Lafayette Square USA Adds Unsecured Debt With Two-Series Private Senior Note Placement
The business development company concentrated nearly all of the raise in a 2031 maturity, with coupons that can step up if the notes lose their investment-grade rating and secured leverage rises.
October 1, 2026
Lafayette Square USA, Inc. has added unsecured debt to its capital structure, selling two series of senior notes to qualified institutional investors in a private placement that closed September 29, 2026.
The deal consists of two fixed-rate tranches, both paying interest semiannually:
- Series A: $2 million of 7.82% senior notes due September 29, 2029
- Series B: $78 million of 8.25% senior notes due September 29, 2031
The split leaves nearly all of the raise in the longer-dated Series B tranche. The business development company said it intends to use the net proceeds for general corporate purposes.
Private placements of senior unsecured notes to institutional buyers are a common financing tool for BDCs, which often pair fixed-rate unsecured funding with secured credit facilities. The debt raise follows a $29.4 million equity capital call the company completed in June.
Coupon Step-Up Protection
Both coupons can rise by up to 2.00% above the stated rate if, subject to certain exceptions, the notes cease to hold an investment-grade rating and the company's minimum secured debt ratio exceeds certain thresholds. Because both conditions must be met, a ratings change on its own would not necessarily lift the coupon.
Ranking and Guarantee
The notes are general unsecured obligations that rank at least equally with the company's other unsecured and unsubordinated debt. LS BDC Holdings, LLC, a wholly owned subsidiary, guarantees them on a senior unsecured basis.
Covenants and Investor Protections
The note purchase agreement carries customary terms for privately placed senior unsecured notes, including affirmative and negative covenants such as:
- maintaining the company's status as a BDC under the Investment Company Act of 1940;
- a minimum consolidated net worth test;
- a minimum asset coverage ratio.
The agreement also includes customary events of default with cure and notice periods. If certain change-of-control events occur, the company must offer to repay the notes at 100% of principal plus accrued interest.
The notes were sold under the Section 4(a)(2) private-offering exemption and have not been registered under the Securities Act or any state securities laws.
