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Franklin BSP BDCs to Merge, Forming Company with $3.7 Billion Portfolio

Franklin BSP BDCs to Merge, Forming Company with $3.7 Billion Portfolio. Alternative investment, Benefit Street, Benefit Street Partners Realty Trust, merger, real estate investment trust, Realty Finance Trust, REIT, Franklin BSP Capital Corporation, Franklin BSP Lending Corporation
Franklin BSP BDCs to Merge, Forming Company with $3.7 Billion Portfolio. Alternative investment, Benefit Street, Benefit Street Partners Realty Trust, merger, real estate investment trust, Realty Finance Trust, REIT, Franklin BSP Capital Corporation, Franklin BSP Lending Corporation

Franklin BSP Capital Corporation and Franklin BSP Lending Corporation, business development companies managed by affiliates of Benefit Street Partners LLC, announced that they have entered into an agreement to merge, with FBCC as the surviving company. The merger is subject to certain stockholder approvals and other customary closing conditions.

Under the terms of the proposed merger, Franklin BSP Lending Corporation stockholders will receive an amount of shares of newly issued Franklin BSP Capital Corporation common stock based on the ratio of the Franklin BSP Lending Corporation net asset value per share divided by the Franklin BSP Capital Corporation NAV per share, each determined shortly before the closing of the merger.

The boards of directors of both companies have approved the merger agreement and the transactions. According to Franklin BSP Lending Corporation, the parties to the merger agreement intend the mergers to be treated as a “reorganization.”

Anticipated to occur during the first half of 2024, the merger requires approvals of Franklin BSP Lending Corporation’s and Franklin BSP Capital Corporation’s stockholders, including the approval of Franklin BSP Capital Corporation’s stockholders of the amendment and restatement of its currently effective investment advisory agreement.

“We are very excited to announce the board approval of the merger of FBLC with FBCC,” Richard Byrne, president of BSP, chief executive officer and chairman of FBCC and FBLC, said. “We believe the merger is a compelling transaction that enhances value for both FBCC and FBLC stockholders, and view this as an important next step on our path to creating liquidity.”

The company cites several “highlights” of the proposed merger:

Enhanced Path to Liquidity: The merger is expected to pave the way for a future liquidity event for stockholders through the combined company’s higher return profile and larger equity base.

Immediately Accretive to Net Investment Income: Pro Forma Franklin BSP Capital Corporation is expected to have higher net investment income due to many factors, including the elimination of duplicative operating expenses such as legal, audit, regulatory and administrative costs.

Additional Investing Capacity: The merger will purportedly unlock nearly $700 million of capital to deploy in the current origination environment, which is expected to be further accretive to net investment income.

Increased Scale: The combined company is expected to have total assets of approximately $3.9 billion, and net assets of approximately $2.1 billion, based on June 30, 2023, financials.

High-Quality, Diversified Portfolio: Pro Forma FBCC is expected to have a $3.7 billion portfolio with approximately 97% senior secured investments and minimal non-accruals. With approximately 80% of FBCC’s investments overlapping with FBLC’s investments, the combination of two known, complementary portfolios is expected to facilitate a seamless integration.

Improved Capital Markets Access: The combined company is expected to have better access to more diverse, lower cost sources of debt capital, which may provide the combined company with an enhanced opportunity for further debt optimization.

Franklin BSP Capital Corporation is a non-listed business development company with a $796 million investment portfolio at fair value as of June 30, 2023. Their investment portfolio primarily consists of loans to middle-market companies.

Franklin BSP Lending Corporation is a non-listed BDC with a $2.9 billion investment portfolio at fair value as of June 30, 2023. In January 2022, the company changed its name from “Business Development Corporation of America” to “Franklin BSP Lending Corporation.” Its investment portfolio primarily consists of loans to middle-market companies.

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