Benefit Street to acquire TICC’s investment adviser

The Providence Equity-owned credit firm is buying the investment adviser attached to the $1 billion Connecticut BDC and plans to pivot the portfolio away from syndicated transactions and CLOs to more privately-originated loans.  

Greenwich, Connecticut-based TICC Capital Corp., a publicly-traded BDC, has agreed to sell its investment adviser, TICC Management, to Benefit Street Partners (BSP), the credit investment arm of Providence Equity Partners.

 The transaction depends on gaining the approval of the company's shareholders. The firms will draft a new investment advisory agreement between BSP and TICC Management and select four new independent directors, according to a statement issued by TICC yesterday (4 August). The company's board of directors has unanimously approved the transaction, which is expected to close in the fourth quarter.

BSP declined to comment beyond the release.

As part of the deal, BSP will replace the current members of the investment adviser's investment committee, which will then be supported by BSP's investment and research professionals. Over time, BSP will transition the company's portfolio away from syndicated loans and CLOs to focus on private debt investments sourced by the firm. BSP's private debt strategy targets proprietary access to companies through a network of senior partner relationships, connections with company management, financial intermediaries, private equity sponsors and the broader Providence Equity platform.

The company's current board of directors will expand with the addition of four new independent directors, subject to shareholder approval, who will join the three existing independent board members. BSP’s chief executive Tom Gahan and president Richard Byrne will replace two existing non-independent board members while TICC’s existing management will be replaced with people affiliated with BSP. The investment manager will change its name to reflect the change of control.

“We believe that the BSP relationship will allow the company to realize value for our shareholders in new ways. With access to significant bilateral lending opportunities and with the resources of a much larger lending and investing platform, we expect this transaction to place TICC in a position of strength as the credit markets move through this and future cycles,” Jonathan Cohen, chief executive of TICC Capital, said in a statement.

“We are very excited about the opportunity to leverage our proprietary sourcing network, disciplined investment process and credit expertise to drive attractive, risk-adjusted returns in the portfolio and continue to serve the company and its investors,” commented Gahan.

Like several other BDCs, TICC has been under pressure as its share price traded at a significant discount to book value – 0.74x net asset value. Wells Fargo Securities BDC analyst Jonathan Bock said the discount was a result of considerable CLO exposure along with balance sheet leverage of 0.97x in a report published today (5 August). “As NOI-based [net operating income] dividend coverage now runs near 62 percent and the CLO income stream continues to add volatility to NOI, we prefer to remain on the sidelines, as we wait for the changes implemented by new management,” Bock wrote in the report which gives TICC a neutral market performance rating. Bock’s report said the BSP acquisition and strategy shift was positive.

UBS served as the financial adviser to TICC Management and Houlihan Lokey was adviser to BSP. K&L Gates acted as legal counsel to TICC Management, while Sutherland Asbill & Brennan acted as legal counsel to BSP in connection with the transaction.

BSP oversees $10 billion in assets across a range of credit strategies including high-yield, levered loans, private / opportunistic debt, liquid credit, structured credit and commercial real estate debt. The firm was founded in 2008 and is based in New York.

TICC had about $1.05 billion in assets as of the end of the second quarter, according to the firm’s 2Q earnings.