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Late to party, Bain targets global middle market strategy for BDC

While no stranger to lending to middle market companies, Bain Capital is a latecomer to the BDC party. Other asset investment firms of its size embraced the structure years ago.

A combination of demand from institutional investors and lessons learned from the lenders that came and went during the credit crisis motivated the wait.

“We haven’t gone for explosive growth,” said Michael Ewald.

Calls for a BDC’s advantageous structure led to the SEC filing of the registration statement for Bain Capital Specialty Finance on Oct. 6. The BDC will invest in middle market companies generating $10 million–150 million in annual earnings, with ones that generate $20–75 million in EBITDA the primary target.

Ones smaller than those, generating $10–20 million in earnings, generally have very health relationships with regional banks, so lending to them is more competitive.

Bain plans to differentiate themselves from the crowded playing field of BDCs that lend to middle market companies by investment choices made for the 30% of assets in non-qualifying investments. Here, Bain aims to target European and Australian companies.

The credit originations team under Ewald reflects this: staff in Melbourne is increasing to four from three, seven people are based in London, and the rest are in New York, Boston, and Chicago.

The previous name of the entity is Sankaty Capital Corp, the filing showed. The BDC will be externally managed by Bain professionals through BCSF Advisors. The BDC’s board consists of David Fubini, Thomas Hough, and Jay Margolis. Investment decisions are made by the committee that governs other Bain Funds, and consists of Jonathan Lavine, Tim Barns, Stuart Davies, Jonathan DeSimone, Alon Avner, Michael Ewald, Christopher Linneman, and Jeff Robinson.

Investor capital at Bain has previously had exposure to the middle market lending asset class through other funds, including a dedicated $400 million direct lending fund raised at the start of 2015. In addition, Bain is currently investing from a $1.5 billion fund targeting junior debt investments at middle market companies, with another $3.5–4 billion targeting senior debt of middle market companies through others types of funds and managed accounts.

The BDC has been investing for about three weeks, and is expected to ramp up fully over one year. Excluding leverage, the size is $546 million. The private BDC has a 3-1/2 year investment period, after which it will be wound down, unless it is listed publicly before then.

Many BDCs in recent years have struggled with shares trading below net asset value, marring fundraising efforts through share sales. Before then, the BDC would need to be fully invested, and grow more, with at least $750 million in equity.

Per Ewald, “There’s potential to take it public, but we’ll figure that out when the time’s appropriate. There haven’t been a lot of BDC IPOs lately, so that might be the bigger news story.” — Abby Latour

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Marketo’s $1.79B Take-Private Purchase Backed by Debt from Golub

Golub Capital punched upmarket to provide the debt financing behind the $1.79 billion take-private purchase of San Mateo-based digital-marketing company Marketo (NASDAQ:MKTO) by Vista Equity Partners.

The purchase closed today after shareholders approved the agreement on July 28, Marketo announced this morning.

Wilson Sonsini Goodrich & Rosati served as legal advisor to Marketo. Kirkland & Ellis LLP served as legal advisor to Vista. —Kelly Thompson

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Lower Middle-market Pricing Tightens on Slow Pipeline, Surge of New Platforms

Pricing in the lower middle market is starting to erode amid heated competition for mandates, despite this segment’s traditionally more stable nature.

An analysis of six BDC portfolios that target the lower middle market shows that first-lien rates have fallen significantly year-over-year, according to LCD, an offering of S&P Global Market Intelligence.

The yield on new-issue, floating-rate first-lien debt averaged 8.82% in the first quarter, down from 11.04% in the first three months of 2015 across the six BDCs: Alcentra Capital (ABDC), Capitala (CPTA), Garrison (GARS), Harvest Capital (HCAP), Monroe Capital (MRCC), and Triangle Capital (TCAP).

Yields on middle market second-lien debt contracted less severely, to 10%, from 10.50%, in the same period.

middle market loan yields

Lending this far down the spectrum takes investors to EBITDA depths of roughly $30 million or less, below the traditional middle market marker of $35–50 million. Those brackets aren’t set in stone, but many lenders would agree the two tiers split about there.

Three of the six BDCs target companies generating up to $30 million of EBITDA, while TCAP goes a bit wider, to borrowers generating $35 million. HCAP targets much smaller businesses—typically those with no more than $15 million of EBITDA. MRCC provides a broad catchall of companies with revenue between $10 million and $2.5 billion, but most of the portfolio skews toward the lower end of the range.

