SEC Company Response from Oaktree Specialty Lending Corp (OCSL) (CIK 0001414932) (OCSL) — Jul 13, 2009
Oaktree Specialty Lending Corp (OCSL) (CIK 0001414932)
Date: July 13, 2009 · CIK: 0001414932 · Accession: 0000950123-09-021690
AI Filing Summary & Sentiment
Reasoning
Letter
The information in this preliminary prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell and are not soliciting offers to buy these securities in any state where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY ,
PRELIMINARY PROSPECTUS SUPPLEMENT
(to Prospectus dated July , 2009)
8,121,827 Shares
Fifth Street Finance Corp.
Common Stock
$ per share
We are offering for sale 8,121,827 shares of our common stock, $0.01 par value per share. These shares are being offered at a discount from our most recently determined net asset value per share of $11.94 pursuant to the authority granted by our common stockholders at a special meeting of stockholders held on June 24, 2009. Our current authority to offer shares at a price below net asset value per share ends on June 24, 2010, unless our stockholders extend this authority at another meeting of stockholders before such date. In connection with the receipt of such stockholder approval, we agreed to limit the number of shares that we issue at a price below net asset value pursuant to this authorization so that the aggregate dilutive effect on our then outstanding shares will not exceed 15%. Sales of common stock at prices below net asset value per share dilute the interests of existing stockholders, have the effect of reducing our net asset value per share and may reduce our market price per share. See “Risk Factors” beginning on page 13 of the accompanying prospectus and “Sales of Common Stock Below Net Asset Value” on page S-6 of this prospectus supplement and on page 80 of the accompanying prospectus.
We are a specialty finance company that lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors. Our investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and capital appreciation from our equity investments.
We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. We are managed by Fifth Street Management LLC, whose six principals collectively have over 50 years, and individually have between 14 years and 3 years, of experience lending to and investing in small and mid-sized companies.
Our common stock is listed on the New York Stock Exchange under the symbol “FSC.” On July 9, 2009 and March 31, 2009, the last reported sale price of our common stock on the New York Stock Exchange was $9.85 and $774, respectively. We are required to determine the net asset value per share of our common stock on a quarterly basis and we have not yet determined the net asset value per share of our common stock for the quarter ended June 30, 2009. Our net asset value per share of our common stock as of March 31, 2009 was $11.94.
Investing in our common stock involves a high degree of risk, and should be considered highly speculative. See “Risk Factors” beginning on page 13 of the accompanying prospectus to read about factors you should consider, including the risk of leverage, before investing in our common stock.
This prospectus supplement and any accompanying prospectus contain important information about us that a prospective investor should know before investing in our common stock. Please read this prospectus supplement and any accompanying prospectus before investing and keep them for future reference. We file periodic reports, current reports, proxy statements and other information with the Securities and Exchange Commission. This information is available free of charge by contacting us at White Plains Plaza, 445 Hamilton Avenue, Suite 1206, White Plains, NY 10601 or by telephone at (914) 286-6800 or on our website at www.fifthstreetfinance.com. Information contained on our website is not incorporated by reference into this prospectus supplement, and you should not consider that information to be part of this prospectus supplement. The Securities and Exchange Commission also maintains a website at www.sec.gov that contains such information.
Per Share
Total
Public offering price
$
$
Underwriting discount (6.25%)
$
$
Proceeds, before expenses, to us (1)
$
$
(1)
We estimate that we will incur approximately $750,000 in offering expenses in connection with this offering.
The underwriters have the option to purchase up to an additional 1,218,274 shares of common stock at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus supplement solely to cover any over-allotments. If the over-allotment option is exercised in full, the total public offering price will be $92,000,000, and the total underwriting discount (6.25%) will be $5,750,000. The proceeds to us would be $86,250,000, before deducting estimated expenses payable by us of $750,000.
At our request, the underwriters have reserved shares in the offering for purchase by certain of our directors and officers, although they have no obligation to buy any shares in the offering.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares on or about , 2009.
