OHA Investment Corporation (NASDAQ: OHAI) (“OHAI”) and Portman
Ridge Finance Corporation (“PTMN”) (NASDAQ: PTMN) (f/k/a KCAP
Financial, Inc.) today announced that they have entered into a
definitive agreement under which OHAI will merge with and into
PTMN, a business development company managed by Sierra Crest
Investment Management LLC (“Sierra Crest”), an affiliate of BC
Partners Advisors L.P. (“BC Partners”) and LibreMax Capital LLC.
The transaction is the result of OHAI’s previously announced review
of strategic alternatives and has been approved by a unanimous vote
of the Special Committee of the Board of Directors of OHAI, the
Board of Directors of OHAI (other than directors affiliated with
Oak Hill Advisors, L.P., the external advisor to OHAI, who
abstained from voting) and the Board of Directors of PTMN.
Transaction Highlights
- The combined company will be externally managed by Sierra Crest
and is expected to have total assets of approximately $372 million,
and net asset value of approximately $181 million (each based on
March 31, 2019 balance sheets, not adjusted for transaction
expenses);
- OHAI stockholders will benefit from PTMN’s lower fee structure
(1.50% management fee vs current management fee of 1.75%; 17.5%
incentive fee vs current incentive fee of 20.0%) and should expect
to realize net investment income, net asset value and distribution
accretion within the first year following closing of the
transaction;
- Following the transaction, current OHAI stockholders are
expected to own approximately 16% of the combined
company;
- OHAI’s credit facility will be paid off in full at the closing
of the transaction. Based on PTMN’s lower borrowing cost, the
combined company can expect to realize interest savings of
approximately $0.5 million per annum;
- The transaction is expected to deliver operational synergies
for the combined company as a result of the pro forma larger scale
and elimination of redundant OHAI expenses;
- Pursuant to the merger agreement, if at any time within one
year after the closing date of the transaction shares of PTMN are
trading at a price below 75% of its net asset value, PTMN will
initiate a share buyback program of up to $10 million to support
the trading price of the combined entity for up to one year from
the date such program is announced;
- PTMN stockholder approval is not required for the merger
transaction, contributing to additional certainty of closing;
and
- Oak Hill Advisors, L.P., the external advisor to OHAI, intends
to vote its OHAI shares in favor of the transaction.
Under the terms of the proposed transaction,
OHAI’s stockholders will receive value per share (based on the net
asset value per share of PTMN’s stock and the aggregate value of
cash consideration) of approximately 108% of OHAI’s net asset value
per share at the time of the closing of the transaction from PTMN
and Sierra Crest. As of March 31, 2019, OHAI’s net asset value was
$37.1 million, or $1.84 per share. In connection with the
transaction, OHAI stockholders will receive a combination of (i) a
minimum of $8 million in cash (approximately $0.40 per share) from
PTMN (as may be adjusted as described below); (ii) PTMN shares
valued at 100% of PTMN’s net asset value per share at the time of
closing of the transaction in an aggregate number equal to OHAI’s
net asset value at closing minus the $8 million PTMN cash merger
consideration (as may be adjusted as described below); and (iii) an
additional cash payment from Sierra Crest, the external adviser to
PTMN, of $3 million in the aggregate, or approximately $0.15 per
share. Assuming a transaction based on respective March 31, 2019
net asset values for OHAI and PTMN, adjusted for expected
transaction expenses, and PTMN’s 60-day volume weighted average
price through July 30, 2019 of $2.57, the merger transaction
(including the Sierra Crest additional cash payment) currently
values OHAI shares at approximately $1.46 per share which
represents 83% of OHAI’s March 31, 2019 net asset value and a 35%
premium to OHAI’s closing price on July 30, 2019.