Lower middle market rates remain perched well above the 6–7% levels across the upper bands of the middle market, but pricing at the bottom of the stack is expected to deflate in the months ahead unless the M&A machine kicks back into gear.

Gross new-issue volume in the first quarter was $61.86 million for the six BDCs, roughly half of the $121.67 million total in 1Q15.

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TPG Specialty urges TICC shareholders to vote for its board nominee

TPG Specialty Lending, the BDC that lends to middle market companies, stepped up its fight for rival TICC Capital today as the two sides geared up for a proxy battle.

In a letter dated July 13, TPG Specialty urged TICC Capital shareholders to vote in favor of board nominee T. Kelley Millet at TICC Capital’s annual meeting on Sept. 2. TPG Specialty has tried unsuccessfully to acquire TICC Capital. Millet is CEO of Banca IMI Securities Corp.

TPG is calling to end an ineffective investment advisory agreement between TICC Capital and TICC Management. TPG says TICC Capital shares have grossly underperformed the S&P 500 and the BDC Composite Index since TICC Capital’s IPO in 2003, driven by a 57% decline in NAV. In the meantime, TICC has paid fees of over $140 million to its external adviser and management.

TICC Capital has pursued an unsustainable dividend policy, paying a dividend far exceeding net investment income, TPG Specialty said.

“Do not be fooled! These payments are not comprised solely of investment returns; stockholders are being paid back in part with their own money,” the letter to TICC Capital shareholders said. “More importantly, this strategy has unfortunately resulted in almost irreversible value destruction of NAV per share that will only continue without quick and decisive action.”

TICC Capital has countered with its own board nominee, Tonia Pankopf, who is up for re-election this year. In a letter to its shareholders yesterday, TICC Capital sought support from shareholders to vote in favor of Pankopf and reject TPG Specialty’s plan to terminate its investment advisory agreement with TICC Management.

TICC Capital’s executive officers and directors together hold 5.7% of common stock, the proxy statement filed on July 12 showed. Ahead of the previous shareholder meeting, the board owned 1.8% of common stock, a proxy filed in April 2015 showed.

TICC Capital has also been fighting on another front. NexPoint Advisors, an affiliate of Highland Capital Management, submitted a proposal to cut fees and invest in TICC Capital. In the letter yesterday, TICC Capital told shareholders not to support any potential proposal from NexPoint.

TPG Specialty Lending’s investment portfolio reflects its ongoing interest in TICC. As of March 31, TPG owned 1.6 million TICC shares, representing 0.9% of its portfolio.

TPG has repeatedly said that TICC’s external manager has failed the BDC and, given the chance, TPG could improve returns for shareholders.

“We remain committed to affecting change at TICC,” co-CEO and Chairman Josh Easterly said in an earnings call in May. — Abby Latour

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Capital Southwest new deals total $35M in 4Q; sees market pick up

Capital Southwest originated $34.6 million in six new investments in the recent quarter when the flow of middle market deals slowed generally.

Since the end of the quarter, the volume of upper middle market deals has increased, and terms and spreads have tightened significantly, Capital Southwest CEO Bowen Diehl in an earnings call today for the company’s fiscal fourth quarter ended March 31.

Similarly, the number of deals in the lower middle market decreased late in the March quarter and early in the June quarter. Lower middle market deals traditionally take longer to close and real-time pricing terms and structural trends are far less transparent.

Diehl said risk premiums on lower middle market deals have tightened in the past few months.

“In the past several weeks, however, we have experienced a considerable pick-up in our pipeline of quality, lower middle market deals,” said Diehl.

Among the new deals in the quarter ended March 31 were Chandler Signs and Hygea Holdings. Joint venture partner Main Street Capital also added debt investments to Hygea and Chandler Signs in the quarter ended March 31.

Capital Southwest’s subordinated debt and equity investment in signage company Chandler Signs totaled $6 million. An investment in Hygea Holdings included $8 million in first lien debt and equity warrants. Hygea Holdings is a physician services provider based in Doral, Fla.

The other new investments of Capital Southwest were $5 million of first-lien debt to TaxAct, $4.6 million of first-lien debt toDigital River, $7 million of first-lien debt to Vivid Seats, and $4 million of first-lien debt to Imagine! Print Solutions.

