Fifth Street to use stock proceeds for debt repayment, working capital

By Toni Weeks

San Diego, Sept. 12 - Fifth Street Finance Corp. plans to use the proceeds of its recently announced $80.93 placement of common stock to repay debt under the company's Sumitomo, ING and Wells Fargo facilities, repurchase the company's 5.375% convertible notes due April 1, 2016 and, subsequent to the debt repayment, re-borrow under its credit facilities to make investments in small and mid-sized companies. Proceeds may also be used for general corporate purposes and working capital.

Some of the investments may be made by the company's small business investment company subsidiaries in line with its investment objective, which is to maximize the portfolio's return by generating current income from debt investments along with capital appreciation from equity investments.

According to a prospectus supplement filed with the Securities and Exchange Commission, the company is offering 7.5 million shares of its common stock at $10.79 per share. The deal has a 30-day greenshoe of another 1,125,000 shares for additional proceeds of $12.14 million.

The per-share price is a 1.46% discount to the closing share price of $10.95 on Sept. 10.

UBS Investment Bank, Goldman Sachs & Co., J.P. Morgan Securities LLC and Wells Fargo Securities are the lead underwriters.

Stockholder transaction expenses consist of a sales load of 3.5%. Annual expenses, which include a 5.75% management fee, will be 9.41%.

Settlement is expected to occur on Sept. 14.

Fifth Street Management LLC will be the investment manager.

Fifth Street is a White Plains, N.Y.-based specialty finance company that lends to and invests in small and mid-sized companies, primarily in connection with investments by private equity sponsors. The company invests in securities that are rated below investment grade.

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