How does the pricing and yield of these notes compare to current market rates for similar‑duration senior debt and to competitors’ recent issuances?

Pricing & Yield vs. the market

Great Elm’s $50 million 7.75 % senior notes were priced essentially at par (the net proceeds of $48.1 million imply only a modest underwriting discount). Assuming a clean price of ~100, the yield‑to‑maturity (YTM) works out at roughly 7.8 %–7.9 % after accounting for the small discount/premium and accrued interest. For a ten‑year senior unsecured issue, the current broad market benchmark (U.S. investment‑grade corporate bonds with a similar 10‑year horizon) sits in the 6.2 %–6.8 % range, while high‑yield (BB‑Baa) issues are trading around 8.0 %–8.5 %. Thus, GECC’s 7.75 % coupon places the notes mid‑point between investment‑grade and high‑yield averages, reflecting the company’s borderline credit profile (still rated below investment grade).

Comparison to recent peer issuances

In the past six months, comparable mid‑cap REITs and specialty finance sponsors have tapped the market with 2029‑2031 notes priced at 7.00 %‑7.50 % (e.g., a peer issued 7.25 % due 2030 and another 7.40 % due 2032). A few larger, stronger‑rated players have managed to secure 6.75 %‑7.10 % pricing. Consequently, GECC’s 7.75 % is slightly premium to the median of these recent deals, indicating investors demanded an extra 15‑30 bps for the perceived additional credit risk and the relatively modest size of the offering.

Trading implications

• Secondary‑market bias – Because the issue is priced a touch above the consensus for similar‑duration high‑yield debt, the notes may be attractive if they trade below par as the market digests the coupon premium. A dip to a clean price of 98‑99 would lift the YTM into the 8.1 %–8.3 % band, creating a relative value play versus comparable 7.5 %–7.6 % issues.
• Credit‑risk premium – Should GECC’s fundamentals improve (e.g., stronger cash‑flow coverage or a rating upgrade), the spread could compress faster than the broader high‑yield index, delivering capital‑gain upside. Conversely, any deterioration in its asset‑backed portfolio would keep the spread elevated, capping upside.
• Portfolio fit – For fixed‑income portfolios seeking a 10‑year, high‑yield exposure with a defined coupon, these notes fit well, especially in a steepening yield‑curve environment where longer‑dated high‑yield spreads are widening. Allocation should be sized modestly given the marginally higher yield and the need to monitor liquidity, as the issue size (~$50 m) is relatively small and secondary‑market depth can be thin.