Oct 11 - Fitch Ratings expects to rate Fifth Street Finance Corp's
(FSC) senior unsecured notes 'BBB-'. Proceeds are expected to be used
for general corporate purposes, including the funding of new investments and
working capital requirements. FSC may also use a portion of the proceeds to
repay debt outstanding, including balances on its credit facilities. Fitch does
not expect the issuance to have a material impact on leverage.
RATING DRIVERS AND SENSITIVITES
FSC's Stable Outlook reflects Fitch's expectations for relatively consistent
operating performance, as revolver capacity and portfolio proceeds are
redeployed into cash-yielding investments with attractive risk-adjusted returns,
and the maintenance of solid asset quality, stable liquidity, and strong
dividend coverage from net investment income
Positive rating momentum is believed to be limited over the near term, given
FSC's size and relatively short-operating history as a public company, but could
be influenced over the longer term by consistent operating performance, further
portfolio diversification, stronger cash earnings coverage of the dividend, and
continued economical access to the unsecured markets.
Negative rating action could be driven by an increase in leverage above the
targeted range, resulting from material unrealized depreciation, and/or an
increase in the proportion of equity holdings without a commensurate decline in
leverage. Declines in operating performance, a prolonged increase in non-accrual
levels and weaker dividend coverage would also be viewed unfavorably from a
Headquartered in White Plains, NY, FSC is an externally managed business
development company, formed in 2007 with an objective to generate both current
income and capital appreciation through debt and equity investments. As of June
30, 2012, the company had investments in 76 portfolio companies amounting to
approximately $1.2 billion at fair value.
Fitch expects to assign the following rating:
Fifth Street Finance Corp:
--Senior unsecured notes 'BBB-'.
Fitch currently rates FSC as follows:
--Long-term Issuer Default Rating (IDR) 'BBB-';
--Secured debt 'BBB-;
--Unsecured debt 'BBB-'.
The Rating Outlook is Stable.