Horizon Technology Finance Enhances Capital Resources and Increases Capacity via New $100 Million Credit Facility

Rhea-AI Summary

Horizon Technology Finance (NASDAQ: HRZN) has secured a $100 million senior secured credit facility through its subsidiary, Horizon Funding II, The facility, led by a major U.S. insurance company, allows Horizon to issue up to $100 million in secured notes, with potential expansion to $200 million. The funds will be used to leverage existing investments and support new ones. The credit facility includes a one-year funding period and a three-year investment period, with a 67.5% maximum advance rate. Interest is calculated based on U.S. Treasury yields or a minimum of 5.00%. The facility is collateralized by Horizon's assets and matures in June 2033.

Positive

• Secured a $100 million credit facility to enhance capital resources.
• Potential to increase the credit facility to $200 million.
• Funds will be used to leverage existing investments and support new ones.
• Credit facility has favorable terms including a one-year funding period and a three-year investment period.
• Demonstrates continued support from debt markets.

Negative

• Borrowings bear interest at a minimum rate of 5.00%, which could be high in certain market conditions.
• The facility is collateralized by the company's assets, which presents a risk if the company defaults.

Financial Analyst

Horizon Technology Finance Corporation's new $100 million credit facility is a significant move that can influence its financial structure and growth trajectory. A credit facility is a loan agreement that allows a company to borrow money over time rather than all at once, providing flexibility and assured access to capital. This new credit facility, led by a large U.S. insurance company, can be expanded to $200 million, which underscores the lender's confidence in Horizon’s financial health and potential for growth.

The maximum advance rate of 67.5% indicates the proportion of Horizon’s assets that can be used as collateral for the borrowings, which is quite favorable and demonstrates a strong asset base. The interest rate structure, being the greater of the interpolated yield plus 3.15% or 5.00%, ensures that Horizon can manage its interest expenses relative to prevailing market rates. Such flexibility in interest rates is beneficial for the company as it can shield against unfavorable rate fluctuations.

This facility enhances Horizon's capabilities to leverage existing investments and deploy new capital efficiently, which is important for its business model that focuses on providing secured loans to venture capital-backed companies. This move could lead to improved earnings potential by amplifying their lending operations. However, it's essential for investors to monitor how effectively Horizon uses this additional capital without overleveraging, which could strain their balance sheet in adverse conditions.

In summary, this development is positive for Horizon’s strategic financial positioning and its ability to generate shareholder value through prudent growth.

Market Research Analyst

From a market perspective, Horizon Technology Finance Corporation's new credit facility is an important lever for capital deployment. By increasing their borrowing capacity, Horizon can expand its portfolio of secured loans to high-growth potential sectors like technology, life sciences and sustainability. These sectors are characterized by rapid innovation and high capital needs, making Horizon’s financing solutions critical for these venture-backed companies.

This credit facility is particularly timely as the demand for venture debt has been growing, especially amid varying venture capital funding climates where companies seek non-dilutive funding options. The one-year funding period and three-year investment period provide Horizon with ample time to strategically allocate these funds, which can lead to a diversified and robust loan portfolio that can drive long-term growth.

However, investors should be mindful of the potential risks associated with this facility. The collateralization of the credit facility by certain of Horizon’s assets could pose risks if the underlying assets do not perform as expected. Additionally, the condition of the broader economy and interest rate movements could impact borrowing costs and asset valuations, affecting Horizon’s financial stability.

Overall, this credit facility is a well-structured opportunity that, if executed prudently, can significantly enhance Horizon's market position and growth prospects.

FARMINGTON, Conn.--(BUSINESS WIRE)-- Horizon Technology Finance Corporation (NASDAQ: HRZN) (“Horizon” or the “Company”), an affiliate of Monroe Capital, and a leading specialty finance company that provides capital in the form of secured loans to venture capital-backed companies in the technology, life science, healthcare information and services, and sustainability industries, today announced that Horizon Funding II, LLC, Horizon’s wholly-owned subsidiary (“HFII”), has closed a $100 million senior secured credit facility led by a large U.S. based insurance company pursuant to which HFII may issue up to $100 million of secured notes. The capacity under the credit facility may be increased to $200 million with the mutual agreement of Horizon and the lenders.

Horizon intends to use the credit facility to leverage its existing investments, as well as deploy additional capital for new investments. The new credit facility complements the Company’s existing credit facilities.

The new credit facility has a one-year funding period, during which time HFII may make additional borrowings under the credit facility, and a three-year investment period, during which time HFII may make additional loans. The credit facility has a maximum advance rate of 67.5% based on the number of distinct obligors whose loans serve as collateral for the credit facility. Borrowings bear interest, payable monthly, determined at a rate per annum equal to the greater of (i) the yield for the United States Treasury constant maturity 3-year and 5-year in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) – H.15” interpolated to a 4.88-year weighted average life plus 3.15% and (ii) 5.00%. The credit facility is collateralized by certain of the Company’s assets and matures in June 2033.

“We are pleased to close our new credit facility, further expanding the borrowing capacity on our balance sheet and bolstering our ability to offer venture debt solutions to high-quality companies,” stated Daniel R. Trolio, Executive Vice President and Chief Financial Officer of Horizon. “Along with underscoring the continued support of Horizon from the debt markets, we believe this additional facility will enable Horizon to prudently grow its venture debt portfolio and generate further shareholder value.”

About Horizon Technology Finance
Horizon Technology Finance Corporation (NASDAQ: HRZN), externally managed by Horizon Technology Finance Management LLC, an affiliate of Monroe Capital, is a leading specialty finance company that provides capital in the form of secured loans to venture capital backed companies in the technology, life science, healthcare information and services, and sustainability industries. The investment objective of Horizon is to maximize its investment portfolio’s return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. Horizon is headquartered in Farmington, Connecticut, with a regional office in Pleasanton, California, and investment professionals located throughout the U.S. Monroe Capital is an $18 billion asset management firm specializing in private credit markets across various strategies, including direct lending, technology finance, venture debt, opportunistic, structured credit, real estate and equity. To learn more, please visit horizontechfinance.com.

Forward-Looking Statements
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Horizon’s filings with the Securities and Exchange Commission. Horizon undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240624453843/en/

Investor Relations:

ICR

Garrett Edson

ir@horizontechfinance.com

(646) 200-8885

Media Relations:

ICR

Chris Gillick

HorizonPR@icrinc.com

(646) 677-1819

Source: Horizon Technology Finance Corporation

FAQ

What is Horizon Technology Finance's new credit facility?

Horizon Technology Finance has secured a $100 million senior secured credit facility led by a major U.S. insurance company.

How will Horizon Technology Finance use the new credit facility?

Horizon intends to leverage existing investments and deploy additional capital for new investments.

What are the terms of Horizon Technology Finance's new credit facility?

The facility includes a one-year funding period, a three-year investment period, a 67.5% maximum advance rate, and interest determined by U.S. Treasury yields or a minimum of 5.00%.

When does the new credit facility for Horizon Technology Finance mature?

The credit facility matures in June 2033.

What is the potential expansion capacity of Horizon Technology Finance's new credit facility?

The credit facility capacity may be increased to $200 million with mutual agreement.

What is the stock symbol for Horizon Technology Finance?

The stock symbol for Horizon Technology Finance is HRZN.