- Establishes a top-15, externally managed, publicly traded BDC
with significantly increased market presence and improved economies
of scale
- Combined company estimated to have over $500 million of net
assets and a portfolio in excess of $900 million at close
- New best-in-class fee structure with reduced base management
fee rates and increased hurdle rates
- Transaction expected to close in fourth quarter 2019
Crescent Capital BDC, Inc. (“Crescent BDC”) and Alcentra Capital
Corporation (“Alcentra Capital”) (NASDAQ:ABDC) -- a middle-market
BDC managed by Alcentra NY, LLC (“Alcentra NY”), a majority-owned
subsidiary of BNY Alcentra Group Holdings, Inc. -- announced today
that they have entered into a definitive merger agreement under
which Crescent BDC will acquire Alcentra Capital. This transaction
is the result of Alcentra Capital’s previously announced review of
strategic alternatives led by an independent director committee
(the “Committee of Independent Directors”) of its board of
directors, and has been unanimously approved by the Committee of
Independent Directors, the independent directors of Crescent BDC
and the boards of directors of both companies.
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the full release here:
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Under the terms of the transaction, in exchange for
approximately 12.9 million shares of Alcentra Capital common stock,
Alcentra Capital’s stockholders will receive approximately (i)
$19.3 million in cash, or $1.50 per share, from Crescent BDC; (ii)
5.2 million shares of Crescent BDC common stock; and (iii) $21.6
million in cash, or $1.68 per share, from CBDC Advisors, LLC,
Crescent BDC’s investment adviser (“Crescent Cap Advisors”). Any
final dividend that Alcentra Capital must pay in connection with
the closing of the transaction to comply with applicable tax
requirements that is in excess of Alcentra Capital’s regular
quarterly dividends will reduce the cash consideration to be paid
by Crescent BDC on a dollar-for-dollar basis. The total cash and
stock consideration to be received at closing is currently
estimated to be approximately $141.9 million after taking into
account certain post-closing adjustments, or approximately $11.02
per share, representing 1.0x Alcentra Capital’s net asset value per
share as of June 30, 2019, and 1.36x the closing price of Alcentra
Capital’s common stock on August 12, 2019. The total value of the
consideration to be received by Alcentra Capital stockholders at
closing is variable and may be different than the estimated total
consideration described herein depending on a number of factors,
including as a result of transaction costs that are different than
those estimated by the parties, fair value adjustments, operating
performance subsequent to June 30, 2019 and share issuances.
Crescent Cap Advisors will provide significant financial support
to the transaction, including approximately $1.68 per share
referenced above of the total approximately $3.18 per share cash
consideration to be paid to Alcentra Capital’s stockholders at
closing and the fee waivers discussed below. In addition, Crescent
Cap Advisors has agreed to fund at closing approximately $1.4
million of Crescent BDC’s transaction expenses incurred related to
this transaction.
Prior to the consummation of the transaction, Crescent BDC will
convert to a Maryland corporation, and as a result, the combined
company will be incorporated in Maryland. Crescent BDC will apply
for listing on the NASDAQ under the ticker symbol “CCAP” and is
expected to trade publicly immediately upon the consummation of the
transaction.
Jean-Marc Chapus, Co-Founder and Managing Partner of Crescent
Capital Group LP commented, “Over 25 years ago, we had a vision to
establish a research-driven investment firm focused solely on one
market, below investment grade credit. Since that time, we have
differentiated ourselves in the marketplace, strategically growing
our asset base across multiple economic and business cycles to be
more effective and relevant to our clients, both our investors and
the private equity community whose companies we finance. The
Crescent Capital Group platform is unmatched, and now with the
addition of Alcentra Capital to our Crescent BDC portfolio, we will
be able to provide our combined shareholders with even further
opportunities for income generation and capital appreciation.”
“At Crescent Capital Group, we look to invest in niche companies
with defensible market strategies and experienced management teams
that can survive market cycles," added Mark Attanasio, Co-Founder
and Managing Partner of Crescent Capital Group LP. "We have the
right people and the right investment processes in place to promote
long-term growth for our clients, and we look forward to broadening
our investment portfolio with the acquisition of Alcentra
Capital.”
