WhiteHorse, STRS of Ohio create JV to invest in the mid-market – updated

The two entities created a joint venture with $125m of committed capital with the hope of acquiring additional financing.

WhiteHorse Finance (WHF) and the State Teachers Retirement System of Ohio will commit up to $125 million into a joint venture.

The newly formed vehicle, WHF STRS Ohio Senior Loan Fund, will focus on lending senior secured loans to the lower mid-market. WHF committed to provide up to $75 million of subordinated notes and equity and STRS committed to provide up to $50 million.

The joint venture is also hoping to bring on an additional $250 million in capital from outside financing to bring its committed capital up to $375 million, according to a press release.

The pension fund was unable to be reached by press time.

“Forming the joint venture with STRS Ohio, where we’re diversifying into lower risk assets by investing in lower mid-market senior secured debt facilities, was a natural extension of our disciplined, diverse sourcing strategy,” Stuart Aronson, the chief executive officer at WhiteHorse Finance told Private Debt Investor.

Aronson said that they expect the JV will lend to companies with senior secured assets that have between $8 million and $40 million in EBITDA. He added that they are targeting first-lien loans priced between LIBOR plus 500 and LIBOR plus 650.

WhiteHorse’s mid-market strategy is to lend to US-based companies with between $50 million and $300 million of enterprise value, through loans that are between $10 million and $50 million on average, according to the BDC’s website.

“We continue to believe direct lending offers opportunities to originate assets with attractive risk-adjusted returns, and we believe this joint venture advances that strategy for us,” Aronson said.

This isn’t the first joint venture between a pension fund and a BDC that’s focused on mid-market lending. In 2017, Owl Rock Capital Corporation and UC Regents, created a joint vehicle to invest senior secured loans to the mid-market. Both entities contributed $100 million to the venture and have since reupped their commitments. The vehicle, Sebego Lake, is now worth more than $571 million at fair value, according to SEC documents.

The STRS of Ohio is a public pension fund based in Columbus, Ohio that covers more than 493,000 past and present teachers in Ohio. The pension fund has more than $79 billion in assets under management.

WhiteHorse Finance is a publicly-traded BDC managed by an affiliate of H.I.G. Capital, which has more than $30 billion in assets under management.

This piece has been updated to include comments from WhiteHorse Finance.