Stira Alcentra Global Credit Fund (SAGC), a closed-end fund formerly known as Steadfast Alcentra Global Credit Fund, has agreed to merge with Priority Income Fund Inc., a closed-end fund that would be the surviving entity of the merger.
The boards of both funds have approved the proposed merger, which is expected to close during the first or second quarter of 2019 with the approval of Stira Alcentra fund shareholders and other customary closing conditions. The approval of Priority’s shareholders is not required.
In September 2018, the board of Stira Alcentra Global Credit Fund suspended the fund’s $3 billion initial public offering and distribution reinvestment plan due to market conditions not being conducive to continuing the offering. Since that time, the board has been evaluating various strategic alternatives for the company.
The Stira Alcentra Global Credit Fund launched in May 2017 and raised approximately $36.2 million in investor equity. The fund is advised by a Steadfast affiliate and sub-advised by Alcentra NY LLC, a BNY Mellon investment boutique.
The proposed merger is a “NAV for NAV” transaction, under which Stira Alcentra shareholders would receive the number of shares of Priority common stock determined by applying an exchange ratio that compares the respective net asset values of the funds shortly before closing.
Priority Income Fund was created to acquire an investment portfolio of senior secured loans or pools of senior secured loans known as collateralized loan obligations. Priority commenced operations in January 2014 and had approximately $336 million of net assets (as compared to approximately $36 million for SAGC) as of September 30, 2018. To date, Priority has invested predominantly in the equity and junior debt tranches of CLOs.
In March 2018, Provasi Capital Partners LP terminated its dealer manager agreement for the Priority Income Fund offering, but later rescinded the termination notice and appointed investment management firm Destra Capital Investments LLC as sub-wholesaler for the offering.
“The proposed merger is expected to provide SAGC shareholders with significantly increased shareholder distributions, improved scale, better fixed cost absorption, increased access to financing and enhanced portfolio diversification, while staying consistent with Stira Alcentra Global Credit Fund’s historical corporate senior secured and floating rate credit asset allocation focus,” said Richard Gann, president of Stira Alcentra Global Credit Fund.
“We believe that Stira Alcentra Global Credit Fund and Priority shareholders will find compelling the multiple expected benefits of the proposed merger, including a significantly increased anticipated cash distribution rate from SAGC’s approximately 7 percent historic distribution rate to Priority’s approximately 10 percent current distribution rate,” said M. Grier Eliasek, president and chief executive officer of Priority.
Priority’s existing common stock offering, unrelated to the proposed merger, is expected to continue uninterrupted.
Priority is managed by Priority Senior Secured Income Management LLC, which is led by a team of investment professionals from the investment and operations team of Prospect Capital Management L.P.
Headquartered in New York City, Prospect Capital Management L.P. is an SEC-registered investment adviser with approximately $6.2 billion of assets under management as of September 30, 2018.
Stira Alcentra Global Credit Fund’s investment adviser is Stira Investment Adviser, LLC, an affiliate of the Steadfast Companies, a group of integrated real estate investment, management and development companies. The Steadfast Companies, with their corporate office located in Irvine, California, own or manage more than $5.6 billion in assets. Since their founding in 1994, the Steadfast Companies have, directly or indirectly, sponsored over 50 privately or publicly offered prior real estate investment programs.