Priority Income Fund Inc., a non-traded closed-end fund, has named Preferred Capital Securities LLC, a broker dealer and wholesale distributor, to serve as the dealer manager for its 18-month follow-on common stock offering once it is declared effective by the Securities and Exchange Commission.
Priority Income Fund had $536.6 million of total assets as of September 30, 2019 and invests in pools of senior secured loans made primarily to U.S. companies whose debt is rated below investment grade or, in limited circumstances, unrated. Provasi Securities LP previously served as dealer manager for the fund.
Priority said that its objectives for the follow-on offering include scale-driven benefits, increased investment diversity, larger per investment capability (including expanding the ability to pursue majority control investments with call, extension, and refinancing benefits), better access to financing, and other potential benefits.
“As proposed and directed by the independent directors of the board, Priority pursued an extensive review of qualified dealer managers for this follow-on offering, and [Preferred Capital Securities] was the best solution by a significant margin,” said M. Grier Eliasek, chairman and chief executive officer of Priority and president of Prospect.
Formed in 2013, Preferred Capital Securities is a boutique managing broker-dealer that distributes investment products through broker-dealers and registered investment advisors. The firm has raised more than $2.2 billion of capital as a wholesale distributor, including $530 million in the 12 months ended September 30, 2019.
“We are impressed with the 9.86 percent annualized distribution rate, fully covered by net investment income, that Priority generated for the trailing 12 months ending September 30, 2019 for Class R shares based on the most recent offering price,” said Jeff Smith, CEO of Preferred Capital Securities. “We look forward to making this investment opportunity available to more income-seeking investors in the marketplace.”
The follow-on offering includes approximately 71.6 million previously registered shares that are being carried forward to the new offering. The fund’s initial public offering launched in 2013 and sold 28.4 million shares for a total of $436.5 million, as of October 31, 2019.
The fund plans to offer three share classes with different up-front sales loads, including Class R shares, Class RIA shares, and Class I shares. The minimum initial investment is $1,000, and the share prices were not included in the preliminary prospectus.
Class R shares will be available to the general public and include selling commissions of up to 6.0 percent and dealer manager fees of up to 0.75 percent.
Class RIA shares, available for fee-based accounts, have dealer manager fees of up to 0.75 percent, but no selling commissions.
Class I shares, or institutional shares, have no selling commissions or dealer manager fees.
In May 2019, Priority Income Fund completed its merger with Stira Alcentra Global Credit Fund, a closed-end fund formerly known as Steadfast Alcentra Global Credit Fund.
Priority Income Fund was created to acquire and grow an investment portfolio primarily consisting of senior secured loans or pools of senior secured loans known as collateralized loan obligations. The loans will generally have a floating interest rate and include a first lien on the assets of the respective borrowers, which typically are private and public companies based in the United States.
Preferred Capital Securities is an affiliate of Preferred Apartment Communities (NYSE: APTS).
Prospect Capital Management L.P., which serves as the operating member of the investment adviser for Priority Income Fund, has more than $6 billion of assets under management in multiple traded and non-traded registered investment companies focused on structured credit, middle-market lending, real estate, and other yield and total return investment strategies.