CION Investment Corp 8-K Summary
Business Context and Reporting Period
This Form 8-K Current Report, dated October 11, 2023, covers events occurring on October 10, 2023. CION Investment Corporation, a business development company incorporated in Maryland, announced the issuance of additional debt securities to institutional investors in Israel.
Key Financial Metrics
- Debt Issuance: Approximately $33.7 million in aggregate principal amount of Series A Unsecured Notes due 2026.
- Net Proceeds: Approximately $32.3 million after deduction of fees and offering expenses.
- Interest Rate: Floating rate equal to SOFR plus a credit spread of 3.82% per year.
- Maturity Date: August 31, 2026.
- Interest Payment Schedule: Quarterly on February 28, May 31, August 31, and November 30, commencing November 30, 2023.
- Use of Proceeds: Investments in portfolio companies, working capital, and general corporate purposes.
- Credit Rating: A1.il by Midroog Ltd. (affiliate of Moody's).
Material Changes and Debt Structure
The issuance expands the existing Series A Unsecured Notes due 2026 issued in February 2023. The new notes share identical terms and conditions with the prior issuance. The notes are general unsecured obligations ranking pari passu with existing unsecured unsubordinated indebtedness. They rank senior to subordinated debt, effectively junior to secured debt, and structurally junior to subsidiary indebtedness.
Covenants, Risks, and Contingencies
The Deed of Trust includes affirmative and negative covenants requiring:
- Maintenance of status as a business development company under the Investment Company Act of 1940.
- Minimum shareholders' equity of $525 million.
- Minimum asset coverage ratio of not less than 150%.
- Unencumbered asset coverage ratio of 1.25 to 1.00.
Events of default include nonpayment, material misrepresentation, breach of covenant, cross-default on indebtedness exceeding $50 million, and bankruptcy. The notes were sold offshore to non-U.S. persons under Regulation S and are not registered under the U.S. Securities Act.
Investor Verification Checklist
- Verify the current aggregate principal amount of outstanding Series A Unsecured Notes due 2026.
- Confirm current compliance with the $525 million minimum shareholders' equity covenant.
- Review the current asset coverage ratio and unencumbered asset coverage ratio against the 150% and 1.25:1 thresholds.
- Assess the impact of the floating SOFR rate on future interest expense given current market rates.
- Confirm the status of the $32.3 million net proceeds deployment into portfolio companies.