BDCA Stockholders to Vote on AR Capital Replacement
Shareholders of Business Development Corporation of America, a publicly registered non-traded business development company sponsored by AR Global Investments – the successor business to AR Capital, will soon vote on the previously announced strategic transaction with a subsidiary of Benefit Street Partners.
On Friday, the company sent a letter and accompanying proxy voting materials to shareholders detailing the potential transaction where BSP Acquisition I will acquire all of the outstanding interests of the company’s adviser, BDCA Adviser LLC. Benefit Street has agreed to acquire $10 million of BDCA common stock, based on the net asset value per share at the close of the transaction. If approved, the adviser will be controlled by Benefit Street.
Benefit Street is the credit investment arm of Providence Equity Partners and has more than $13 billion in assets under management. The firm co-sponsored the Griffin-Benefit Street Partners BDC, which closed earlier this year. Providence Equity Partners is a global private equity and credit investment firm with $45 billion in assets under management.
Peter Budko, who currently serves as chairman and chief executive officer of the BDCA, will resign immediately from his positions. Director Edward Weil Jr. will also resign. The board will appoint Benefit Street president Richard Byrne to serve as BDCA’s president, chief executive officer and chairman of the board. Corinne Pankovcin is expected to remain BDCA’s chief financial officer, treasurer and secretary, and Guy Talarico is expected to remain the chief compliance officer.
The future board will consist of four non-interested directors and one interested director, if the transaction goes through. Leslie Michelson, Randolph Read, Edward Rendell will remain on the board, and stockholders are being asked to elect one new non-interested director – Ronald Kramer, the CEO of Griffon Corporation (NYSE: GFF).
The current members of the adviser’s investment committee will be replaced with Thomas Gahan, CEO of Benefit Street, Michael Paasche, a senior managing director of BSP, and Blair Faulstich, the head of originations of BSP, each with over 20 years of experience in the financial services industry.
Earlier this month, NexPoint Advisors LP submitted a management proposal to the BDCA board which included a permanent 50 percent reduction of the company’s management and incentive fee arrangements, as well as the implementation of NexPoint’s stockholder loyalty program, under which NexPoint provides a 2 percent match to stockholders that invest through the program and retain their shares for at least one year. The proposal also included the direct investment of at least $50 million in BDCA shares. The board did not respond to any of NexPoint’s requests to meet and discuss its proposal.
BDCA was the focus of a proxy fraud scandal late last year. Its then-sponsor, AR Capital, and dealer manager, Realty Capital Securities, were also involved in a series of scandals which led to the termination of all AR Capital-sponsored investment programs and an agreement by RCS to terminate its business.
Shareholders can also vote on the transaction at the special meeting of stockholders held on October 28th at The Core Club in New York City.
BDCA invests primarily in first and second lien senior secured loans and mezzanine debt issued by middle market companies. The company’s portfolio is comprised of $2.3 billion in directly-owned investments, since the last quarterly filing with the Securities and Exchange Commission. The company commenced its initial public offering in January 2011 and raised $1.9 billion before closing the offering in April 2015. The annualized yield for distributions was 7.78 percent based on its then public offering price of $11.15 per share.
