Palmer Square Capital BDC Inc. (NYSE: PSBD) disclosed on July 15 that it has completed the refinancing of a $300 million term debt securitization through its wholly owned indirect subsidiary, Palmer Square BDC CLO 1, Ltd. The transaction, structured as a CLO reset, replaces the existing secured notes with new classes of debt while extending the final maturity to 2039.
The Issuer issued $228 million of AAA-rated Class A-R Notes that carry an interest rate of Term SOFR plus 1.28%, along with $72 million of AA-rated Class B-R Notes priced at Term SOFR plus 1.75%. Both tranches are scheduled to mature on July 15, 2039. The notes may be redeemed earlier at the direction of a majority of the subordinated noteholders, with the company's consent, or by the company itself on any business day after the refinancing date.
Palmer Square Capital BDC continues to retain 100% of the subordinated notes, which do not bear interest but are entitled to all residual principal and interest payments from the underlying loan portfolio after the secured noteholders are paid. This retention satisfies U.S. Risk Retention Rules and EU/UK Securitization Regulations.
The CLO is backed by a diversified portfolio of senior secured loans, with the potential to invest in second-lien loans, corporate bonds, or debtor-in-possession loans that carry bankruptcy-priority security. Palmer Square Capital BDC serves as collateral manager and has agreed to irrevocably waive all collateral management fees for as long as it remains in that role.
BofA Securities acted as the initial purchaser for the newly issued secured notes, which were sold in a private placement and have not been registered under the Securities Act. The indenture governing the notes includes customary covenants and events of default.
This refinancing functions as long-term balance sheet financing for a portion of the company's portfolio investments, and the notes remain subject to the company's regulatory asset coverage requirements applicable to business development companies. The transaction does not alter the overall size of the CLO but resets its terms and extends its duration, providing Palmer Square with continued access to structured financing for its middle-market lending activities.