Dallas-based Capital Southwest, an internally managed BDC whose shares trade on the Nasdaq under the symbol CSWC, has been shifting its investment portfolio to middle market loans from equity. Last year, the company spun off some assets into an industrial growth company to shareholders.

Since June 2014, Capital Southwest has exited legacy portfolio companies totaling $222 million. The company is transforming its portfolio from cash and non-yielding investments to assets that generate recurring income. The portfolio is now made up of 59% of investments that generate recurring income, up from 1% in June 2014, before the strategy change.

The investment portfolio grew to $178 million as of March 31, from $135 million as of Dec. 31.

Investments in the I-45 Senior Loan Fund increased to $36 million from $28 million at year-end. The I-45 SLF is a joint venture with BDC Main Street Capital that invests in syndicated senior secured loans to upper middle market companies. — Abby Latour

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How did ACAS become a takeover target? Answer’s in the portfolio mix

How did American Capital become a takeover target? The answer lies in the lender’s equity-heavy, low-yielding investment portfolio mix.

Ares Capital, which trades on the Nasdaq under the ticker ARCC, announced on May 23 it would buy American Capital in a $3.4 billion deal, excluding the company’s mortgage management businesses. American Capital trades on the Nasdaq as ACAS.

One of American Capital’s strategies was its trademarked One Stop Buyout, where it could invest in debt ranging from senior to junior, as well as preferred and common stock, acquiring control of an operating company through a transaction.

However, the accumulation of equity did not allow the company to maintain the steady dividend growth that investors had grown to rely on.

In November 2008, the company stopped paying dividends and began evaluating them quarterly to better manage volatile markets. At the same time, American Capital announced an expansion into European middle market investing through the acquisition of European Capital. Also that year, American Capital opened an office in Hong Kong, its first office in Asia.

The news of the dividend policy change triggered a plunge in American Capital shares. Shares have persistently traded below book value since.

At its peak, the One Stop Buyout strategy accounted for 65% of American Capital’s portfolio. It has since slashed this to under 20% of the portfolio, of which less than half of that amount is equity. It continues to sell off assets.

In a reflection of the change in investment mix, S&P Global Ratings placed Ares Capital BBB issuer, senior unsecured, and senior secured credit ratings on CreditWatch negative, as a result of the cash and stock acquisition plan.

“The CreditWatch placement reflects our expectation that the acquisition may weaken the combined company’s pro forma risk profile, with a higher level of equity and structured finance investments,” said S&P Global analyst Trevor Martin in a May 23 research note.

At the same time, S&P Global Ratings placed the BB rating on American Capital on CreditWatch positive after the news.

“The CreditWatch reflects our expectation that ACAS will be merged into higher-rated ARCC upon the completion of the transaction, which we expect to close in the second half of 2016. Also, we expect ACAS’ outstanding debt to be repaid in conjunction with the transaction,” S&P Global analyst Matthew Carroll said in a research note.

Not the first time
But Ares Capital says it has a plan. In 2010, Ares acquired Allied Capital, a BDC which pre-dated the financial crisis. On a conference call at the time of the deal announcement, management said it plans a similar strategy for integrating American Capital, of repositioning lower yielding and non-yielding investments into higher-yielding, directly sourced assets.

Ares Capital managed to increase the weighted average yield of the Allied investment portfolio by over 130 bps in the 18 months after the purchase, and reduce non-accrual investments from over 9% to 2.3% by the end of 2012, Michael Arougheti said in the May 23 investor call. Arougheti is co-chairman of Ares Capital and co-founder of Ares.

“The Allied book was a little bit more challenged, or a lot more challenged, than the ACAS portfolio is today,” Arougheti said. Ares Capital’s non-accrual investments totaled 1.3% on a cost basis, or 0.6% at fair value, as of March 31.

“Remember, that acquisition was made against a much different market backdrop. And so, while the roadmap is going to be very similar… this can be a lot less complicated that that transaction was for us.”

The failings of American Capital’s strategy reached fever pitch last November, when the lender capitulated to pressure from activist investor Elliott Management just a week after it raised an issue with the spin-off plan.

American Capital’s management had proposed in late 2014 spinning off two new BDCs to shareholders, and said it would focus on the business of asset management. However, in May last year, management revised the plan, saying it would spin off just one BDC.

But Elliott Management stepped in, announcing in November that it acquired an 8.4% stake. It later increased its stake further, becoming the largest shareholder of American Capital. The company argued that even the new plan would only serve to entrench poorly performing management, and called for management to withdraw the spin-off proposal.