“Crescent Capital Group’s $25 billion platform, longstanding
sponsor origination relationships and disciplined underwriting and
investment processes serve as a strong foundation to continue to
deliver attractive, risk-adjusted returns to our shareholders,”
commented Jason Breaux, Chief Executive Officer of Crescent BDC.
“We believe this transaction is the right next step in the
development of our BDC and provides our investors with improved
scale and flexibility as we continue to enhance our private credit
capabilities.”
Following the transaction, Crescent BDC stockholders and
Alcentra Capital stockholders are expected to own approximately 81%
and 19%, respectively, of the combined company, which will remain
externally managed by Crescent Cap Advisors. All Crescent BDC
officers and directors in office immediately prior to the closing
of the transaction will remain in their current roles following
closing.
In connection with the transaction, Crescent Cap Advisors has
agreed to establish what we believe is a best-in-class fee
structure and amend its current investment management agreement
with Crescent BDC to take effect immediately after the closing of
the transaction. Key terms of this fee structure include:
- Annual base management fee rate reduced from 1.50% to
1.25%;
- Six quarters of base management fee waivers, so that only 0.75%
will be charged for such time period;
- Annualized incentive fee hurdle increased from 6% to 7% while
maintaining a 17.5% income incentive fee; and
- Six quarters of full waivers of the income-based portion of the
incentive fee.
Additionally, Crescent BDC will implement a stock repurchase
program for a period of twelve months following the closing of the
transaction via open-market share repurchases in an aggregate
amount of up to $20 million, less any amounts provided under any
repurchase program for Crescent BDC stock that is entered into by
affiliates of Crescent BDC or Crescent Cap Advisors, subject to
certain regulatory restrictions (including Rule 10b-18 under the
Securities Exchange Act of 1934).
Including the financial support provided by Crescent Cap
Advisors, it is anticipated that the combination will:
- Establish a top-15, externally managed, publicly traded BDC
with significantly increased market presence and improved economies
of scale;
- Enhance portfolio diversification consistent with Crescent
BDC’s and Alcentra Capital’s strategy of maintaining a senior
secured first lien-focused portfolio;
- Facilitate a dividend policy designed to over-earn a quarterly
$0.41 dividend per share; and
- Further strengthen Crescent BDC’s balance sheet and augment
access to growth capital.
Over two-thirds of Crescent BDC’s stockholders already support
the transaction and have agreed to vote their shares in favor of
the merger and related transactions. Additionally, Crescent BDC
stockholders (other than those Alcentra Capital stockholders
receiving Crescent BDC shares in connection with the transaction)
generally will be restricted from trading their shares for at least
six months following the closing of the transaction, subject to a
modified lock-up schedule thereafter for an additional six
months.
Commenting on Alcentra Capital’s review of strategic
alternatives, which involved inbound and outbound contact and entry
into confidentiality agreements with numerous parties, Edward
Grebow, chair of Alcentra Capital’s Committee of Independent
Directors, stated, “The transaction with Crescent BDC is the result
of a thorough strategic review process by the Committee of
Independent Directors, and the Board is pleased to recommend it to
Alcentra Capital’s stockholders. The proposed transaction
accelerates Alcentra Capital’s portfolio transition to upper
middle-market senior secured investments, delivers significant
short- and long-term value to Alcentra Capital’s existing
stockholders and compares favorably to precedent strategic
transactions in the BDC space. With a more diversified portfolio,
we expect the combined company to be positioned to deliver strong,
consistent performance for investors.”
Suhail A. Shaikh, Chief Executive Officer of Alcentra Capital,
added, “We have made significant progress rotating our legacy
portfolio and stabilizing NAV over the past four quarters. We are
now in a much stronger position and, through the combination with
Crescent BDC, will create a larger BDC with a highly complementary
portfolio that offers immediate additional value for our
stockholders.”
