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Stellus Capital Investment Corp (NYSE:SCM), a business development company with a market capitalization of $385 million and an attractive dividend yield of 11.43%, announced on Monday the issuance of $75 million in aggregate principal amount of 7.250% notes due April 1, 2030. The offering, which closed on the same day, saw the notes being offered and sold pursuant to the company’s registration statement previously filed with the SEC. According to InvestingPro data, the company maintains strong financial health with a current ratio of 1.57, indicating robust liquidity management.
The notes, which are unsecured and rank pari passu with Stellus Capital’s existing and future unsecured, unsubordinated indebtedness, will pay interest semi-annually on April 1 and October 1, starting October 1, 2025. They are senior to any potential future preferred stock and to any future indebtedness that expressly provides it is subordinated to the notes. However, they are effectively subordinated to all existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness of any of the company’s subsidiaries. With total debt of $593 million as reported in InvestingPro’s comprehensive financial analysis, the company has demonstrated effective debt management while maintaining a conservative P/E ratio of 7.7.
Stellus Capital has the option to redeem the notes wholly or partially before October 1, 2029, at a price equal to the greater of a calculated sum involving the Treasury Rate plus 50 basis points or 100% of the principal amount. After this date, the redemption price will be 100% of the principal amount plus accrued interest.
In the event of a Change of Control Repurchase Event, as defined in the Fourth Supplemental Indenture, note holders have the right to require the company to repurchase the notes at 100% of the principal amount plus accrued interest.
The company intends to use the net proceeds from the offering to repay part of the outstanding amount under its credit facility, although it may re-borrow under the same facility for future investments in lower middle-market companies, consistent with the company’s investment objectives and strategies, and for working capital and general corporate purposes. Investors seeking deeper insights into Stellus Capital’s investment strategy and financial performance can access detailed analysis through InvestingPro, which reveals additional valuable metrics and highlights the company’s impressive track record of maintaining dividend payments for 14 consecutive years.
This financial move by Stellus Capital Investment Corp is based on a press release statement and is presented without any speculative or subjective commentary.
In other recent news, Stellus Capital Investment Corporation reported its fourth-quarter 2024 earnings, which showed a slight miss in both earnings per share (EPS) and revenue compared to analysts’ forecasts. The company’s EPS was $0.37, below the expected $0.3957, while revenue reached $25.61 million, falling short of the anticipated $26.54 million. Despite the earnings miss, Stellus Capital achieved a significant milestone by reaching a $1 billion investment portfolio for the first time. The company declared a Q1 2025 dividend of $0.40 per share, payable monthly, although it expects to slightly fall short of full dividend coverage in the first quarter. Analyst firm Keefe, Bruyette & Woods maintained a Market Perform rating on Stellus Capital, noting that earnings forecasts are below the company’s dividend, signaling a cautious stance on the firm’s ability to maintain its dividend payouts. The analysts also highlighted the company’s $1.64 of spillover income, which could provide some financial cushion. Concerns were raised over tariff impacts and market yield compression, which could affect up to 10% of Stellus’s portfolio. Furthermore, the percentage of non-accruals in the portfolio rose to 8%, indicating potential concerns about asset quality and repayment.
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