Capital Southwest Expands Revolver to $595M and Lowers Borrowing Spread
Capital Southwest Corporation (NASDAQ:CSWC) expanded its senior secured corporate credit facility from $510 million to $595 million on September 2, offering a lower interest spread of 2.00% over SOFR compared to the previous rate of 2.15%. The company also removed an additional SOFR adjustment and reduced unused commitment fees depending on utilization levels. With this amendment, Capital Southwest now has until September 2031 for final maturity, extending its liquidity runway significantly. The firm reported $280 million in outstanding balances under the facility as of June 30, which could result in annual interest savings if maintained at that level. The company also holds approximately $2.2 billion in investments and has no debt maturities before 2029. However, concerns remain about credit risk given a regulatory debt-to-equity ratio of nearly 1:1 as well as nonaccrual investments representing part of the portfolio. While increased capacity could support new middle-market loan funding at lower costs, it also raises potential for higher credit losses if underwriting standards are not maintained. The amended facility includes several financial covenants to manage leverage and liquidity risks.
