MidCap steps in to support OHAI

The Apollo subsidiary has provided Oak Hill’s BDC a $56.5m facility that will be used, in part, to pay back an existing debt facility due 15 September.

OHA Investment Corporation (OHAI) has enlisted the support of an Apollo affiliate in paying down existing debt as part of an ongoing effort to diversify its portfolio away from energy investments inherited upon taking control of the BDC in 2014.

OHAI announced Friday it has secured a $56.5 million secured term loan credit facility from MidCap Financial, which is managed by Apollo Capital Management. The facility matures on 9 March 2018 and carries an interest rate of Libor plus 5.35 percent for Eurodollar loans (with a 1 percent Libor floor) and base rate plus 4.35 percent for base rate loans, according to the statement.

A $40.5 million portion of the loan will be used to pay a $38.5 million balance on OHAI's existing investment facility and transaction expenses, and support the firm's balance sheet. The remaining $16 million of the of the facility will come in the form of a delayed draw term loan that will be committed for one year and used to operate the business, according to the statement.

On the firm's second quarter earnings call last month, OHAI president and chief executive officer Steven Wayne told analysts that the existing facility's 29 July maturity had been extended to 15 September.

“The closing of this new credit facility is an important and positive step for OHAI as we continue to work on transitioning our portfolio away from legacy energy assets as it provides meaningful capital for us to grow and continue to diversify our investment portfolio,” said Wayne in the statement announcing the MidCap facility.

In October 2014 , Oak Hill Advisors took control of what had previously been called NGP Capital Resources Company after having been hired as an advisor to the BDC. In the years since, it has struggled to overcome challenges related to its majority-exposure to energy against the backdrop of volatile oil prices.

On the firm's recent earnings call, Wayne told analysts that while steps had been taken to expand the non-energy portion of the portfolio, OHAI remained heavily exposed to the sector.

“There continues to be significant volatility in energy commodities in the current price environment for oil and natural gas, [which] while certainly improved from the first quarter of the year, still poses a challenge to all industry participants. If these conditions persist, they will continue to affect the energy portion of the portfolio,” he said.

OHAI and MidCap representatives did not return messages seeking further comment by press time.

OHAI is a BDC managed by Oak Hill with a focus on direct lending to mid-market companies across industries.

Oak Hill is an alternative investment firm focused on both performing and distressed credit. The New York-headquartered firm has about $29 billion in assets under management and maintains offices in Los Angeles, London, Hong Kong, Sydney, Luxembourg and Fort Worth, Texas.

MidCap Financial is a mid-market specialty finance firm with more than $8 billion of commitments under management. Managed by Apollo Global Management subsidiary Apollo Capital Management, the firm focuses on general and healthcare asset backed loans, leveraged loans to private equity backed companies, loans to venture capital backed medical companies, real estate loans to medical facilities and lender finance term loans or revolvers in consumer and commercial finance.