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PhenixFin: Issues New Baby Bond

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FIXED INCOME NEWS

New Issue

PhenixFIN (PFX) has just completed the issuance and pricing of a new publicly-traded unsecured note, which will trade under the ticker PFXNZ. The BDC is raising $50mn in this manner for a 5 year period, but with a 2 year prepayment option. The new debt yields 5.125% – on the high side compared to recent issuances by its peers, but generous given the small size of the BDC, its inability to generate enough earnings to pay dividends and its recent history of controversy.

Replacement

The new debt is (1%) less expensive than its only current debt outstanding – the Baby Bond with the ticker PFXNL – which was to mature 3/30/2023.

PFX has announced its intention to redeem at least ” a portion” of the $77mn PFXNL outstanding. However, the BDC has the cash resources (we estimate over $60mn) to pay off the entire amount. At this stage, though, no amount or timing has been set for the redemption of the existing notes.

One And Only

If PFXNL is repaid in full, the new Baby Bond will be – initially – the only remaining debt of any kind on its balance sheet. Total investments and net cash – we estimate – should be approximately $200mn, providing PFXNZ debt holders 400% asset coverage.

We’ve updated the BDC Fixed Income Table with the changes to PFXNL – assuming redemption in full. We’ve not yet added PFXNZ, waiting until – at least – the new debt trades openly in the markets.

Looking Forward

We’ll revisit the subject of PFX; its balance sheet and longer term ambitions when the BDC releases its IIIQ 2021 results. The new management team that ousted Medley Capital have been close lipped about what their plans are and what shareholders should expect.

This move – at least – suggests that there are no immediate plans to liquidate the BDC’s portfolio or undertake a sale. At he same time it’s difficult to imagine how the BDC can continue indefinitely at this small size and without paying its shareholders a dividend of some kind. The management does not seem to have access to anything like a normal “platform” to find, book and monitor new investments.

Despite this new financing news, PFX remains “ a riddle wrapped in a mystery inside an enigma“.

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