Consummation of Crescent BDC’s acquisition of Alcentra Capital
is subject to Alcentra Capital stockholder approval, customary
regulatory approvals and other closing conditions. The transaction
is expected to close in the fourth quarter of 2019.
BofA Merrill Lynch served as financial advisor to Crescent BDC.
Kirkland & Ellis LLP served as legal counsel to Crescent BDC.
Proskauer Rose LLP served as legal counsel to the independent
directors of Crescent BDC.
Houlihan Lokey served as financial advisor, and Sullivan &
Worcester LLP served as legal counsel, to the Committee of
Independent Directors. Dechert LLP served as legal counsel to
Alcentra Capital.
In connection with the transaction, Ally Bank has provided a
commitment letter dated August 12, 2019 agreeing to provide
Crescent BDC with a $200 million leverage facility which is
expected to close later this month. Wells Fargo Bank NA has been a
lender to Crescent BDC since 2016 and currently provides a $250
million leverage facility which is expected to remain outstanding
after the close of the transaction.
CONFERENCE CALL INFORMATION
Crescent BDC and Alcentra Capital will be holding a joint
conference call to discuss the transaction on Tuesday, August 13,
2019 at 1:15 p.m. PT / 4:15 p.m. ET. To participate please dial
(877) 407-0789 or (201) 689-8562 (international) at least ten
minutes prior to the call and ask for conference ID number
13693741. A webcast link for this call along with a presentation
will be also posted online at www.crescentbdc.com and
www.alcentracapital.com.
For those unable to participate during the live broadcast, a
replay will be available through Tuesday, August 27, 2019, at 8:59
p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921
(U.S.) or (412) 317-6671 (international) and use conference ID:
13693741.
About Crescent BDC
Crescent BDC is a business development company that seeks to
maximize the total return of its stockholders in the form of
current income and capital appreciation by providing capital
solutions to companies with sound business fundamentals and strong
growth prospects. Crescent BDC utilizes the extensive experience,
origination capabilities and disciplined investment process of
Crescent Capital Group LP. Crescent BDC is externally managed by
Crescent Cap Advisors, a subsidiary of Crescent Capital. Crescent
BDC has elected to be regulated as a business development company
under the Investment Company Act of 1940. For more information
about Crescent BDC, visit http://crescentbdc.com. However, the
contents of such website are not and should not be deemed to be
incorporated by reference herein.
About Crescent Capital Group
Crescent Capital Group is headquartered in Los Angeles with
offices in Boston, London, and New York. With more than 80
investment professionals and approximately 170 employees, the firm
invests at all levels of the capital structure, with a significant
focus on below investment grade credit through strategies that
invest in senior bank loans, high yield debt, mezzanine debt,
distressed debt, and other private debt securities. As of June 30,
2019, Crescent Capital Group managed approximately $25 billion,
with a relatively equal split between marketable securities and
privately originated debt investments. For more information about
Crescent Capital Group, visit www.crescentcap.com. However, the
contents of such website are not and should not deemed to be
incorporated by reference herein.
About Alcentra Capital
Alcentra Capital provides customized debt and equity financing
solutions to middle-market companies, which Alcentra Capital
generally defines as U.S. based companies having between $15.0
million and $75.0 million of EBITDA. Alcentra Capital’s investment
objective is to provide attractive risk-adjusted returns by
generating current income from its debt investments. Alcentra
Capital seeks to partner with business owners, management teams and
financial sponsors by providing customized financing for change of
ownership transactions, recapitalizations, strategic acquisitions,
business expansion and other growth initiatives.
Alcentra Capital, which is externally managed by Alcentra NY, is
a closed-end, non-diversified management investment company that
has elected to be treated as a business development company under
the Investment Company Act of 1940. In addition, for tax purposes,
Alcentra Capital has elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue
Code.
About Alcentra NY and BNY Alcentra Group Holdings
Alcentra NY a registered investment adviser under the Investment
Advisers Act of 1940, is a subsidiary of BNY Alcentra Group
Holdings, Inc. (“Alcentra Group”), one of the world’s leading
sub-investment grade credit asset managers focusing on the U.S. and
European markets. Alcentra Group has an investment track record
that spans across approximately 75 separate investment vehicles and
accounts totaling approximately $40 billion as of June 30, 2019
(including accounts managed by Alcentra NY, Alcentra Ltd, and
assets managed by Alcentra Group personnel for affiliates under
dual officer arrangements).
