FSC sells healthcare lender to MidCap Financial

The Connecticut BDC is selling its stake in the Healthcare Finance Group to the Apollo-owned MidCap Financial, an asset-based lender.  

Fifth Street Finance Corp (FSC), one two business development companies (BDCs) managed by Fifth Street Asset Management, has sold its portfolio company, HFG (Healthcare Finance Group) Holdings to MidCap Financial. HFG is a specialty lender providing asset-backed lending and term-loan products to the healthcare industry. FSC acquired the company in June 2013 and since then, has expanded the company's suite of products and capabilities, FSC said in a statement yesterday (22 June). Terms of the deal were not disclosed.

“Over the course of our strategic review, we decided that it was important to refocus FSC on our core lending businesses, particularly middle-market sponsor-backed lending, as well as technology lending and aircraft leasing,” Todd Owens, chief executive at FSC said in a statement. “We see a tremendous opportunity in the middle-market and believe that FSC's capital can be used to generate higher risk-adjusted returns in our core lending businesses,” he added.

Fifth Street Finance Corp. provides financing to small and mid-sized companies, primarily in connection with investments by private equity sponsors. The company originates and invests in one-stop financings, first lien, second lien, mezzanine debt and equity co-investments. FSC is regulated as a BDC and externally managed by a subsidiary of Fifth Street Asset Management, a Greenwich, Connecticut-based credit manager with about $6 billion in assets. 

MidCap Financial is a mid-market-focused, specialty finance firm that provides senior debt capital and has historically worked on healthcare deals. Since it was acquired by Apollo Global Management in 2013, the firm began working on a new, broader commercial finance platform with the alternative investment firm and, through Apollo, now works on asset-based lending into most industries. MidCap’s co-founder and former chief executive, Howard Widra,was promoted to partner at Apollo in February. Apollo also reported on its first quarter earnings call that MidCap added $2.1 billion to its fee-generating assets in that quarter.