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Fidus Prices 'Publicly Traded' Or Exchange Traded 'Notes' At 5.875%

|About: Fidus Investment (FDUS)

Fidus Investment Corporation (FDUS) on 2/02/18 announced that it has closed a registered public offering of $43.5 million aggregate principal amount of its 5.875% notes due 2023, which resulted in net proceeds to the Company of approximately $41.8 million based on a public offering price of 100% of the aggregate principal amount of the Notes, after deducting payment of underwriting discounts and commissions and estimated offering expenses payable by the Company. The Notes are expected to be listed, and trade, on The Nasdaq Global Select Market under the trading symbol “FDUSL” within 30 days of February 2, 2018. 

The Notes will bear interest at a rate of 5.875% per year, payable quarterly on February 1, May 1, August 1 and November 1 of each year, beginning on May 1, 2018. The Notes are expected to be rated “A-” by Egan-Jones Ratings Company. The Company has also granted the underwriters an option to purchase an additional $6.5 million aggregate principal amount of Notes to cover over allotments, if any, within 30 days of January 30, 2018. 

Context - other BDC bonds sales:

On 1/18/18 TSLX announced that it has priced an offering of $150.0 million of 4.50% Notes due 2023. 

On 11/22/17 PennantPark Floating Rate Capital Ltd. announced that it has priced an institutional offering in Israel of $138.7 million of its 3.83% Series A Notes.

On 11/16/17 Main Street Capital Corporation announced that it has priced an underwritten public offering of $185.0 million in aggregate principal amount of 4.50% notes due 2022.
On 8/07/17 Ares Capital announced that it has priced an underwritten public offering of $750.0 million in aggregate principal amount of 3.500% notes due 2023.
On 7/17/17 BlackRock Capital Investment Corporation announced the pricing of $125 million in aggregate principal amount of senior unsecured 5.00% Convertible Notes due 2022.
On 4/06/17 Prospect Capital Corporation announced the pricing of $225 million in aggregate principal amount of senior unsecured 4.95% Convertible Notes Due 2022.
On 1/26/17 TPG Specialty Lending announced that it has agreed to sell to initial purchasers in a private offering $100 million aggregate principal amount of its 4.50% Convertible Senior Notes due 2022.
On 1/24/17 Ares Capital Corporation announced that it has agreed to sell to initial purchasers in a private offering $350 million aggregate principal amount of its 3.75% Convertible Notes due 2022.
On 9/27/16 Goldman Sachs BDC announced that it has agreed to sell in an offering of $100 million aggregate principal amount of 4.50% convertible notes due 2022.
On 9/27/16 New Mountain Finance Corporation announced the pricing of $35 million in aggregate principal amount of additional 5.00% unsecured convertible notes due 2019.

Context - Bond 'Pricing' over the last year

At the end of 2017, the 10 year US Treasury was selling at a yield of 2.405%. At the end of Q3-17, the 10 year US Treasury was selling at a yield of 2.34%.
At the end of Q2-17, the 10 year US Treasury was selling at a yield of 2.30%.
At the end of Q1-17, the 10 year US Treasury was selling at a yield of 2.37%.
As of noon EST on 2/02/18, the 10 year Treasury was selling at a yield of 2.843%.

Context  - Fudus leverage

At the end of Q3-17, the average BDC had roughly an 80% Debt/NAV ratio. At the end of Q3-17, FDUS has a 54.18% Debt/NAV ratio - but over the last three years the ratio had at times been slightly above sector average.

FDUS at the end of Q3-17 had an annualized debt expense to debt ratio of 4.70% and a self reported average cost of debt of 3.6%. Put in different words - the amortization of debt costs plus the cost of the unused credit facility added 110 bps to the cost of debt.

My comments: I personally want this offering on my radar. I do not want to own baby bonds or debt in BDCs where I already own equity. While I current own the FDUS equity - I still have concerns about its high PWAY. Thus this holding may not survive 2018. With a near 6% yield - I am interested. 

Disclosure: I am/we are long FDUS.