Wells Fargo Securities
Stifel Nicolaus
The date of this prospectus supplement is ,
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Prospectus Summary
S-1
Fees and Expenses
S-6
Use of Proceeds
S-8
Sales of Common Stock Below Net Asset Value
S-8
Capitalization
S-13
Underwriting
S-14
Validity of the Securities
S-17
Available Information
S-18
PROSPECTUS
Page
Prospectus Summary
The Offering
Fees and Expenses
Selected Financial and Other Data
Risk Factors
Special Notice Regarding Forward-Looking Statements
Use of Proceeds
Price Range of Common Stock and Distributions
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Senior Securities
Business
Portfolio Companies
Management
Portfolio Management
Investment Advisory Agreement
Administration Agreement
License Agreement
Certain Relationships and Related Party Transactions
Control Persons and Principal Stockholders
Sales of Common Stock Below Net Asset Value
Dividend Reinvestment Plan
Description of Our Securities
Material U.S. Federal Income Tax Considerations
Regulation
Plan of Distribution
Custodian, Transfer and Distribution Paying Agent and Registrar
Brokerage Allocation and Other Practices
Legal Matters
Independent Registered Public Accounting Firm
Available Information
Privacy Notice
Index to Financial Statements
F-1
S-i
You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Neither we nor the underwriters have authorized any other person to provide you with different information from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement and the accompanying prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any shares of our common stock by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement and the accompanying prospectus is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of our common stock. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information different from or additional to the information in that prospectus.
This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common stock and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which gives more information. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control.
Information contained in this prospectus supplement and the accompanying prospectus may contain forward-looking statements, which can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” or “continue” or the negative thereof or other variations thereon or comparable terminology. The matters described in “Risk Factors” in the accompanying prospectus and certain other factors noted throughout this prospectus supplement and the accompanying prospectus constitute cautionary statements identifying important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements.
S-ii
PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus supplement and the accompanying prospectus. It is not complete and may not contain all of the information that you may want to consider. To understand the terms of the common stock offered hereby, you should read the entire prospectus supplement and the accompanying prospectus carefully. Together, these documents describe the specific terms of the shares we are offering. You should carefully read the sections titled “Risk Factors,” “Selected Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements” in the accompanying prospectus, as well as the documents identified in the section titled “Available Information” in this prospectus supplement. Except as otherwise noted, all information in this prospectus supplement and the accompanying prospectus assumes no exercise of the underwriters’ over-allotment option.
We commenced operations on February 15, 2007 as Fifth Street Mezzanine Partners III, L.P., a Delaware limited partnership. Effective as of January 2, 2008, Fifth Street Mezzanine Partners III, L.P. merged with and into Fifth Street Finance Corp., a newly formed Delaware corporation. Unless otherwise noted, the terms “we,” “us,” “our” and “Fifth Street” refer to Fifth Street Mezzanine Partners III, L.P. prior to the merger date, and Fifth Street Finance Corp. on and after the merger date. In addition, the terms “Fifth Street Management” and “investment adviser” refer to Fifth Street Management LLC.
Fifth Street Finance Corp.
We are a specialty finance company that lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors. We define small and mid-sized companies as those with annual revenues between $25 million and $250 million. We are externally managed and advised by Fifth Street Management, whose six principals collectively have over 50 years, and individually have between 14 years and 3 years, of experience lending to and investing in small and mid-sized companies. Fifth Street Management is an affiliate of Fifth Street Capital LLC, a private investment firm founded and managed by Leonard M. Tannenbaum who has led the investment of over $450 million in small and mid-sized companies, including the investments made by Fifth Street, since 1998.
Our investment objective is to maximize our portfolio’s total return by generating current income from our debt investments and capital appreciation from our equity investments. To meet our investment objective we seek to (i) capitalize on our investment adviser’s strong relationships with private equity sponsors; (ii) focus on transactions involving small and mid-sized companies which we believe offer higher yielding debt investment opportunities, lower leverage levels and other terms more favorable than transactions involving larger companies; (iii) continue our growth of direct originations; (iv) employ disciplined underwriting policies and rigorous portfolio management practices; (v) structure our investments to minimize risk of loss and achieve attractive risk-adjusted returns; and (vi) leverage the skills and experience of our investment adviser.