Forward-Looking Statements
This communication contains “forward-looking” statements as that
term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended by the Private Securities Litigation Reform Act of 1995,
including statements regarding the proposed transaction between
Crescent BDC and Alcentra Capital pursuant to a merger agreement
dated August 12, 2019 (the “Merger Agreement”) among Crescent BDC,
Alcentra Capital, Crescent Cap Advisors and a wholly-owned
subsidiary of Crescent BDC. All statements, other than historical
facts, including statements regarding the expected timing of the
closing of the proposed transaction; the ability of the parties to
complete the proposed transaction considering the various closing
conditions; the expected benefits of the proposed transaction such
as improved operations, enhanced revenues and cash flow, growth
potential, market profile and financial strength; the competitive
ability and position of the combined company following completion
of the proposed transaction; and any assumptions underlying any of
the foregoing, are forward-looking statements. Forward-looking
statements concern future circumstances and results and other
statements that are not historical facts and are sometimes
identified by the words “may,” “will,” “should,” “potential,”
“intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,”
“overestimate,” “underestimate,” “believe,” “could,” “project,”
“predict,” “continue,” “target” or other similar words or
expressions. Forward-looking statements are based upon current
plans, estimates and expectations that are subject to risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated
or anticipated by such forward-looking statements. The inclusion of
such statements should not be regarded as a representation that
such plans, estimates or expectations will be achieved. Important
factors that could cause actual results to differ materially from
such plans, estimates or expectations include, among others, (1)
that one or more closing conditions to the transaction, including
certain regulatory approvals, may not be satisfied or waived, on a
timely basis or otherwise, including that a governmental entity may
prohibit, delay or refuse to grant approval for the consummation of
the proposed transaction, may require conditions, limitations or
restrictions in connection with such approvals or that the required
approval by the stockholders of each of Crescent BDC and Alcentra
Capital may not be obtained; (2) the risk that the mergers or other
transactions contemplated by the Merger Agreement may not be
completed in the time frame expected by Crescent BDC and Alcentra
Capital or at all; (3) unexpected costs, charges or expenses
resulting from the proposed transaction; (4) uncertainty of the
expected financial performance of the combined company following
completion of the proposed transaction; (5) uncertainty with
respect to the trading levels of shares of the combined company’s
common stock on NASDAQ; (6) failure to realize the anticipated
benefits of the proposed transaction, including as a result of
delay in completing the proposed transaction or integrating the
businesses of Crescent BDC and Alcentra Capital; (7) the ability of
the combined company to implement its business strategy; (8)
difficulties and delays in achieving synergies and cost savings of
the combined company; (9) inability to retain and hire key
personnel; (10) the occurrence of any event that could give rise to
termination of the Merger Agreement; (11) the risk that stockholder
litigation in connection with the proposed transaction may affect
the timing or occurrence of the contemplated merger or result in
significant costs of defense, indemnification and liability; (12)
evolving legal, regulatory and tax regimes; (13) changes in laws or
regulations or interpretations of current laws and regulations that
would impact Crescent BDC’s classification as a business
development company; and (14) changes in general economic and/or
industry specific conditions. Some of these factors are enumerated
in the filings Crescent BDC and Alcentra Capital have made with the
Securities and Exchange Commission (the “SEC”), and will be
contained in the materials Crescent BDC and Alcentra Capital will
file with the SEC in connection with the proposed transactions
under the Merger Agreement, including a Crescent BDC registration
statement on Form N-14 (the “Registration Statement”), which will
include Crescent BDC’s and Alcentra Capital’s joint proxy statement
on Schedule 14A that also constitutes a prospectus of Crescent BDC
(the “Joint Proxy Statement/Prospectus”).
