Alcentra BDC puts itself on the block

The New York-based US direct lending arm of Alcentra has hired Houlihan Lokey to lead a review process to evaluate strategic alternatives for the business development company.

Alcentra Capital Corporation (ABDC), the US direct lending arm of London-based Alcentra, has announced it will pursue strategic alternatives – a movement that comes as it faces a proxy contest from investment firm and family office The Stilwell Group.

A committee of New York-based ABDC’s independent directors has hired investment bank Houlihan Lokey as a financial advisor to assist in a possible transaction. The business development company’s stock popped on the announcement, trading at $7.92 as of 11:05am Friday, which was up from its $7.59 price at Thursday’s close.

“We are very pleased with the progress management continues to make in rotating the company’s legacy assets into upper middle-market senior secured investments and stabilising the company’s net asset value,” Edward Grebrow, chairman of the ABDC committee of independent directors, said in a statement. “As management continues its efforts to increase value for our stockholders, the board believes it is also important at this time to explore additional options that may be available to further enhance the value of the company.”

Earlier this year, Stilwell nominated two directors for ABDC’s board: Corissa Porcelli, Stilwell’s director of research, and Michelle Bergman, founder of financial services law firm Bergman Law. Stilwell holds 8.6 percent of ABDC.

ABDC declined to comment on what types of buyers it is seeking or what effect Stilwell had on the decision to seek strategic alternatives.

M&A has been a recurring theme in the BDC space recently, particularly as the transaction involving Medley Capital Corporation (MCC) and its related entities drags on. NexPoint Advisors and Marathon Asset Management have both made bids for MCC to counter the MCC management-backed merger proposal that has vehement dissent from some shareholders.

Last year, Triangle Capital Corporation sold its book to Benefit Street Partners and its management contract to Barings. KCAP Financial also sold itself to BC Partners.