Fifth Street taps Greenhill to advise on sale – exclusive

The US lender has appointed an investment bank to shop FSAM around potential buyers.  

Fifth Street Asset Management (FSAM) has hired Greenhill & Co. to advise on selling the investment advisor to its two business development companies (BDCs).

Steven Friedman, head of financial services corporate advisory at Greenhill in New York, is working on the deal, according to sources familiar with the process.

Both Friedman and a Fifth Street spokesman declined to comment.

Greenhill also worked with Fifth Street on the sale of a healthcare lender, Healthcare Finance Group, to MidCap Financial, a portfolio company of Apollo Global Management’s Athene subsidiary, in May, according to statement from Fifth Street at the time.

The potential sale of the BDC manager was first reported by PDI last month.

Fifth Street’s two BDCs, the Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR) have been battling with shareholder criticism and multiple lawsuits that accuse the firm of mis-management, poor alignment of interests with shareholders and abysmal performance. The share price of both BDCs, as well as that of FSAM, their publicly traded investment manager, have declined sharply over the past two years. FSAM stock is trading at less than $2 per share today (9 February), down from $16 at the time of its IPO in October 2014.

Sources say that given the complexity of Fifth Street’s platform, and the flurry of lawsuits and shareholder criticism surrounding the firm, it will be difficult to value and sell the manager.

Fifth Street’s management has countered critics on recent earnings calls and through public statements arguing that FSAM is the right investment advisor to the two BDCs and that its fee structures are in line with competitors.

American Capital (ACAS), a Bethesda, Maryland-based BDC that has also been the subject of shareholder criticism, hired Goldman Sachs and Credit Suisse recently to advise on a potential sale, according to The Washington Post. American Capital announced in November that it would embark on a strategic review to improve shareholder value that could include a sale of the investment advisor.