DBRS Morningstar Assigns BBB Rating to Stellus Capital’s $100 million Notes due March 2026, Tr. Neg.

DBRS, Inc. (DBRS Morningstar) assigned a rating of BBB to the $100 million 4.875% Notes due March 30, 2026 (the Notes) issued by Stellus Capital Investment Corporation (Stellus or the Company). The proceeds of the Notes will be used to redeem all of the Company’s outstanding 5.75% Notes due 2022 and repay a portion of the Company’s outstanding credit facility. The trend on the Notes is Negative.

The Negative trend reflects DBRS Morningstar’s view that the challenging and uncertain environment due to the Coronavirus Disease (COVID-19) pandemic has the potential to adversely impact the performance of the investment portfolios of BDCs. While we note that the performance of Stellus’ investment portfolio through the pandemic has been sound, we see the headwinds for middle market borrowers in the current environment as still substantial. These concerns are somewhat mitigated by support of Stellus’ portfolio companies from private equity sponsors, which may selectively invest additional capital in their portfolio companies.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions (September 29, 2020): https://www.dbrsmorningstar.com/research/367510/global-methodology-for-rating-non-bank-financial-institutions.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The primary sources of information used for this rating include Company Documents and S&P Global Market Intelligence. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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