as follows (dollars in thousands):
|  | For the Three Months Ended June 30, |  |  | For the Nine Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
2023 Notes Interest |  | $ | - |  |  | $ | - |  |  |  | - |  |  | $ | 820 |
2028 Notes Interest |  |  | 756 |  |  |  | 772 |  |  |  | 2,264 |  |  |  | 1,894 |
Credit facility interest |  |  | 739 |  |  |  | 477 |  |  |  | 1,930 |  |  |  | 830 |
Commitment fees |  |  | 17 |  |  |  | - |  |  |  | 48 |  |  |  | - |
Amortization of Credit Facility deferred financing costs |  |  | 127 |  |  |  | 83 |  |  |  | 340 |  |  |  | 199 |
Amortization of debt issuance costs |  |  | 83 |  |  |  | 83 |  |  |  | 249 |  |  |  | 287 |
Total |  | $ | 1,722 |  |  | $ | 1,415 |  |  |  | 4,831 |  |  | $ | 4,030 |
Weighted average stated interest rate |  |  | 6.4 | % |  |  | 6.0 | % |  |  | 6.3 | % |  |  | 5.8 | %
Weighted average debt outstanding |  | $ | 94,127 |  |  | $ | 83,061 |  |  | $ | 88,660 |  |  | $ | 81,227 |

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