As of March 31, 2009, we have originated $343.3 million of investments and our portfolio totaled $290.8 million at fair value and was comprised of investments in 26 portfolio companies. The weighted average annualized yield of our debt investments as of March 31, 2009 was approximately 16.4%. Our investments generally range in size from $5 million to $40 million and are principally in the form of first and second lien debt investments, which may also include an equity component. As of March 31, 2009, all of our debt investments were secured by first or second priority liens on the assets of our portfolio companies. Moreover, we held equity investments consisting of common stock, preferred stock or LLC interests in 20 out of 26 portfolio companies as of March 31, 2009.
Fifth Street Mezzanine Partners III, L.P., our predecessor fund, commenced operations as a private partnership on February 15, 2007. Effective as of January 2, 2008, Fifth Street Mezzanine Partners III, L.P. merged with and into Fifth Street Finance Corp., a newly formed corporation that is an externally managed, closed-end, non-diversified management investment company which has elected to be treated as a business development company under the Investment Company Act of 1940, or the “1940 Act.”
As a business development company, we are required to comply with regulatory requirements, including limitations on our use of debt. We are permitted to, and expect to, finance our investments using debt and equity. See the section titled “Regulation” in the accompanying prospectus. We elected, effective as of January 2, 2008, t
Show Raw Text
CORRESP
1
filename1.htm
corresp
The
information in this preliminary prospectus supplement is not
complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell and are not soliciting offers to buy these securities in
any state where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED
JULY ,
2009
PRELIMINARY
PROSPECTUS SUPPLEMENT
(to Prospectus dated July , 2009)
8,121,827 Shares
Fifth Street Finance
Corp.
Common Stock
$ per
share
We are offering for sale 8,121,827 shares of our common
stock, $0.01 par value per share. These shares are being
offered at a discount from our most recently determined net
asset value per share of $11.94 pursuant to the authority
granted by our common stockholders at a special meeting of
stockholders held on June 24, 2009. Our current authority
to offer shares at a price below net asset value per share ends
on June 24, 2010, unless our stockholders extend this
authority at another meeting of stockholders before such date.
In connection with the receipt of such stockholder approval, we
agreed to limit the number of shares that we issue at a price
below net asset value pursuant to this authorization so that the
aggregate dilutive effect on our then outstanding shares will
not exceed 15%. Sales of common stock at prices below net asset
value per share dilute the interests of existing stockholders,
have the effect of reducing our net asset value per share and
may reduce our market price per share. See “Risk
Factors” beginning on page 13 of the accompanying
prospectus and “Sales of Common Stock Below Net Asset
Value” on
page S-6
of this prospectus supplement and on page 80 of the
accompanying prospectus.
We are a specialty finance company that lends to and invests in
small and mid-sized companies in connection with investments by
private equity sponsors. Our investment objective is to maximize
our portfolio’s total return by generating current income
from our debt investments and capital appreciation from our
equity investments.
We are an externally managed, closed-end, non-diversified
management investment company that has elected to be treated as
a business development company under the Investment Company Act
of 1940. We are managed by Fifth Street Management LLC, whose
six principals collectively have over 50 years, and
individually have between 14 years and 3 years, of
experience lending to and investing in small and mid-sized
companies.
Our common stock is listed on the New York Stock Exchange under
the symbol “FSC.” On July 9, 2009 and
March 31, 2009, the last reported sale price of our common
stock on the New York Stock Exchange was $9.85 and $774,
respectively. We are required to determine the net asset value
per share of our common stock on a quarterly basis and we have
not yet determined the net asset value per share of our common
stock for the quarter ended June 30, 2009. Our net asset
value per share of our common stock as of March 31, 2009
was $11.94.
Investing in our common stock involves a high degree of risk,
and should be considered highly speculative. See “Risk
Factors” beginning on page 13 of the accompanying
prospectus to read about factors you should consider, including
the risk of leverage, before investing in our common stock.
This prospectus supplement and any accompanying prospectus
contain important information about us that a prospective
investor should know before investing in our common stock.
Please read this prospectus supplement and any accompanying
prospectus before investing and keep them for future reference.
We file periodic reports, current reports, proxy statements and
other information with the Securities and Exchange Commission.
