CION Investment Secures $30 Million Unsecured Term Loan
CION expects to use the proceeds for general corporate purposes, aiming to enhance liquidity.
October 07, 2024
CION Investment Corporation has entered into a $30 million unsecured term loan facility with an Israeli institutional investor, aiming to bolster its working capital and improve liquidity. After deducting fees and expenses, the company received approximately $29.4 million in net borrowings. The funds are expected to be used for general corporate purposes, ensuring CION maintains flexibility in its financial planning.
The loan will mature on September 30, 2027, and bears a floating interest rate that adjusts according to the three-month Secured Overnight Financing Rate (SOFR). This rate includes a credit spread of 3.80% per year and is subject to a minimum SOFR floor of 4.0%. Interest payments are due quarterly in arrears, ensuring manageable cash flow requirements.
The loan is unsecured, meaning it is treated equally with all existing and future unsecured debt but is subordinate to any secured obligations. CION has the right to prepay the loan early, but any such action would come with a prepayment fee. This fee would either be zero or the discounted present value of the remaining interest payments, calculated using a SOFR rate plus 2.00%.
Financial Covenants and Obligations
As part of the agreement, CION is bound by several financial covenants designed to protect the lender. These include maintaining minimum shareholder equity of $543.6 million and an asset coverage ratio of at least 150%. The company is also required to uphold an interest coverage ratio of no less than 1.25 to 1.00, as well as an unencumbered asset coverage ratio of at least 1.25 to 1.00. The assets used to meet these requirements must largely consist of first lien senior secured loans and cash, with more than 65% of the total value in these categories.
Implications and Strategic Position
The injection of $30 million through this loan places CION in a stronger financial position, offering them additional resources for operational needs and future growth initiatives. With a long-term maturity date and flexible repayment options, the company can focus on executing its business strategies without immediate financial strain. By securing this unsecured loan, CION demonstrates confidence in its ability to navigate market conditions while maintaining strong liquidity and balance sheet performance.
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