If the aggregate number of shares of PTMN stock
to be issued in connection with the merger would exceed 19.9% of
the issued and outstanding shares of PTMN common stock immediately
prior to the transaction closing, then the cash consideration
payable by PTMN will be increased to the minimum extent necessary
such that the aggregate number of shares of PTMN common stock to be
issued in connection with the merger does not exceed such
threshold. The exact exchange ratio for the stock component of the
merger will be determined by the net asset value of OHAI and PTMN
as of the closing, calculated as of 5:00 p.m. New York City time on
the day prior to the closing of the transaction. In addition to
approval by OHAI’s stockholders, the closing of the merger is
subject to customary conditions. The parties currently expect the
transaction to be completed in the fourth calendar quarter of
2019.
“We believe this transaction, which is the
culmination of a thorough strategic process that OHAI’s Board of
Directors initiated to enhance stockholder value, provides an
attractive outcome for and is in the best interest of OHAI
stockholders, while providing continued value creation opportunity
for PTMN stockholders,” said Steven Wayne, OHAI’s President and
Chief Executive Officer. “In addition to a significant cash
consideration component, we believe our stockholders will continue
to realize significant identifiable value through their continued
ownership of PTMN stock and partnership with the credit team at BC
Partners.”
“We are very excited to merge OHA Investment
Corporation with Portman Ridge Finance Corporation, as it embodies
an important step in our vision for the BDC space and is expected
to be an accretive transaction for OHAI and PTMN
stockholders. We believe the combined entity will benefit
from having lower financing costs, a lower blended fee structure, a
reduction in per share public company costs and increased trading
liquidity in the equity,” said Ted Goldthorpe, President and Chief
Executive Officer of PTMN and Head of BC Partners Credit.
Transaction Advisors
Keefe, Bruyette & Woods served as exclusive
financial advisor to the Special Committee of OHAI’s Board of
Directors. Dechert LLP served as counsel to OHAI and the Special
Committee of OHAI’s Board of Directors. UBS Investment Bank served
as financial advisor and Simpson Thacher & Bartlett LLP served
as counsel to PTMN.
Investor Presentation and Conference Call
PTMN and OHAI will host a joint conference call on Thursday,
August 1, 2019 at 2:30 pm Eastern Time to discuss the transaction.
All interested persons are invited to participate on the call and
can access the conference call by dialing (866) 757-5630.
International callers can access the conference by dialing (707)
287-9356. Conference ID is 6296868. Callers are encouraged to dial
in at least 5-10 minutes prior to the call. The presentation
materials for the call will be accessible through the Investor
Relations page of the OHAI’s website,
http://www.ohainvestmentcorporation.com or through the Investor
Relations Page of PTMN’s website, http://www,portmanridge.com
About OHA Investment Corporation
OHA Investment Corporation (NASDAQ: OHAI) is a
specialty finance company designed to provide its investors with
current income and capital appreciation. OHAI focuses primarily on
providing creative direct lending solutions to middle market
private companies across industry sectors. OHAI is externally
managed by Oak Hill Advisors, L.P., a leading independent
investment firm (www.oakhilladvisors.com). OHAI’s filings with the
Securities and Exchange Commission (“SEC”), earnings releases,
press releases and other financial, operational and governance
information are available on OHAI’s website at
http://ir.ohainvestmentcorporation.com/home.
About Portman Ridge Finance
CorporationPortman Ridge Finance Corporation (NASDAQ:
PTMN) is a publicly traded, externally managed investment company
that has elected to be regulated as a business development company
under the Investment Company Act of 1940. PTMN’s middle market
investment business originates, structures, finances and manages a
portfolio of term loans, mezzanine investments and selected equity
securities in middle market companies. PTMN’s investment activities
are managed by its investment adviser, Sierra Crest Investment
Management LLC, an affiliate of BC Partners Advisors, LP and
LibreMax Capital LLC.
PTMN's filings with the SEC, earnings releases,
press releases and other financial, operational and governance
information are available on PTMN's website at
www.portmanridge.com.
