PennantPark Float and MCG merger approved

PennantPark Floating Rate Capital and the MCG Capital Corporation’s equity holders voted to approve the proposed merger. The transaction should close this week.  

Shareholders of PennantPark Floating Rate Capital (PFLT) and MCG Capital Corporation (MCGC) overwhelmingly voted to approve to merge their two BDCs at separate meetings on Friday (14 August).

PFLT's stockholders approved the issuance of PFLT common stock in connection with the merger agreement, with approximately 89 percent approval for the proposal. MCG's stockholders also approved the combination, with over 90 percent by value voting in favor.

The merger is expected to close this week. It should add about $175 million in assets to PFLT’s $373.4 million portfolio.

Keefe, Bruyette & Woods and SunTrust Robinson Humphrey are serving as financial advisers to PFLT. Dechert and Venable are acting as legal counsel to PFLT.

Morgan Stanley is financial adviser to MCGC, while Wachtell, Lipton, Rosen & Katz is MCGC’s legal counsel while Sutherland is acting as legal counsel to MCGC with respect to the Investment Company Act of 1940, the legislation that governs BDCs.

PennantPark Floating Rate Capital focuses on providing US mid-market private companies with floating rate senior secured loans. The vehicle also occasionally invests in mezzanine debt and equity co-investments. PFLT is managed by PennantPark Investment Advisers, which also runs the larger PennantPark Investment Corporation (PNNT) publicly-traded BDC and some private funds.

MCG Capital Corporation is a commercial finance company that provides capital and advisory services to lower mid-market companies in the US. MCG’s portfolio companies typically use credit lines from the BDC to finance acquisitions, refinancing, growth, working capital and other general corporate purposes.

PennantPark first announced its intention to acquire the assets of the struggling lender in April. MCG, which mainly focused on the telecommunications, media and publishing industries, has struggled with poorly performing legacy assets linked to traditional businesses.