American Capital listened. Within days, American Capital unveiled a strategic review, including a sale of part or all of the company.

One reason for the about-face was likely its incorporation status in Delaware, which made the board vulnerable to annual election. Incorporation in Maryland, utilized by other BDCs, is considered more favorable to management, in part because the election of boards is often staggered.

Although American Capital had shrunk its investment portfolio in recent quarters, it had participated in the market until recently.

Among recent deals, American Capital helped arrange in November a $170 million loan backing an acquisition of Kele, Inc. by Snow Phipps Group. Antares Capital was agent. In June 2015, American Capital was sole lender and second-lien agent on a $51 million second-lien loan backing an acquisition of Compusearch Software Systems by ABRY Partners. — Abby Latour

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Qlik Technologies record $1B loan signals direct lending growing up

With today’s record $1 billion loan to fund an acquisition of Qlik Technologies, BDCs are giving notice that direct lending is moving far beyond its middle market roots to challenge traditionally distributed debt financing.

Ares Capital Corp. is leading the $1.075 financing, announced today, which is the largest-ever unitranche credit facility by a BDC. Unitranche combines different tiers of debt, which normally would have different interest rates, into a single loan.

Private equity firm Thoma Bravo is buying Qlik, based in Radnor, Pa., but founded in Sweden, which provides data visualization and analytics software. Shares trade on Nasdaq under the ticker QLIK.

Golub Capital, TPG’s dedicated credit and special situations platform, or TSSP, and Varagon Capital Partners are also joint lead arrangers.

It remains to be seen if this is the advent of a new lending landscape in which unitranche deals of $1 billion or more are commonplace. The acquisition financing for Qlik Technologies stemmed from a period in the loan market when primary issuance was stalled due to financial market volatility that disrupted usual syndication channels.

Leveraged finance market conditions have since improved. Admittedly, the deal’s structure would be a tougher decision by Thoma Bravo in current conditions than those of two months ago, when risk-averse investors shunned complex-story credits or pushed for economic and structural concessions to levels that made buyouts unattractive.

What’s more, this transaction isn’t expected to close until the third quarter, when financial market conditions could be far different than those offered in what is, for now, a buoyant environment for credit. Minimizing risk due to the syndication process is far more attractive to a buyer in most cases.

The transaction is subject to shareholder and regulatory approvals.

A merger deal announced last week stoked expectations that larger loan deals may be ahead from BDCs. Ares Capital, which trades on Nasdaq under the ticker ARCC, announced on May 23 it would buy rival lender American Capital, which trades on Nasdaq as ACAS, for $3.4 billion.

Ares management made no secret of the fact that the company’s purchase of American Capital would allow Ares to originate larger loans, thus generating more underwriting and distribution fees.

In an investor presentation about the purchase of American Capital, Ares pointed out how volatile market conditions had led to enhanced pricing and terms, and increased regulatory burden for banks was opening opportunities for them.

Market volatility—as well as increased regulatory scrutiny of commercial banks that emerged more than two years ago—had already opened the door to club-like transactions by BDCs, which will likely hold the majority of the debt for the Qlik deal.

BDCs are able, and willing, to accept higher leverage levels than banks. In the case of Qlik Technologies, the transaction is expected to result in leverage of more than 6x, sources said.

What’s more, the company generates most revenue outside the U.S., and EBITDA is highly adjusted, creating a structurally complex deal, sources said. Significant cost savings are expected through the buyout.

Such adjustments can present hurdles for banks looking to gain internal approvals to underwrite debt deals, and the prospect of a new alternative financing channel could spur renewed interest in buyout business.

Notably, the $1.075 billion unitranche loan for Qlik Technologies accounts for around one-third of the roughly $3 billion purchase price. Under terms of the acquisition, Qlik shareholders will receive $30.50 in cash per share.

Ares Capital says it is committed to holding a large portion of the financing. At the same time, Ares Capital said it would lead a syndication process to attract more lenders to the credit facility, but only a small part is expected to be syndicated.

“We believe this transaction is representative of the growing acceptance of direct lending as a mature asset class, and we believe our market leading position puts us in the forefront of this paradigm shift,” said Kipp deVeer, Ares Capital CEO, in a statement today.

Ares Capital is no stranger to larger-sized deals.