The inclusion of forward-looking statements should not be
regarded as a representation that any plans, estimates or
expectations will be achieved. Any forward-looking statements speak
only as of the date of this communication. Except as required by
federal securities laws, neither Crescent BDC nor Alcentra Capital
undertakes any obligation to update or revise any forward-looking
statements, whether as a result of new information or development,
future events or otherwise. Readers are cautioned not to place
undue reliance on any of these forward-looking statements.
Additional Information and Where to Find It
This communication relates to a proposed business combination
involving Crescent BDC and Alcentra Capital, along with related
proposals for which stockholder approval will be sought
(collectively, the “Proposals”). In connection with the Proposals,
Crescent BDC and Alcentra Capital will file relevant materials with
the SEC, including the Registration Statement and Joint Proxy
Statement/Prospectus. The Registration Statement and Joint Proxy
Statement/Prospectus will each contain important information about
Crescent BDC and Alcentra Capital, the proposed transactions, the
Proposals and related matters. INVESTORS AND SECURITY HOLDERS OF
CRESCENT BDC AND ALCENTRA CAPITAL ARE URGED TO READ THE
REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS AND OTHER
DOCUMENTS THAT WILL BE FILED WITH THE SEC, CAREFULLY AND IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT CRESCENT BDC, ALCENTRA CAPITAL THE
PROPOSED TRANSACTIONS, THE PROPOSALS AND RELATED MATTERS.
Investors and security holders will be able to obtain the
Registration Statement, the Joint Proxy Statement/Prospectus and
other documents filed with the SEC by Crescent BDC and Alcentra
Capital, free of charge, from the SEC’s web site at www.sec.gov and
from either Crescent BDC’s or Alcentra Capital’s web sites at
http://crescentbdc.com or at www.alcentracapital.com. Investors and
security holders may also obtain free copies of the Registration
Statement, the Joint Proxy Statement/Prospectus and other documents
filed with the SEC from Crescent BDC by contacting Crescent BDC’s
Investor Relations Department at bdcir@crescentcap.com or from
Alcentra Capital by contacting Alcentra Capital’s Investor
Relations Department at investorrelationsbdc@alcentra.com.
Participants in the Solicitation
This communication is not a solicitation of a proxy from any
investor or security holder. However, Crescent BDC, Alcentra
Capital, and their respective directors and executive officers,
other members of their management and employees may be deemed to be
participants in the solicitation of proxies in connection with the
Proposals. Information regarding Crescent BDC’s directors and
executive officers is available in its definitive proxy statement
for its 2019 annual meeting of stockholders filed with the SEC on
April 26, 2019. Information regarding Alcentra Capital’s directors
and executive officers is available in an amendment to its annual
report for the year ended December 31, 2018 on Form 10-K/A (the
“2018 Form 10-K/A”), filed with the SEC on April 30, 2019. To the
extent holdings of securities by such directors or executive
officers have changed since the amounts printed in Crescent BDC’s
2019 proxy statement and Alcentra Capital’s 2018 Form 10-K/A, such
changes have been or will be reflected on Statements of Changes in
Beneficial Ownership on Form 4 filed by such directors or executive
officers, as the case may be, with the SEC. More detailed
information regarding the identity of potential participants, and
their direct or indirect interests, by security holdings or
otherwise, will be set forth in the Registration Statement and the
Joint Proxy Statement/Prospectus when such documents become
available. These documents may be obtained free of charge from the
sources indicated above.
No Offer or Solicitation
The information in this communication is for informational
purposes only and shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities or the solicitation of any vote or approval in
any jurisdiction pursuant to or in connection with the Proposals or
otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190813005292/en/
Crescent Capital BDC
Investors/Media: ADDO Investor Relations Kimberly Esterkin / Andrew
Greenebaum kesterkin@addoir.com 310-829-5400
Alcentra Capital Investors: Suhail
A. Shaikh, Chief Executive Officer, 212 922-6038 Ellida McMillan,
Chief Financial Officer, 212 922-6644
Media: Brunswick Group, Bryan Darrow / Kate Beers (212)
333-3810, alcentra@brunswickgroup.com
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