This information is available free of charge by contacting us at
White Plains Plaza, 445 Hamilton Avenue, Suite 1206, White
Plains, NY 10601 or by telephone at
(914) 286-6800
or on our website at www.fifthstreetfinance.com. Information
contained on our website is not incorporated by reference into
this prospectus supplement, and you should not consider that
information to be part of this prospectus supplement. The
Securities and Exchange Commission also maintains a website at
www.sec.gov that contains such information.
Per Share
Total
Public offering price
$
$
Underwriting discount (6.25%)
$
$
Proceeds, before expenses, to us (1)
$
$
(1)
We estimate that we will incur approximately $750,000 in
offering expenses in connection with this offering.
The underwriters have the option to purchase up to an additional
1,218,274 shares of common stock at the public offering price,
less the underwriting discount, within 30 days from the
date of this prospectus supplement solely to cover any
over-allotments. If the over-allotment option is exercised in
full, the total public offering price will be $92,000,000, and
the total underwriting discount (6.25%) will be $5,750,000. The
proceeds to us would be $86,250,000, before deducting estimated
expenses payable by us of $750,000.
At our request, the underwriters have
reserved shares
in the offering for purchase by certain of our directors and
officers, although they have no obligation to buy any shares in
the offering.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares on or
about ,
2009.
Wells Fargo Securities
Stifel Nicolaus
The date of this prospectus supplement
is ,
2009
TABLE OF
CONTENTS
PROSPECTUS
SUPPLEMENT
Page
Prospectus Summary
S-1
Fees and Expenses
S-6
Use of Proceeds
S-8
Sales of Common Stock Below Net Asset Value
S-8
Capitalization
S-13
Underwriting
S-14
Validity of the Securities
S-17
Available Information
S-18
PROSPECTUS
Page
Prospectus Summary
1
The Offering
5
Fees and Expenses
9
Selected Financial and Other Data
11
Risk Factors
13
Special Notice Regarding Forward-Looking Statements
29
Use of Proceeds
29
Price Range of Common Stock and Distributions
30
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
32
Senior Securities
49
Business
50
Portfolio Companies
60
Management
63
Portfolio Management
68
Investment Advisory Agreement
70
Administration Agreement
76
License Agreement
76
Certain Relationships and Related Party Transactions
77
Control Persons and Principal Stockholders
77
Sales of Common Stock Below Net Asset Value
80
Dividend Reinvestment Plan
85
Description of Our Securities
86
Material U.S. Federal Income Tax Considerations
89
Regulation
94
Plan of Distribution
98
Custodian, Transfer and Distribution Paying Agent and Registrar
99
Brokerage Allocation and Other Practices
99
Legal Matters
99
Independent Registered Public Accounting Firm
99
Available Information
99
Privacy Notice
100
Index to Financial Statements
F-1
S-i
You should rely only on the information contained in this
prospectus supplement and the accompanying prospectus. Neither
we nor the underwriters have authorized any other person to
provide you with different information from that contained in
this prospectus supplement or the accompanying prospectus. If
anyone provides you with different or inconsistent information,
you should not rely on it. This prospectus supplement and the
accompanying prospectus do not constitute an offer to sell, or a
solicitation of an offer to buy, any shares of our common stock
by any person in any jurisdiction where it is unlawful for that
person to make such an offer or solicitation or to any person in
any jurisdiction to whom it is unlawful to make such an offer or
solicitation. The information contained in this prospectus
supplement and the accompanying prospectus is complete and
accurate only as of their respective dates, regardless of the
time of their delivery or sale of our common stock. This
prospectus supplement supersedes the accompanying prospectus to
the extent it contains information different from or additional
to the information in that prospectus.
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of this offering of common
stock and also adds to and updates information contained in the
accompanying prospectus. The second part is the accompanying
prospectus, which gives more information. To the extent the
information contained in this prospectus supplement differs from
the information contained in the accompanying prospectus, the
information in this prospectus supplement shall control.
Information contained in this prospectus supplement and the
accompanying prospectus may contain forward-looking statements,
which can be identified by the use of forward-looking
terminology such as “may,” “will,”
“expect,” “intend,” “anticipate,”
“estimate,” or “continue” or the negative
thereof or other variations thereon or comparable terminology.