Last year, Ares Capital closed an $800 million loan for American Seafoods Group, another example of a non-regulated arranger capturing lending business that usually would have gone to a large bank. American Seafoods used proceeds to refinance debt and fund a bond exchange.

The amount of Ares Capital’s exposure to this investment has since shrunk.

As of March 31, the fair value of the American Seafood investment in Ares Capital’s investment portfolio totaled $81.7 million, including first-lien debt, second-lien debt, equity, and warrants. The largest of these was a $55 million, L+900 second-lien loan due 2022, with a fair value of $53 million.

The per-share purchase price for Qlik represents a 40% premium over $21.83, which was the average share price in the 10 days prior to March 3.

On March 3, activist shareholder Elliott Management unveiled an investment in Qlik Technologies, a move that prompted the company to put itself up for sale. Later that month, Qlik hired Morgan Stanley to explore a possible sale of the company, Reuters reported. — Abby Latour

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Ares Capital grows even bigger with $3.4B American Capital purchase

Two of the largest listed BDCs are merging to form a middle market lending behemoth that will have $13 billion in investments (at fair value). The largest, Ares Capital (ticker: ARCC), announced yesterday that it’s buying American Capital (ticker: ACAS) for $3.4 billion.

The purchase will put even more miles between ARCC and its nearest competitor, now Prospect Capital (ticker: PSEC), which has $6.2 billion in assets against ARCC’s $9.3 billion. The ACAS portfolio will give ARCC another $4.7 billion in investments and expand the number of portfolio companies to 385 from 220.

With the purchase, ARCC will gain scale and flexibility to underwrite larger commitments to compete against traditional banks. Last year’s financing for American Seafoods Group whetted ARCC’s appetite for bigger names. After all, bigger deals generate bigger underwriting and distribution fees. ARCC underwrote an $800 million loan for American Seafoods, snagging a mandate that typically would’ve gone to large banks.

ARCC management yesterday said that it wants the ability to extend commitments of $500 million to $1 billion for any one transaction, with the aim of holding $250 million, whereas before ARCC would go as large as $300 million, with the aim of holding $100 million.

The ACAS purchase also will give ARCC more breathing room under its 30% non-qualifying bucket to ramp its new joint-venture fund with Varagon. The Varagon platform is replacing ARCC’s joint-venture with GE Capital, which began to wind down last year in the wake of GE Capital asset sales.

The boards of directors of both companies have unanimously approved the acquisition.

The purchase requires shareholder approvals and is contingent on the $562 million sale of ACAS’s mortgage unit to American Capital Agency (ticker: AGNC) in a separate transaction.

Elliott Management, holder of a 14.4% interest in American Capital, strongly supports the transactions and will vote its shares in favor.

Ares Management agreed to an income-based fee waiver of up to $100 million for the first ten quarters after closing.

The combined company will remain externally managed by Ares Capital Management LLC, and all current Ares Capital officers and directors will remain in their current roles.

ACAS will continue with planned asset sales ahead of closing, in collaboration with Ares. ACAS hired Goldman Sachs and Credit Suisse in January to vet buyers. Since March 31, ACAS has announced sales of over $550 million in balance sheet investments. In addition to the mortgage business, ACAS is looking to sell its European Capital assets. — Kelly Thompson/Jon Hemingway

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Senate hearing opens discussion on BDC regulation changes

A hearing by the Senate banking committee showed bi-partisan agreement for BDCs as a driver of growth for smaller U.S. companies, but exposed some rifts over whether financial companies should benefit from easier regulation.

BDCs are seeking to reform laws, including allowing more leverage of a 2:1 debt-to-equity ratio, up from the current 1:1 limit. They say the increase would be modest compared to existing levels for other lenders, which can reach 15:1 for banks, and the low-20x ratio for hedge funds.

A handful of BDCs are seeking to raise investment limits in financial companies. They argue that the current regulatory framework, dating from the 1980s when Congress created BDCs, fails to reflect the transformation of the U.S. economy, away from manufacturing.

BDCs stress that they are not seeking any government or taxpayer support.

They are also seeking to ease SEC filing requirements, a change that would streamline offering and registration rules, but not diminish investor protections.

Ares Management President Michael Arougheti told the committee members in a hearing on May 19 that although BDCs vary by scope, they largely agree that regulation is outdated and holding back the industry from more lending from a sector of the U.S. economy responsible for much job creation.

“While the BDC industry has been thriving, we are not capitalized well enough to meet the needs of middle market borrowers that we serve. We could grow more to meet these needs,” Arougheti said.

