BOULDER, Colo. -- (Business Wire)
First Opportunity Fund, Inc. (OTC: FOFI) (the “Fund”) announced today
that it has entered into a committed secured credit facility agreement
with BNP Paribas Prime Brokerage, Inc. ("BNP"), which currently has a
maximum commitment amount of $30 million (the “Credit Facility”). The
Fund will use the Credit Facility as leverage and may seek to increase
the commitment amount from time to time, depending on the Fund’s ability
to satisfy BNP’s asset coverage requirements. The Credit Facility
provides for a secured line of credit for the Fund, whereby Fund assets
are pledged against advances made to the Fund. The Credit Facility has a
floating rate of interest tied to short-term interest rates.
Summary of Risks Associated with the Credit
Facility: The purchase of securities while borrowings are
outstanding under the Credit Facility will have the effect of leveraging
the Fund. Such leveraging increases the Fund’s exposure to capital risk,
and borrowed funds are subject to interest costs that will reduce net
income. The use of leverage by a Fund creates an opportunity for greater
total return, but, at the same time, creates unique risks. For example,
leveraging may exaggerate changes in the net asset value of Fund shares,
as well as in the yield on the Fund’s portfolio. The interest rate under
the Credit Facility is floating, such that fluctuations in the interest
rate environment may have a material impact on the cost of deploying and
maintaining the Credit Facility. Although the principal of such
borrowings will be fixed, the Fund’s assets may change in value during
the time borrowings are outstanding. Borrowings will create interest
expenses for the Fund that could exceed the income from the assets
purchased with the borrowings. To the extent the income or capital
appreciation derived from securities purchased with borrowings exceeds
the interest the Fund pays on the borrowings, the Fund’s return will be
greater than if leverage had not been used. Conversely, if the income or
capital appreciation from the securities purchased with borrowings is
not sufficient to cover the cost of borrowing, the return to the Fund
will be less than if leverage had not been used and, therefore, any
amount otherwise available for distribution to stockholders as dividends
will be reduced. In the latter case, the Fund’s advisers, in their best
judgment, may nevertheless determine to maintain the Fund’s leveraged
position if they expect that the benefits to the Fund’s stockholders of
maintaining the leveraged position will outweigh the current reduced
Current stockholders and prospective investors should consult their own
financial and legal advisors about risks associated with investing in
the Fund in light of its intent to deploy leverage.
For more information on the Fund, please visit us on the web at www.firstopportunityfund.com.
First Opportunity Fund, Inc.
Brandon Krinhop, 303-449-0426
Source: First Opportunity Fund, Inc.
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