Crescent Capital BDC’s $141.9 Million Acquisition of Alcentra Capital Corporation

BofA Merrill Lynch served as financial advisor to Crescent BDC. Kirkland & Ellis LLP served as legal counsel to Crescent BDC. Proskauer Rose LLP served as legal counsel to the independent directors of Crescent BDC.Houlihan Lokey served as financial advisor, and Sullivan & Worcester LLP served as legal counsel, to the Committee of Independent Directors. Dechert LLP served as legal counsel to Alcentra Capital.

Crescent Capital BDC, Inc. is a business development company externally managed by Crescent Cap Advisors, a subsidiary of Crescent Capital.

Alcentra Capital Corporation (NASDAQ:ABDC) is a middle-market business development company managed by Alcentra NY, LLC.

Under the terms of the transaction, in exchange for approximately 12.9 million shares of Alcentra Capital common stock, Alcentra Capital’s stockholders will receive approximately $19.3 million in cash, or $1.50 per share, from Crescent BDC; 5.2 million shares of Crescent BDC common stock; and $21.6 million in cash, or $1.68 per share, from CBDC Advisors, LLC, Crescent BDC’s investment adviser (“Crescent Cap Advisors”). Any final dividend that Alcentra Capital must pay in connection with the closing of the transaction to comply with applicable tax requirements that is in excess of Alcentra Capital’s regular quarterly dividends will reduce the cash consideration to be paid by Crescent BDC on a dollar-for-dollar basis. The total cash and stock consideration to be received at closing is currently estimated to be approximately $141.9 million after taking into account certain post-closing adjustments, or approximately $11.02 per share, representing 1.0x Alcentra Capital’s net asset value per share as of June 30, 2019, and 1.36x the closing price of Alcentra Capital’s common stock on August 12, 2019. The total value of the consideration to be received by Alcentra Capital stockholders at closing is variable and may be different than the estimated total consideration described herein depending on a number of factors, including as a result of transaction costs that are different than those estimated by the parties, fair value adjustments, operating performance subsequent to June 30, 2019 and share issuances.

Crescent Cap Advisors will provide significant financial support to the transaction, including approximately $1.68 per share referenced above of the total approximately $3.18 per share cash consideration to be paid to Alcentra Capital’s stockholders at closing and the fee waivers discussed below. In addition, Crescent Cap Advisors has agreed to fund at closing approximately $1.4 million of Crescent BDC’s transaction expenses incurred related to this transaction.

Additionally, Crescent BDC will implement a stock repurchase program for a period of twelve months following the closing of the transaction via open-market share repurchases in an aggregate amount of up to $20 million, less any amounts provided under any repurchase program for Crescent BDC stock that is entered into by affiliates of Crescent BDC or Crescent Cap Advisors, subject to certain regulatory restrictions (including Rule 10b-18 under the Securities Exchange Act of 1934).

In connection with the transaction, Ally Bank has provided a commitment letter dated August 12, 2019 agreeing to provide Crescent BDC with a $200 million leverage facility which is expected to close later this month. Wells Fargo Bank NA has been a lender to Crescent BDC since 2016 and currently provides a $250 million leverage facility which is expected to remain outstanding after the close of the transaction.

The Dechert team advising Alcentra Capital is led by corporate partners Harry Pangas (Picture) and Gregory Schernecke, with assistance from corporate associates Ross MacConnell, Clay Douglas, Madeleine Williams, Yitian Jin and Carly Robinson, as well as tax partner Ari Zak and tax associate Mansi Seth.

Involved fees earner: Clay Douglas – Dechert; Yitian Jin – Dechert; Ross MacConnell – Dechert; Harry Pangas – Dechert; Carly Robinson – Dechert; Gregory Schernecke – Dechert; Mansi Seth – Dechert; Madeleine Williams – Dechert; Ari Zak – Dechert;

Law Firms: Dechert;

Clients: Alcentra Capital Corporation;

Author: Ambrogio Visconti