Business Context and Reporting Period
Company: Carlyle Credit Income Fund (NYSE: CCIF)
Filing Type: Form 8-K (Current Report)
Report Date: August 26, 2024 (Events reported August 26–27, 2024)
Context: The Fund announced two concurrent capital raising transactions: a private placement of convertible preferred shares and a registered direct offering of common shares.
Key Financial Metrics and Transaction Details
| Transaction Type | Instrument Details | Volume | Price | Net Proceeds (Approx.) |
|---|---|---|---|---|
| Convertible Preferred Placement | 7.125% Series B Convertible Preferred Shares due 2029 | 11,517 shares | $930.00 per share | $10.6 million |
| Registered Direct Offering | Common Shares | 1,444,865 shares | $7.9592 per share | $11.5 million |
Preferred Share Terms:
- Dividend Rate: 7.125% fixed annual rate ($71.25 per share), payable quarterly.
- Liquidation Preference: $1,000.00 per share.
- Seniority: Senior to Common Shares; equal to Series A Preferred Shares; subordinate to Credit Agreement indebtedness.
- Asset Coverage Requirement: Fund must maintain at least 200% asset coverage; failure triggers mandatory redemption.
Material Changes and Capital Structure
The filing details a material change in the Fund's capital structure through the issuance of new equity securities:
- Series B Preferred Shares: Authorized via the Second Supplement to the Amended and Restated Declaration of Trust. These shares are unlisted and non-transferable without consent.
- Common Shares: Issued pursuant to an effective shelf registration statement (Form N-2). No placement agent or underwriter was retained.
- Voting Arrangements: Purchasers and the Institutional Adviser granted the Fund an irrevocable proxy to vote all Preferred Shares held by them in proportion to the vote of other preferred shareholders.
Guidance, Risks, and Contingencies
Redemption and Conversion Triggers:
- Term Redemption: Mandatory redemption on August 27, 2029, at liquidation preference plus accumulated unpaid dividends.
- Optional Redemption: Fund may redeem shares on or after February 27, 2025.
- Asset Coverage Failure: If asset coverage falls below 200% and is not cured within 30 days of reporting, the Fund must redeem shares to restore the ratio to 200% (or up to 285% at its discretion).
- Conversion Penalty: If the Fund fails to deliver Common Shares upon conversion, the dividend rate on surrendered shares increases to 9.125%.
- Downgrade Penalty: If the shares are downgraded below investment grade, the dividend rate on all Convertible Preferred Shares increases by 1.00%.
- Change of Control: Holders have the right to require repurchase at 100% of liquidation preference plus accrued dividends.
Delisting Risk: If Common Shares cease to be publicly traded for 20 consecutive trading days, the Fund must redeem the Convertible Preferred Shares.
Investor Verification Checklist
- Verify the Fund's current asset coverage ratio to assess the risk of mandatory redemption under the 200% threshold.
- Confirm the total outstanding preferred share count post-issuance to evaluate dividend obligations relative to cash flow.
- Review the "Statement of Preferences" (Exhibit 3.1) for specific details on dividend adjustment mechanisms and conversion pricing formulas.
- Monitor the Fund's ability to maintain the NYSE listing for Common Shares to avoid forced redemption of Preferred Shares.
- Check for any subsequent filings regarding the use of the approximately $22.1 million in combined net proceeds.