OFS Capital Initiates Unsecured Notes Offering to Manage Existing Debt

OFS Capital Corp has initiated an unsecured notes offering to partially redeem its outstanding 4.75% Notes. Analysts maintain a stable outlook with a consensus price target of $9.00 per share, and the stock receives a "Hold" recommendation from brokerage firms. The move reflects the company's proactive approach to managing its debt obligations efficiently.

OFS Capital Corporation (NASDAQ: OFS) has initiated an underwritten offering of unsecured notes, aiming to partially redeem its outstanding 4.75% Notes due in 2026. The move is part of the company's strategic debt management and reflects its proactive approach to managing its debt obligations efficiently.

The offering, which has been submitted for listing on the Nasdaq Global Select Market under the trading symbol "OFSSO," is expected to commence trading within 30 days from the original issue date, pending approval. The interest rate and other terms of the notes will be determined at the time of pricing. The company intends to use the net proceeds from this offering to redeem $25.0 million in aggregate principal amount of its 4.75% Notes due 2026, plus accrued interest and any required make-whole premium payment.

As of July 14, 2025, OFS Capital had approximately $125.0 million aggregate principal amount outstanding of its 4.75% Notes due 2026. The company issued notices to the holders of these notes on July 11, 2025, regarding the exercise of its option to redeem a portion of the issued and outstanding amount. The redemption is scheduled for August 11, 2025.

The offering is being managed by Lucid Capital Markets, LLC and Goldman Sachs & Co. LLC. Investors are advised to carefully consider the investment objective, risks, and charges and expenses of the company before investing. The preliminary prospectus supplement and accompanying prospectus have been filed with the Securities and Exchange Commission and contain a description of these matters and other important information about the company.

Analysts maintain a stable outlook on OFS Capital with a consensus price target of $9.00 per share. The stock has received a "Hold" recommendation from brokerage firms. The company's strategic debt refinancing initiative is aimed at optimizing its capital structure and reducing near-term liabilities, aligning with its stated goals of extending debt maturities and lowering refinancing risks.

The offering carries both strategic imperatives and risks. While the move could reduce pressure to refinance large chunks of debt in the near term and potentially lower interest costs, the new notes are unsecured and subordinated to secured debt. This subordination could disadvantage holders in a liquidity crisis. Additionally, the company's asset coverage ratio of 160% offers a buffer, but margin compression in net investment income (NII) hints at operational headwinds. Investors should carefully consider these factors.

References:
[1] https://www.businesswire.com/news/home/20250716964259/en/OFS-Capital-Corporation-Commences-Offering-of-Notes
[2] https://seekingalpha.com/news/4467851-ofs-capital-commences-offering-of-notes
[3] https://www.ainvest.com/news/ofs-capital-strategic-debt-refinancing-balancing-act-shareholder-2507/