Based in Rolling Meadows, IL, OFS Capital (NASDAQ:OFS) scheduled a $101 million IPO with a market capitalization of $143 million for Friday, November 2, 2013.
Before Sandy, seven IPOs were scheduled for the week of October 29. Three have been pushed back to next week. The full IPO calendar is available here.
N-2A filed October 24, 2012
Manager, Joint Managers: Morgan Stanley; UBS;Barclays; RBC
Co Managers: Oppenheimer; Janney Montgomery Scott; Ladenburg Thalmann; Wunderlich Securities; Houlihan Lokey.
OFS is a Business Development Corporation that will file, for tax purposes, to be a Regulated Investment Company. OFS has a book of loans with a remaining life of 3.5 years.
OFS intends to pay for the December quarter at a rate of $.34 per quarter, which is a 9% annualized rate, which will be difficult to achieve on a continuing basis unless there are realized capital gains.
IPOdesktop expects OFS to trade similarly to Monroe Capital (NASDAQ:MRCC), which IPO'd October 25 at $15, and then traded around the IPO price.
IPO COSTS BORNE BY OFS - PRE-IPO
(Which is different than the recent comparable Monroe Capital IPO)
Proforma net asset value pre-IPO: $19.46*
*OFS expects to absorb the following so that IPO buyers don't have to:
. Sales load (as a percentage of offering price): 7.00%
. Offering expenses (as a percentage of offering price): 5.77%
Proforma net asset value post-IPO: $15
But OFS's operating expenses as a percentage of assets are expected to be 8.4%, compared to Monroe Capital's 7.3%.
Web site is "currently under construction".
Orchard First Source Asset Management, LLC, the "parent" company, is pretty invisible.
Historically, substantially all of OFS' investment portfolio consisted of senior secured loans to middle-market companies in the United States.
As of June 30, 2012, the investment portfolio, including investments held by OFS' wholly-owned subsidiary, OFS Capital WM, LLC, and Tamarix Capital Partners, L.P., in which OFS owns a majority of the limited partnership interests, consisted of outstanding loans of approximately $210.6 million in aggregate principal amount, and OFS had debt of $155.0 million aggregate principal amount outstanding.
As of June 30, 2012, OFS' investment portfolio consisted primarily of senior secured loans to middle-market companies and, to a lesser extent, junior capital, including mezzanine debt and preferred and common equity.
As of June 30, 2012, OFS' portfolio loan investments, including those held by OFS Capital WM and Tamarix LP, had a contractual 3.5-year weighted average life to maturity.
In addition, as of June 30, 2012, OFS had commitments of $212.1 million and outstanding loans of $210.6 million in aggregate principal amount. The difference between the amount of commitments and the outstanding loans is attributable to the unfunded portion of revolving loans in OFS' portfolio at that time.
OFS intends to pay a distribution of $0.34 per share for the quarter ending December 31, 2012. The amount the distribution will be proportionately reduced to reflect the number of days remaining in the quarter after the completion of OFS' IPO.
The $.34 distribution per share is an annualized rate of 9%, which is a potential misrepresentation because of the "hurdle rate" clause (unless capital gains are realized).
Public fund owners are set up to get the first 2% (8% annualized) of "pre-incentive fee net investment income" quarterly income, but the next .5% of "pre-incentive fee net investment income" quarterly income (2% annualized) goes to OFS as the first part of the "incentive fee."
The second part of the incentive fee targets capital gains: OFS gets 20% of realized capital gains, which is a separate calculation.
INVESTMENT ADVISORY FEES
Under the Investment Advisory Agreement, from the completion of this offering through October 31, 2013, the base management fee paid to OFS Advisor will be calculated at an annual rate of 0.875% of OFS' total assets (other than cash and cash equivalents, but including assets purchased with borrowed amounts, and including assets owned by any consolidated entity).
Doubles Next Year
After October 31, 2013, the base management fee will be calculated at an annual rate of 1.75% of total assets (other than cash and cash equivalents, but including assets purchased with borrowed amounts, and including assets owned by any consolidated entity).
As of October 9, 2012, OFS had 24 full-time employees and five part-time employees. OFS is headquartered in Rolling Meadows, Illinois, a suburb of Chicago, with additional offices in New York, New York and Los Angeles, California.
Compares to Monroe Capital, a recent IPO (see above)
USE OF PROCEEDS
OFS expects to net $87 million from its IPO. OFS expects to use the IPO proceeds and cash on hand to pay $99 million in debt.
Disclaimer: This OFS IPO report is based on a reading and analysis of OFS' N2-A filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.