On September 24, 2026, business development company Runway Growth Finance Corp. entered into an underwriting agreement to issue and sell $45.0 million aggregate principal amount of 7.75% Notes due 2031. The offering, priced on September 25, 2026, allows the specialty lender to redeem all of its higher-cost 9.00% Senior Notes due 2027 and pay down revolving bank borrowings under its credit facility with KeyBank National Association, cutting annual coupon expense by 125 basis points on the refinanced tranche while extending debt duration to October 2031.
Key Takeaways
- Fixed-Rate Refinancing: Runway Growth priced $45.0 million in 7.75% Notes due 2031 at $25.00 par per note, generating $43.65 million in net proceeds before expenses (97.00%) with an underwriting discount of 3.00% ($1.35 million).
- Cost of Capital Reduction: Net proceeds are earmarked to redeem the company’s remaining $32.97 million of 9.00% Senior Notes due 2027 and repay KeyBank credit facility debt, eliminating 125 basis points of annual interest expense on that maturing debt.
- Retail-Accessible Exchange Listing: The unsecured notes are structured as exchange-traded baby bonds designed to list on the Nasdaq Global Select Market under ticker symbol RWAYM within 30 days of the October 1, 2026 settlement.
- Maturity Extension and Call Protection: The transaction extends debt maturity by more than four years to October 1, 2031, with three years of initial call protection until optional redemption becomes available on October 1, 2028.
Refinancing Mechanics and Sources and Uses
According to the company’s pricing term sheet filed pursuant to Rule 433, Runway Growth Finance Corp. priced the $45.0 million offering of 7.75% Notes due 2031 at 100% of par value ($25.00 per note). The underwriters, led by Oppenheimer & Co. Inc., B. Riley Securities, Inc., Lucid Capital Markets, LLC, and MUFG Securities Americas Inc., were also granted a 30-day option to purchase up to an additional $6.75 million in aggregate principal amount of notes solely to cover over-allotments. The transaction carries an underwriting discount of 3.00% ($1.35 million), yielding net proceeds of $43.65 million before estimated offering expenses.
The settlement date is scheduled for October 1, 2026, under customary closing conditions. The notes will pay interest quarterly in arrears on March 1, June 1, September 1, and December 1 of each year, commencing December 1, 2026. The initial optional redemption date is October 1, 2028, at which point Runway Growth may redeem the notes in whole or in part at 100% of the principal amount plus accrued and unpaid interest. Morningstar DBRS is expected to assign an investment rating of BBB (low) to the issuance.
Runway Growth outlined a direct balance sheet deleveraging and liability optimization strategy for the capital. The company intends to allocate net proceeds toward two primary debt obligations: fully redeeming its outstanding 9.00% Senior Notes due 2027 (which carried $32.97 million in principal as of June 30, 2026) and paying down outstanding borrowings under its revolving credit facility with KeyBank National Association ($350.0 million outstanding as of June 30, 2026), with any residual proceeds supporting general corporate purposes.
| Offering Metric / Term | 7.75% Notes Due 2031 (New Issue) | 9.00% Notes Due 2027 (To Be Redeemed) |
|---|---|---|
| Aggregate Principal Amount | $45.0 million (plus $6.75M option) | $32.97 million (as of June 30, 2026) |
| Stated Annual Coupon | 7.75% (fixed) | 9.00% (fixed) |
| Issue Price per Note / Denomination | $25.00 (par) | $25.00 (par) |
| Payment Schedule | Quarterly (Mar/Jun/Sep/Dec) | Quarterly |
| Initial Optional Redemption Date | October 1, 2028 (at 100% par) | Currently callable |
| Stated Maturity Date | October 1, 2031 | December 1, 2027 |
| Target Exchange Listing | Nasdaq: RWAYM | Nasdaq: RWAYL |
Why BDCs Turn to Exchange-Traded Baby Bonds
Business development companies face unique regulatory and capital-structure requirements under the Investment Company Act of 1940. Under Section 61(a)(2) of the 1940 Act, BDCs must maintain a minimum asset coverage ratio of 150%, restricting overall leverage to a maximum debt-to-equity ratio of 2.0x. When market valuations cause BDC common shares to trade near or below net asset value (NAV), issuing additional equity risks immediate dilution to existing shareholders. As detailed in ECMSource’s coverage of private credit direct lending expansion, private credit managers have increasingly turned to diversified debt issuance to support loan book expansion without equity dilution.
Exchange-traded notes—commonly known in capital markets as baby bonds due to their $25 par value—solve this dilemma by tapping retail income demand alongside institutional fixed-income allocations. Because baby bonds trade on national equity exchanges like the Nasdaq rather than over-the-counter bond desks, they provide secondary-market liquidity, quarterly distributions, and convenient brokerage access for individual investors seeking high-yield credit. For corporate issuers like Runway Growth and corporate peers issuing corporate notes debt packages, exchange-traded notes create predictable multi-year unsecured funding while lowering blended interest expense.
By replacing its 9.00% 2027 notes with a 7.75% coupon, Runway Growth achieves an immediate 125-basis-point reduction in coupon expense on the $32.97 million tranche. This represents approximately $412,000 in annualized gross interest savings while pushing the maturity wall out from December 2027 to October 2031, gaining nearly four additional years of duration.
Balance Sheet Structure and What to Watch Next
In its preliminary prospectus supplement filed September 23, 2026, Runway Growth reported unaudited total assets of $1,222.36 million as of June 30, 2026. The portfolio included $1,192.35 million of investments at fair value and $10.83 million in cash and cash equivalents. Total debt, net stood at $678.95 million, comprising $350.0 million drawn on its KeyBank credit facility, $32.97 million of SWK 2027 Notes, $40.25 million of July 2027 Notes, $107.0 million of April 2028 Notes, $50.0 million of December 2029 Notes, and $103.25 million of February 2031 Notes.
Similar to recent capital restructurings across corporate credit, including senior notes refinancing packages, managing debt maturity ladders in a high-interest-rate environment requires proactive liability management before debt reaches its final 12-to-18-month maturity window.
Investors and credit analysts should monitor several upcoming milestones:
- Settlement and Closing: Expected on October 1, 2026, subject to customary closing conditions.
- Overallotment Exercise: The 30-day window during which underwriters may exercise the option for up to $6.75 million in additional notes.
- Redemption Notice: Formal notice of redemption for the 9.00% Senior Notes due 2027 to extinguish the higher-cost debt.
- Nasdaq Trading Commencement: Official listing of the notes under the symbol RWAYM on the Nasdaq Global Select Market within 30 days of issuance.
Sources
- U.S. Securities and Exchange Commission: Runway Growth Finance Corp. Form 8-K Current Report (Item 1.01 and Item 2.03), filed September 25, 2026
- U.S. Securities and Exchange Commission: Runway Growth Finance Corp. Free Writing Prospectus (Rule 433 Pricing Term Sheet), filed September 25, 2026
- U.S. Securities and Exchange Commission: Runway Growth Finance Corp. Preliminary Prospectus Supplement (Form N-2), filed September 23, 2026
Disclosure: This article is for informational purposes only and is not investment advice.