Franklin Square-backed Ascent gets $500m equity infusion

The BDC investor hopes the new capital will delever the energy company and provide more liquidity.  

Ascent Resources, a US energy holding company, is to sell 2.2 billion common shares in a private placement expected to raise $500 million of fresh equity capital, the company said.

If successful, the sale will bring total equity infusions this year to $712 million.

The equity capital falls behind senior loans from Franklin Square Capital Partners’ business development companies (BDCs) who have said they were hoping to delever Ascent.

“If successful, these transactions will significantly delever the company and provide it with significant liquidity to develop what we believe to be an attractive acreage in the Utica basin,” said Brad Marshall, senior managing director at GSO Capital Partners, which sub-advises the BDCs.

Ascent is the second largest investment at publicly-traded Franklin Square Investment Capital (FSIC), which has 4.4 percent of its capital invested in the company.

Franklin Square’s BDCs have about 9 percent invested in energy and are facing a number of realised and unrealised losses. As of the end of last year, the BDCs’ debt and common equity investments in Ascent were marked at 89.5 percent of par and 21 percent of cost, respectively.

The BDCs have said equity infusions, like that at Ascent, and cuts to capital expenditure have helped put their investments on a better track in terms of future profitability.

“We believe the recently closed and potential transactions will further strengthen our secured debt investment, which sits at the top of the capital structure at Ascent,” said Marshall speaking on a recent earnings call.

Ascent sourced the new capital from private equity sponsors The Energy & Minerals Group, First Reserve and other institutional investors, according to a source.

The shares will be sold at $0.224 per common unit. The proceeds are expected to be funded around 24 March, after which it will be able to exercise its right to redeem outstanding 2.5 percent convertible subordinated notes due 2021 for incremental junior secured loans due 2019 and common units or Class A shares of a newly formed entity.

“Ascent considers the contribution to be an important milestone to effect significant deleveraging through the redemption of its new convertible notes,” the company said.

Formed in January 2015, Ascent’s equity owners include Energy & Minerals Group, First Reserve, Aubrey McClendon and other investors associated with the recently deceased former Chesapeake Energy CEO, according to Ascent’s website.

The Franklin Square vehicles have about $15.7 billion in assets under management across five BDCs, the traded FSIC, non-traded FSIC II, III and IV, as well as the energy-focused Franklin Square Energy & Power.

Philadelphia-based Franklin Square Capital Partners is the advisor on the BDCs overseeing administration and fundraising, while New York-based GSO is the sub-advisor focused on investment strategy and origination.