Sierra Income Corporation, formerly a non-traded business development company, has completed its merger into Barings BDC Inc. (NYSE: BBDC), a publicly traded business development company.
The combined company, which will remain externally managed by Barings LLC, is expected to have more than $2.7 billion of assets under management on a pro forma basis.
For each share of Sierra common stock held, Sierra shareholders received 0.44973 of a share of Barings BDC common stock and approximately $0.98 in cash.
Approximately 46 million shares of Barings BDC common stock were issued to Sierra shareholders in connection with the merger, resulting in former Sierra stockholders and current Barings BDC stockholders owning 41.3 percent and 58.7 percent of the combined company, respectively.
Barings BDC invests primarily in senior secured loans to private U.S. middle market companies that operate across various industries. Its investment activities are managed Barings LLC, a global asset manager with more than $391 billion of assets under management.
Sierra invested primarily in first lien senior secured debt, second lien secured debt and, to a lesser extent, subordinated debt of middle market companies with annual revenue between $50 million and $1 billion. The company oversaw a portfolio of investments with a fair value of $544.3 million as of September 31, 2021.
Following the closing of the merger, Barings LLC and Barings BDC entered into an investment advisory agreement that will increase the incentive fee hurdle rate from 8.00 percent to 8.25 percent, annualized.
Barings LLC also entered into a credit support agreement with Barings BDC “to protect against net cumulative unrealized and realized losses of up to $100 million on the acquired Sierra investment portfolio over the next 10 years.”
“In connection with the closing of the merger, Barings BDC’s board of directors affirmed Barings BDC’s commitment to open-market purchases of shares of Barings BDC’s common stock in an aggregate amount of up to $30.0 million at then-current market prices at any time shares trade below 90 percent of Barings BDC’s then most recently disclosed net asset value per share. Any repurchases pursuant to the authorized program will occur during the 12-month period commencing on April 1, 2022…,” the company said.
Barings BDC has also increased the size of its board from eight to 10 directors and appointed Valerie Lancaster-Beal and Stephen R. Byers, former directors of Sierra, to serve as independent members of the board. Lancaster-Beal and Byers have also been appointed to serve on each standing committee of the board.
Over the last five days, Barings BDC stock has traded between $10.76 and $10.91.