BSP, BDCA acquisition a done deal

Business Development Corporation of America has replaced its old external advisor and plans to focus on senior debt.

Credit investment firm Benefit Street Partners (BSP) closed its acquisition of Business Development Corporation of America (BDCA) this week as anticipated, a deal which won the unanimous backing of the buyer’s shareholders and reshuffles the seller’s board.

The two companies, both based in New York, announced the transaction’s completion on Tuesday almost four months after it disclosed the deal in a July regulatory filing. Before finalising it, BSP’s shareholders, who all voted in favour of the deal at a Friday meeting, had to sign off on the proposed acquisition. BSP will take AR Capital place as BDCA’s external advisor.

According to the statement, BDCA will focus primarily on investing in senior secured loans, which include first lien, second lien and unitranche debt, alongside investments in mezzanine and unsecured debt and equity.

As part of the transaction, BSP president Richard Byrne’s president became BDCA’s chairman and chief executive officer. Corrine Pankovcin, currently the non-traded businesses development company’s chief financial officer, will continue in that role, according to the statement. Houlihan Lokey and Ropes & Gray served as BSP’s financial advisor and legal counsel, respectively.

Peter M. Budko, BDCA’s former CEO, and Edward Weil Jr., who holds various board positions in other companies affiliated with AR Global, have both stepped down from the board. Ronald Kramer, CEO of the Griffin Corporation business conglomerate that owns residential garage door manufacturer Clopay Building Products, has been added to the board as an independent director, according to the statement.

BDCA’s lead independent director, Leslie Michelson, said in the announcement that BSP’s origination, underwriting and portfolio management “will improve performance on a risk-adjusted basis and reduce operating expenses”. Byrne echoed that sentiment in the statement, saying BSP’s “ability to be a one-stop lending solution” will be a boon to “BDCA’s already strong platform”.

BDCA’s general counsel was not available for further comment, and a representative for BSP declined to comment.

BDCA’s net asset value per share, an important indicator for BDCs, had been decreasing before the sale. Most recently, it posted a year-on-year decline from $9.53 in the second quarter of 2015 to the $8.84 for the three months ending 30 June, according to SEC quarterly reports. In Q2 2014, it stood at $9.89.

AR Capital and Apollo Global Management in August 2015 reached a deal in which Apollo would buy a majority stake in AR Capital for $378 million, though that transaction fell apart in November. The deal, disclosed in an SEC filing, consisted of $200 million in cash and $178 million of Apollo stock.

On 30 September, BSP and Realty Finance Trust (RFT) closed a deal that made BSP the external advisor to RFT, replacing a separate affiliate of AR Global. According to the announcement, provisions of the deal included calculating BSP’s management fee to be based on stockholders’ equity rather than assets and an annual performance fee that will be revised so it is more shareholder friendly. BSP manages more than $14 billion in assets and is the credit arm of Providence Equity Partners, which manages $49 billion.

 

According to BDCA’s report for the second quarter filed with the SEC, the top three industries the company invested in are diversified investment vehicles (16.5 percent of its portfolio), aerospace and defense (9.4 percent), and healthcare providers and services (6.7 percent). It listed $2.6 billion in assets.