On December 22, 2020, Capital Southwest Corporation (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) by and between the Company and Raymond James & Associates, Inc., as representative of the several underwriters named on Schedule A thereto, in connection with the issuance and sale of $75,000,000 aggregate principal amount of the Company’s 4.50% Notes due 2026 (the “Notes” and the issuance and sale of the Notes, the “Offering”).

On December 29, 2020, the Company and U.S. Bank National Association (the “Trustee”), entered into a Third Supplemental Indenture (the “Third Supplemental Indenture”) to the Base Indenture, dated October 23, 2017, between the Company and the Trustee (the “Base Indenture”; and together with the Third Supplemental Indenture, the “Indenture”). The Third Supplemental Indenture relates to the Company’s issuance of the Notes.

The Notes bear interest at a rate of 4.50% per year payable semi-annually in arrears on January 31 and July 31 of each year, beginning on July 31, 2021. The Notes will mature on January 31, 2026 and may be redeemed in whole or in part at the Company’s option at any time prior to October 31, 2025, at par plus a “make-whole” premium, and thereafter at par.

The Company intends to use the net proceeds from the Offering to redeem all of its outstanding 5.95% Notes due 2022 and repay a portion of the outstanding indebtedness under the Company’s senior secured revolving credit facility, as amended (the “Credit Facility”). However, through re-borrowings under the Credit Facility, the Company intends to make investments in lower middle market and upper middle market portfolio companies in accordance with the Company’s investment objective and strategies and for other general corporate purposes, including payment of operating expenses.

The Notes are the direct unsecured obligations of the Company and rank pari passu with all existing and future unsubordinated unsecured indebtedness issued by the Company, senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the Notes, effectively subordinated to all of the existing and future secured indebtedness issued by the Company (including indebtedness that is initially unsecured in respect of which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness, including, without limitation, borrowings under the Credit Facility, and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.

The Indenture contains certain covenants, including certain covenants requiring the Company to comply with Section 18(a)(1)(A) as modified by Section 61(a)(2) of the Investment Company Act of 1940, as amended (the “1940 Act”), or any successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to the Company by the U.S. Securities and Exchange Commission (the “SEC”), to comply with Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act, or any successor provisions, after giving effect to any exemptive relief granted to the Company by the SEC and subject to certain other exceptions, and to provide financial information to the holders of the Notes and the Trustee if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the Indenture.

In addition, holders of the Notes can require the Company to repurchase some or all of the Notes at a purchase price equal to 50% of their principal amount, plus accrued and unpaid interest to, but not including, the repurchase date upon the occurrence of a “Change of Control Repurchase Event,” as defined in the Third Supplemental Indenture.

The Notes were offered and sold in an offering registered under the Securities Act of 1933, as amended, to the Registration Statement on Form N-2 (File No. 333-232492), the prospectus supplement dated December 22, 2020 and the pricing term sheet filed with the SEC on December 22, 2020. The transaction closed on December 29, 2020. The net proceeds to the Company were approximately $73.4 million, after deducting the underwriting discount of $1.5 million and the estimated offering expenses of approximately $140,000 payable by the Company.

The foregoing descriptions of the Underwriting Agreement, the Third Supplemental Indenture, and the Notes do not purport to be complete and are qualified in their entirety by reference to the full text of the Underwriting Agreement, the Third Supplemental Indenture, and the form of global note representing the Notes, respectively, each filed as exhibits hereto and incorporated by reference herein.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information required by Item 2.03 contained in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

CAPITAL SOUTHWEST CORP Exhibit
EX-1.1 2 exhibit11-underwritingagre.htm EX-1.1 DocumentExhibit 1.1CAPITAL SOUTHWEST CORPORATION (a Texas Corporation) $75,…
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About CAPITAL SOUTHWEST CORPORATION (NASDAQ:CSWC)

Capital Southwest Corporation is an investment company that specializes in providing customized financing to middle market companies in a range of industry segments located primarily in the United States. The Company is a specialty lending company. Its principal investment objective is to produce risk-adjusted returns by generating current income from debt investments and capital appreciation from its equity and equity related investments. It focuses on partnering with business owners, management teams and financial sponsors to provide financing solutions to fund growth, changes of control, or other corporate events. In allocating future investments, it focuses on investing in senior and subordinated debt securities secured by security interests in portfolio company assets, coupled with equity interests. It targets senior and subordinated investments in the lower middle market and private loan transactions, as well as first and second lien syndicated loans in middle market companies.