Two Carlyle BDCs set to merge

NS Investment stock will be converted into cash and shares of TCG BDC.

Two private business development companies managed by the Carlyle Group, NF Investment Corporation and TCG BDC, plan to merge, with the latter expected to go public, filings with the US Securities and Exchange Commission show.

As consideration, NFIC shareholders would receive up to 95 percent cash, with the remaining 5 percent being shares in TCG, according to an NFIC proxy filing. The deal’s proposed maximum aggregate value is $155.18 million.

If the shareholders vote in favour of the merger in a 6 June meeting, the deal would close the next day. NFIC would cease to exist as a separate company,  according to the SEC filing . TCG BDC will be the surviving entity, which would be expected to complete an initial public offering. 

Carlyle declined to comment.

In a proxy statement filed with the SEC, the NFIC board of directors advised its shareholders to vote ‘yes’ on the proposed merger at its upcoming shareholder’s meeting.  The agreement is “in the best interests of NFIC” and “the interest of the NFIC stockholders will not be diluted as a result”, the board said.

The firm also noted that TCG BDC has a “significantly higher base management fee rate than NFIC” and that the board expects these fees to increase after both the merger and the IPO.

NFIC lists a 0.25 percent management fee and does not have an incentive fee.

TCG’s pre-IPO management fee is 1.5 percent. Its incentive fee consists of a 20 percent fee on pre-incentive fee investment income and 20 percent fee on realised capital gains. After an IPO the fees would increase.

The net asset value of such shares issued via an IPO will be determined as of the business day immediately prior to the closing date, a filing reads.

According to their latest earnings results, NF Investment’s net asset value per share hit $19.03 at the end of first quarter, compared to $19.07 at the end of last year, while TCG BDC’s net asset value was $18.30 as of 31 March and $18.32 as of 31 December.