The matters described in “Risk Factors” in the
accompanying prospectus and certain other factors noted
throughout this prospectus supplement and the accompanying
prospectus constitute cautionary statements identifying
important factors with respect to any such forward-looking
statements, including certain risks and uncertainties that could
cause actual results to differ materially from those in such
forward-looking statements.
S-ii
PROSPECTUS
SUMMARY
This summary highlights some of the information in this
prospectus supplement and the accompanying prospectus. It is not
complete and may not contain all of the information that you may
want to consider. To understand the terms of the common stock
offered hereby, you should read the entire prospectus supplement
and the accompanying prospectus carefully. Together, these
documents describe the specific terms of the shares we are
offering. You should carefully read the sections titled
“Risk Factors,” “Selected Financial and Other
Data,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and
“Financial Statements” in the accompanying prospectus,
as well as the documents identified in the section titled
“Available Information” in this prospectus supplement.
Except as otherwise noted, all information in this prospectus
supplement and the accompanying prospectus assumes no exercise
of the underwriters’ over-allotment option.
We commenced operations on February 15, 2007 as Fifth
Street Mezzanine Partners III, L.P., a Delaware limited
partnership. Effective as of January 2, 2008, Fifth Street
Mezzanine Partners III, L.P. merged with and into Fifth Street
Finance Corp., a newly formed Delaware corporation. Unless
otherwise noted, the terms “we,” “us,”
“our” and “Fifth Street” refer to Fifth
Street Mezzanine Partners III, L.P. prior to the merger date,
and Fifth Street Finance Corp. on and after the merger date. In
addition, the terms “Fifth Street Management” and
“investment adviser” refer to Fifth Street Management
LLC.
Fifth
Street Finance Corp.
We are a specialty finance company that lends to and invests in
small and mid-sized companies in connection with investments by
private equity sponsors. We define small and mid-sized companies
as those with annual revenues between $25 million and
$250 million. We are externally managed and advised by
Fifth Street Management, whose six principals collectively have
over 50 years, and individually have between 14 years
and 3 years, of experience lending to and investing in
small and mid-sized companies. Fifth Street Management is an
affiliate of Fifth Street Capital LLC, a private investment firm
founded and managed by Leonard M. Tannenbaum who has led the
investment of over $450 million in small and mid-sized
companies, including the investments made by Fifth Street, since
1998.
Our investment objective is to maximize our portfolio’s
total return by generating current income from our debt
investments and capital appreciation from our equity
investments. To meet our investment objective we seek to
(i) capitalize on our investment adviser’s strong
relationships with private equity sponsors; (ii) focus on
transactions involving small and mid-sized companies which we
believe offer higher yielding debt investment opportunities,
lower leverage levels and other terms more favorable than
transactions involving larger companies; (iii) continue our
growth of direct originations; (iv) employ disciplined
underwriting policies and rigorous portfolio management
practices; (v) structure our investments to minimize risk
of loss and achieve attractive risk-adjusted returns; and
(vi) leverage the skills and experience of our investment
adviser.
As of March 31, 2009, we have originated
$343.3 million of investments and our portfolio totaled
$290.8 million at fair value and was comprised of
investments in 26 portfolio companies. The weighted average
annualized yield of our debt investments as of March 31,
2009 was approximately 16.4%. Our investments generally range in
size from $5 million to $40 million and are
principally in the form of first and second lien debt
investments, which may also include an equity component. As of
March 31, 2009, all of our debt investments were secured by
first or second priority liens on the assets of our portfolio
companies. Moreover, we held equity investments consisting of
common stock, preferred stock or LLC interests in 20 out of 26
portfolio companies as of March 31, 2009.
Fifth Street Mezzanine Partners III, L.P., our predecessor fund,
commenced operations as a private partnership on
February 15, 2007. Effective as of January 2, 2008,
Fifth Street Mezzanine Partners III, L.P. merged with and into
Fifth Street Finance Corp., a newly formed corporation that is
an externally managed, closed-end, non-diversified management
investment company which has elected to be treated as a business
development company under the Investment Company Act of 1940, or
the “1940 Act.”
As a business development company, we are required to comply
with regulatory requirements, including limitations on our use
of debt. We are permitted to, and expect to, finance our
investments using debt and equity. See the section titled
“Regulation” in the accompanying prospectus. We
elected, effective as of January 2, 2008, t