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XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT), a closed-end investment company, has entered into a new credit agreement with BNP Paribas SA (ETR:BNPP), securing a $300 million senior secured revolving credit facility. The deal, finalized on March 21, 2025, replaces the Trust’s previous credit arrangement with Société Générale.
The new credit facility, scheduled to terminate on March 19, 2027, allows the Trust to borrow at an interest rate based on SOFR plus a margin of 1.48%. Additionally, the Trust is subject to a quarterly commitment fee on unused commitments, with the rate depending on the proportion of the principal obligations to the commitments.
The Trust’s obligations under the facility are backed by substantially all of its assets, with covenants typical for agreements of this nature, including restrictions on indebtedness, liens, and dividends. The Trust utilized $237 million of the facility immediately to repay outstanding borrowings under the previous agreement.
As of the closing date, the Trust’s financial leverage, including the credit facility and outstanding preferred shares, was approximately 39.73% of its Managed Assets. The Trust’s leveraging strategy, which involves risks, aims to enhance returns but does not guarantee success. Notably, InvestingPro analysis shows the Trust maintains a remarkable 15.4% dividend yield and has consistently paid dividends for 9 consecutive years. For more detailed insights and financial metrics, subscribers can access additional ProTips on the platform.
This financial move is detailed in the Trust’s filing with the Securities and Exchange Commission, based on a press release statement. InvestingPro technical indicators suggest the stock is currently in oversold territory, while maintaining historically low price volatility - factors that could interest income-focused investors.
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