Griffin Capital is transferring all assets of its business development company into its interval credit fund, following a shareholder vote on Monday, a filing with the US Securities and Exchange Commission showed.
The Griffin Capital BDC stockholders now hold shares in the Griffin Intuitional Access Credit Fund, while the BDC is effectively liquidated, according to the reorganization prospectus submitted to shareholders before the vote.
The converted Class F shares of the credit fund have the same aggregate net asset value as the NAV of the BDC. tThe Griffin Capital BDC’s net asset value was $8.56 per share as of 30 June, according to the latest quarterly report.
The stockholders’ vote, which was held during a special shareholder meeting at the firm’s El Segunda, California headquarters, comes after the board of trustees approved the reorganization in March. The board cited regulatory headwinds in the BDC space and comparatively greater investment flexibility of interval credit funds.
Recent and proposed rules adopted by regulatory bodies like the Financial Industry Regulatory Authority and Department of Labor have led to a “significant decline in capital raising ability across the publicly-offered non-traded BDC industry,” the reorganization prospectus stated. “Due to these factors, [Griffin Capital BDC] has not achieved sufficient size to ensure its continued economic viability absent the reorganization.”
On top of new regulations, the board also claimed that the general 1940 Act requirements to invest primarily in emerging US businesses limited the BDC’s ability to meet its investment objectives.
And in contrast, interval funds are not subject to the strict regulatory requirements of the BDC structure like portfolio composition limits, the document stated. The board also argued the mandated liquidity of an interval credit fund—which is obligated to periodically offer between 5 percent to 25 percent of outstanding shares of the fund, priced at net asset value—is another relative advantage.
The BDC had been sub-advised by Benefit Street Partners until July when the firm severed its sub-advisory agreement, which had been in place since January 2015, with Griffin, another filing showed.
In March 2016, the board announced its intention to vote on a new structure, like an interval credit fund, in order to reduce the two firms’ exposure to regulatory challenges in the BDC space, suspending any stock offering of the BDC, which was then named Griffin-Benefit Street Partners BDC.
The Griffin Capital BDC had a total of $39.06 million in net assets as of 30 June, while Griffin Institutional Access Credit Fund had $20.16 million in net assets as of that date. The firm was not immediately available to comment further.