In response to criticism about expansion of investment to financial services companies, the issue of the 30% limit requires further discussion, Arougheti said.

The legislation under discussion is the result of lengthy bi-partisan collaboration and reflects concern about increased financial services investments, resulting in a prohibition on certain investments, including private equity funds, hedge funds and CLOs, Arougheti added.

“There are many financial services companies that have mandates that are consistent with the policy mandates of a BDC,” Arougheti added.

Senator Elizabeth Warren (D-MA) raised the issue of high management fees of BDCs even in the face of poor shareholder returns. Several BDCs have indeed moved to cut fees in order to better align interests of shareholders and BDC management companies.

She said that Ares’ management and incentive fees have soared, at over 35% annually over the past decade, outpacing shareholder returns of 5%, driving institutional investors away from the sector, and leaving behind vulnerable mom-and-pop retail investors. Arougheti countered by saying reinvestment of dividends needed to be taken into account when calculating returns, and said institutional investors account for 50–60% of shareholders.

Warren said raising the limit of financial services investment to 50%, from 30%, diverts money away from small businesses that need it, while BDCs still reap the tax break used to incentivize small business investment.

“A lot of BDCs focus on small business investments and fill a hole in the market. A lot of companies in Massachusetts and across the country get investment money from BDCs,” said Warren.

“If you really want to have more money to invest, why don’t you lower your high fees and offer better returns to your investors? Then you get more money, and you can go invest it in small businesses,” Warren said.

Brett Palmer, President of the Small Business Investor Alliance (SBIA), said the May 19 hearing, the first major legislative action on BDCs in the Senate, was a step toward a bill that could lead to a new law.

“There is broad agreement that BDCs are filling a critical gap in helping middle market and lower middle market companies grow. There is a road map for getting a BDC bill across the finish line, if not this year, then next,” Palmer said, stressing the goal was this year.

Technically, the hearing record is still open. The Senate banking subcommittee for securities and investment could return with further questions to any of the witnesses. Then, senators can decide what the next stop will be, ranging from no action to introduction of a bill.

Pat Toomey (R-PA) brought up the example of Pittsburgh Glass Works, a company that has benefited from a BDC against a backdrop that has seen banks pulling back from lending to smaller companies following the financial crisis, resulting in a declining number of small businesses from 2009 to 2014.

The windshield manufacturer, a portfolio company of Kohlberg & Co., received $410 million in financing, of which $181 million came from Franklin Square BDCs.

“Business development companies have stepped in to fill that void,” Toomey told the committee hearing. “For Pittsburgh Glass, it was the best financing option available to them.”

FS Investment Corp.’s investment portfolio showed a $68 million L+912 (1% floor) first-lien loan due 2021 as of March 31, an SEC filing showed.

Arougheti cited the example of OTG Management, a borrower of Ares Capital. OTG Management won a contract to build out and operate food and beverage concessions at JetBlue’s terminal at New York airport JFK, but was unable to borrow from traditional senior debt lenders or private equity firms due to its limited operating history.

Ares Capital’s investment in OTG Management included a $24.7 million L+725 first-lien loan due 2017 as of March 31, an SEC filing showed. — Abby Latour

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Littlejohn-backed Interior Specialists to acquire HD Supply unit

Interior Specialists, Inc. (ISI), a portfolio company of Littlejohn & Co., has agreed to buy the Interior Solutions unit of Nasdaq-listed HD Supply for an undisclosed amount. The transaction is expected to close in the second quarter, according to the company.

Further details regarding the transaction were not disclosed.

The acquired business, formerly known as Creative Touch Interiors, is a provider of design center management and installation services to homebuilders.

ISI last summer closed on a $74.3 million term loan to support another acquisition and to refinance existing debt. Garrison Investment Group was lead arranger on the transaction, and as of Dec. 31, BDC Garrison Capital was holding $10.2 million of a first-lien term loan due June 2020, priced at L+800 with a 1% floor. PennantPark Investment Corp. ($25.4 million) and PennantPark Floating Rate Capital ($6.8 million) are also in the loan.

Interior Specialists, based in Carlsbad, Calif., is a new construction interior finishing contractor that supplies and installs flooring, cabinetry, countertops, window coverings, and builder construction options, including appliances, to the residential and commercial builder trades. Littlejohn acquired ISI in 2014. — Jon Hemingway