Flat Rock Capital Corp., a non-traded business development company sponsored by Flat Rock Global, has received shareholder approval to convert to an interval fund. The conversion is expected to be effective on November 20, 2020 when the company will be merged into Flat Rock Core Income Fund, an affiliated interval fund that will be declared effective by the SEC today.
According to documents filed with the Securities and Exchange Commission, nearly 1.5 million shares voted for the company’s withdrawal as a BDC, 7,500 voted against, and 4,000 abstained.
Shareholders of Flat Rock Capital will receive shares of Flat Rock Core Income Fund (Ticker: CORFX) in exchange for their ownership in Flat Rock Capital (consideration was not disclosed).
Flat Rock Core Income Fund provides financing to U.S. middle market businesses. The company invests in first lien, floating rate loans to provide financing for change of ownership transactions, acquisitions, recapitalizations, and growth initiatives.
Through an interval fund structure, Core Income Fund will post a daily net asset value and will continue with the investment strategy that Flat Rock Capital has executed to date.
The company claims that the most significant benefit for shareholders is “the convenience and accessibility the interval fund provides for purchases and shareholder redemptions.”
Like Flat Rock Capital, the Core Income Fund is offered to registered investment advisors and family offices, although investments will no longer be limited to accredited investors, the company said. The fund’s leverage limitation will be also reduced from 2:1 debt to equity to .33X debt to equity.
Flat Rock Global was launched in 2017 by Robert Grunewald, the former president and chief investment officer of Business Development Corporation of America, and Richard Petrocelli, the former chief financial officer of three business development companies: Saratoga Investment Corp., Fifth Street Finance Corp., and Fifth Street Senior Floating Rate Corp. Flat Rock Global is the advisor for Flat Rock Core Income Fund and Flat Rock Opportunity Fund.
As of March 31, 2020, Flat Rock Capital’s investment portfolio had a fair value of $98.2 million and nearly 3 million shares issued and outstanding. The company had a net asset value per share of $18.80 as of the first quarter of 2020.