Forward-Looking StatementsThis
press release may contain forward-looking statements that involve
substantial risks and uncertainties, including statements regarding
the completion of the transaction between OHAI and PTMN. We may use
words such as "anticipates," "believes," "intends," "plans,"
"expects," "projects," "estimates," "will," "should," "may" and
similar expressions to identify forward-looking statements. These
forward-looking statements are subject to various risks and
uncertainties. Certain factors could cause actual results and
conditions to differ materially from those projected, including the
uncertainties associated with (i) the timing or likelihood of the
transaction closing, (ii) the expected synergies and savings
associated with the transaction, (iii) the expected elimination of
certain expenses and costs due to the transaction, (iv) the
percentage of OHAI stockholders voting in favor of the transaction,
(v) the possibility that competing offers or acquisition proposals
for OHAI will be made; (vi) the possibility that any or all of the
various conditions to the consummation of the merger may not be
satisfied or waived; (vii) risks related to diverting management’s
attention from OHAI’s ongoing business operations, (viii) the risk
that stockholder litigation in connection with the transactions
contemplated by the merger agreement may result in significant
costs of defense and liability, (ix) the future operating results
of our portfolio companies or the combined company, (x) regulatory
factors, (xi) changes in regional or national economic conditions
and their impact on the industries in which we invest, and (xii)
other changes in the conditions of the industries in which we
invest and other factors enumerated in our filings with the SEC.
You should not place undue reliance on such forward-looking
statements, which speak only as of the date of this press release.
We undertake no obligation to update our forward-looking statements
made herein, unless required by law. You should, therefore, not
rely on these forward-looking statements as representing our views
as of any date subsequent to the date of this press release. You
should read this communication and the documents that we reference
in this communication completely and with the understanding that
our actual future results may be materially different from what we
expect. We qualify all of our forward-looking statements by these
cautionary statements.
Additional Information and Where to Find
ItThis communication relates to a proposed business
combination involving OHAI and PTMN for which OHAI stockholder
approval will be sought (the “Proposal”). In connection with the
Proposal, each of OHAI and PTMN intend to file relevant materials
with the SEC, including a registration statement on Form N-14,
which will include a proxy statement of OHAI and a prospectus of
PTMN. This communication does not constitute an offer to sell or
the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. No offer of securities shall
be made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act. STOCKHOLDERS OF OHAI ARE URGED TO
READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY
STATEMENT OF OHAI REGARDING THE PROPOSAL (THE “PROXY STATEMENT”)
WHEN IT BECOMES AVAILABLE, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS
THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
OHAI, PTMN, THE MERGER AND THE PROPOSAL. Investors and security
holders will be able to obtain the documents filed with the SEC
free of charge at the SEC’s web site, http://www.sec.gov or, for
documents filed by OHAI, from OHAI’s website at
http://ir.ohainvestmentcorporation.com/home.
Participants in the
SolicitationOHAI and PTMN and their respective directors,
executive officers and certain other members of management,
employees of Oak Hill Advisors, L.P and its affiliates and
employees of Sierra Crest Investment Management LLC and its
affiliates, may be deemed to be participants in the solicitation of
proxies from the stockholders of OHAI in connection with the
Proposal. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of
the OHAI stockholders in connection with the Proposal will be
contained in the Proxy Statement when such document becomes
available. This document may be obtained free of charge from the
sources indicated above.
CONTACTS:
OHAI
Steven T. Wayne – President and Chief Executive
OfficerCory E. Gilbert – Chief Financial
OfficerOHAICInvestorRelations@oakhilladvisors.com
For media inquiries, contact Kekst and Company,
(212) 521-4800Jeremy Fielding – Jeremy.Fielding@kekst.com
PTMN
Ted Gilpin – Chief Financial Officer (212)
891-5007 info@portmanridge.com
Portman Ridge Finance Corporation650 Madison
Avenue, 23rd floorNew York, NY 10022
For media inquiries, contact:
Prosek PartnersKatherine Segura+1 (646)
818-9266ksegura@prosek.com
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