Consolidation Among Private Lenders Ramps Up

(Bloomberg) -- Private lenders OHA Investment Corp. and Portman Ridge Finance Corp. are merging as they look to make bigger investments and boost shareholder returns.

The merger is the latest example of consolidation among business development companies -- lenders that have stepped in to provide funding to America’s smaller businesses as banks retreated in the wake of the financial crisis.

The newly combined company -- which will take the name of Portman Ridge -- will have about $372 million in assets and a net asset value of about $181 million. The merger will allow it to make larger investments and will also be accretive for shareholders, Ted Goldthorpe, head of credit at BC Partners, which will manage the BDC via an affiliate, said in a phone interview.

“This reflects a bigger theme out there, which is asset management has become more and more about scale and I think the BDC space has been in need of consolidation for a long time,” Goldthorpe said.

He sees more acquisitions for the firm on the horizon. BC Partners became the manager of KCAP Financial Inc., which later changed its name to Portman Ridge, in December.

“We’re trying to be the acquirer of choice,” Goldthorpe said. “There’s probably seven or eight BDCs that we’d love to join our family.”

M&A Spree

Other BDCs have also been looking for acquisition opportunities.

Investcorp Credit Management said in June it would buy a majority stake in CM Investment Partners, the manager of a BDC. FS/KKR Advisor LLC, a partnership between FS Investments and KKR Credit, disclosed in the same month it is merging four of its non-traded BDCs into one entity with more than $9 billion in assets under management.

OHA is a middle market lender externally managed by Oak Hill Advisors LP. Its shareholders will get of 108% of OHA’s net asset value.

The newly combined company will be externally managed by Sierra Crest Investment Management LLC, an affiliate of BC Partners Advisors LP, and LibreMax Capital LLC.

©2019 Bloomberg L.P.

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