Horizon Technology (NASDAQ:HRZN) Finance Corp (NASDAQ:HRZN) has entered into a material definitive agreement, issuing $20 million in convertible notes, as detailed in its latest SEC filing on October 18, 2024. The notes, carrying a 7.125% interest rate, are due on October 17, 2031, and were sold to unnamed purchasers in a private transaction exempt from registration under the Securities Act.
The company, a Connecticut-based investment firm, plans to use the proceeds to fund investments in line with its objectives and for general corporate purposes. Interest on these notes is payable quarterly with the first payment due on December 31, 2024. If the notes' credit rating falls below investment grade, an additional interest of 1.00% per annum will accrue until the rating is restored to at least "BBB-" or its equivalent.
The notes are unsecured and rank equally with other non-subordinated unsecured debt of the company. They are senior to future subordinated debt, effectively junior to any secured debt, and structurally junior to any subsidiary obligations. No sinking fund is provided for these notes.
From April 17, 2025, Horizon may redeem the notes in whole or in part. Holders can convert notes into common stock at their option after April 17, 2025, and before the day preceding the maturity date. The conversion price is the higher of the volume-weighted average closing sale price for the five days preceding conversion or the company's most recent net asset value per share. However, conversion is restricted to ensure no holder acquires more than 4.9% of the company's outstanding shares post-conversion.
This financial maneuver was made pursuant to a note purchase agreement dated October 17, 2024, and the company's filing provides a comprehensive overview of the terms and conditions associated with the convertible notes. The issuance of these convertible notes reflects Horizon Technology Finance's strategic financial planning, as it seeks to bolster its investment capacity while maintaining a balanced capital structure. The information is based on a press release statement.
In other recent news, Horizon Technology Finance Corporation has been actively investing in healthcare and technology companies. The specialty finance firm provided a $35 million venture loan facility to GT Medical Technologies, a company known for its FDA-cleared GammaTile® therapy for brain tumor treatment. This funding is expected to boost GT MedTech's growth and market expansion. GT Medical Technologies is supported by investors such as MVM Partners, Glide Healthcare Partners, MedTech Venture Partners, and BlueStone Venture Partners.
In addition, Horizon backed Vesta Healthcare with a $35 million loan to support its growth and working capital needs. Vesta Healthcare offers tech-enabled clinical services for chronic condition management and is backed by notable investors like RA Capital Management and Oak HC/FT.
In terms of financial performance, Horizon reported mixed results for Q2 2024. The company's portfolio size decreased to $647 million due to prepayments and fair value adjustments. However, Horizon managed to fund four new debt investments totaling $11 million and reported an investment income of $26 million for the quarter. The company's net asset value (NAV) per share stood at $9.12 as of June 30. With a new $100 million credit facility and amendments to existing credit facilities, Horizon ended the quarter with $150 million in available liquidity and a debt-to-equity ratio of 1.36:1.
InvestingPro Insights
Horizon Technology Finance Corp's recent issuance of $20 million in convertible notes aligns with its financial strategy, as reflected in several key metrics from InvestingPro. The company's dividend yield stands at an impressive 14.33%, underscoring an InvestingPro Tip that HRZN "pays a significant dividend to shareholders." This high yield may be particularly attractive to investors in the current market environment.
However, it's worth noting that HRZN is currently trading near its 52-week low, with its price at 75.57% of its 52-week high. This could indicate potential value for investors, especially considering another InvestingPro Tip that suggests the stock's RSI indicates it may be in oversold territory.
The company's revenue for the last twelve months as of Q2 2024 was $109.13 million, with a modest growth of 6.41% over the same period. This growth, coupled with the new convertible notes issuance, may provide HRZN with additional resources to fund investments and potentially improve its financial position.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing HRZN's investment potential.
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