Business Context and Reporting Period
Company: Carlyle Credit Income Fund (NYSE: CCIF)
Filing Type: Form 8-K (Current Report)
Date of Report: January 31, 2025
Event: Entry into a Material Definitive Agreement for the issuance of Convertible Preferred Shares.
Key Financial Metrics and Transaction Details
- Instrument Issued: 7.50% Series C Convertible Preferred Shares due 2030.
- Shares Sold: Approximately 20,000 shares.
- Liquidation Preference: $1,000.00 per share.
- Issue Price: $930.00 per share.
- Net Proceeds: Approximately $18.6 million (before expenses).
- Dividend Rate: Fixed annual rate of 7.50% ($75.00 per share per year), payable quarterly.
- First Dividend Payment Date: April 30, 2025.
- Seniority: Senior to Common Shares; equal to Series A (2028) and Series B (2029) Preferred Shares; subordinate to Credit Agreement and future senior indebtedness.
Material Changes and Terms
The Fund adopted the Third Supplement to its Declaration of Trust to authorize the new Series C shares. Key structural terms include:
- Redemption: Mandatory redemption on January 31, 2030, at liquidation preference plus accumulated unpaid dividends. Optional redemption permitted by the Fund on or after July 31, 2025.
- Asset Coverage Requirement: The Fund must maintain an asset coverage ratio of at least 200%. Failure to maintain this ratio triggers a mandatory redemption of preferred shares to restore compliance.
- Conversion Rights: Holders may convert shares into Common Shares starting six months after issuance (July 31, 2025). The conversion price is the greater of the 5-day average market price or the most recent Net Asset Value (NAV).
- Dividend Penalties: If the Fund fails to deliver shares upon conversion, the dividend rate increases to 9.125%. If the shares are downgraded below investment grade, the rate increases by 1.00%.
- Voting Rights: Purchasers and the Institutional Adviser granted an irrevocable proxy to the Fund to vote these shares in proportion to other preferred shareholders.
Guidance, Outlook, and Risks
Management Commentary: The filing does not provide specific forward-looking guidance on earnings or NAV beyond the transaction terms. The issuance is exempt from registration under Section 4(a)(2) of the Securities Act of 1933.
Risks and Contingencies:
- Liquidity Risk: Mandatory redemption obligations if asset coverage falls below 200%.
- Cost of Capital Risk: Potential increase in dividend obligations (up to 9.125%) if conversion obligations are not met or credit ratings are downgraded.
- Transferability: Shares are not listed on any exchange and cannot be transferred without Fund consent.
Investor Verification Checklist
- Verify the Fund's current asset coverage ratio to assess the risk of mandatory redemption.
- Review the full text of the Convertible Preferred Shares Purchase Agreement (Exhibit 10.1) for specific covenants.
- Confirm the Fund's ability to service the new $18.6 million liability alongside existing Series A and Series B preferred shares.
- Monitor the Fund's credit rating status to evaluate the risk of dividend rate increases.
- Check the Fund's liquidity position to ensure it can meet the mandatory redemption date of January 31, 2030.