CION Investment Corp 8-K Summary
Business Context and Reporting Period
This Form 8-K was filed on April 4, 2017, reporting events occurring on March 29, 2017. CION Investment Corporation (CION) announced that its newly formed, wholly-owned special purpose financing subsidiary, Flatiron Funding II, LLC, entered into a material definitive agreement to establish a senior secured credit facility.
Key Financial Metrics and Facility Details
- Facility Size: Revolving credit facility with an aggregate principal amount of $325,000,000.
- Initial Drawdown: $231,698,109 borrowed on March 29, 2017.
- Interest Rate: Floating rate based on the higher of the Citibank prime rate, federal funds rate plus 1.5%, or three-month LIBOR plus 1.0%, plus a spread of 2% per year during the Reinvestment Period (through March 29, 2019) and 3% per year thereafter.
- Maturity: All advances and accrued interest are due by no later than March 30, 2020.
- Fees: Non-usage fee of 0.75% per year on unborrowed amounts (subject to increase to 2% in certain circumstances). Prepayment premiums of 0.75% or 0.50% apply if terminated on or prior to March 29, 2018, or March 29, 2019, respectively.
- Collateral: Secured by a first priority security interest in all assets of Flatiron Funding II, including contributed loans and corporate debt securities.
- Recourse: Obligations are non-recourse to CION; exposure is limited to the value of CION's investment in the subsidiary.
Material Changes
The filing reports the creation of a new direct financial obligation and a significant increase in leverage capacity for the company's financing subsidiary. This represents a material change in the company's capital structure and liquidity management strategy, enabling the funding of a portfolio of loans and corporate debt securities.
Outlook, Risks, and Covenants
The credit agreement includes customary covenants and events of default, including:
- Failure to make payments when due (uncured within two business days).
- Insolvency or bankruptcy of Flatiron Funding II, CION, or the investment adviser (CIM).
- Change of control of Flatiron Funding II or CIM.
- Failure to satisfy borrowing base tests, equity coverage tests, or unencumbered liquidity tests.
- Failure to maintain minimum tangible net worth.
Upon an event of default, Citibank may declare all outstanding advances immediately due and payable. The filing does not provide specific revenue, profit, or cash flow metrics for the reporting period, as this is a current report regarding a specific transaction rather than a periodic financial statement.
Key Facts for Investor Verification
- Verify the specific composition and quality of the assets pledged as collateral to Flatiron Funding II.
- Confirm the impact of the $231.7 million drawdown on CION's overall leverage ratios and liquidity position.
- Monitor compliance with the borrowing base and equity coverage tests to avoid events of default.
- Review the terms of the non-usage fee and potential prepayment penalties to understand the cost of capital flexibility.
- Assess the stability of the investment adviser relationship, as the cessation of CIM's role constitutes an event of default.