Some investors may wish to consider Fifth Street Finance Corp.'s ("FSC's") baby bonds—bonds issued in smaller denominations than typical for corporate bonds. While Fifth Street's stocks tend to be more liquid and have higher yields, investors with a lower tolerance for volatility—or who need greater assurance of principal protection—may prefer investing in baby bonds.
Baby bonds offer investors:
It is not uncommon for institutional investors to purchase corporate bonds with a par value of $1,000—a figure that may be out of reach for retail investors. By comparison, FSC's baby bonds have a par value of $25, offering retail investors an opportunity that might be inaccessible otherwise.
Because the baby bonds trade on public stock exchanges, investors have the ability to enter into or exit from their investment as their needs change over time.
Unlike the stocks of their issuers, which tend to fluctuate more in price, baby bonds generally exhibit lower volatility and have a greater likelihood of returning principal, plus interest, provided the bonds are held to maturity.
Potential investors in FSC’s baby bonds have two securities to choose from: (1) 5.875% baby bonds which mature in 2024 and trade on the NYSE under the ticker symbol FSCE; and (2) 6.125% baby bonds which mature in 2028 and trade on the NASDAQ under the ticker symbol FSCFL. Both bonds offer an attractive yield spread to U.S. Treasuries.
Business Development Companies ("BDCs") invest in private companies and thinly traded securities of public companies, including debt instruments of such companies. Generally, less public information exists for private and thinly traded companies and thus, there is a risk that investors may not be able to make fully informed investment decisions. Less mature and smaller private companies generally involve greater risk than well-established and larger publicly-traded companies. Investing in debt involves risk that the issuer may default on its payments or declare bankruptcy, and debt may not be rated by a credit rating agency. BDCs may not generate income at all times. Additionally, limitations on asset mix and leverage may prohibit the way that BDCs raise capital.
Investing involves substantial risks such as high volatility and/or potential loss of principal. An investor should consider the investment objectives, risks, charges and expenses carefully before investing.
This site may contain certain forward-looking statements, including statements with regard to the future performance of Fifth Street Asset Management Inc. ("FSAM"), Fifth Street Finance Corp. ("FSC") and/or Fifth Street Senior Floating Rate Corp. ("FSFR"). Words such as "believes," "expects," "projects," "anticipates," "estimates," and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, and such factors are identified from time to time in FSAM's, FSC's and FSFR's filings with the Securities and Exchange Commission. Neither FSAM, FSC nor FSFR undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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The summary descriptions and other information included herein and any other materials provided to you by FSAM, FSC, FSFR or their representatives are intended only for informational purposes and convenient reference. The information contained herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. Before making an investment decision with respect to the applicable company, investors are advised to carefully review an applicable prospectus to review the risk factors described therein, and to consult with their tax, financial, investment and legal advisors. These materials do not purport to be complete, and are qualified in their entirety by reference to the more detailed disclosures contained in an applicable prospectus and the applicable company's related documentation.
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