Harvest Capital Credit Corporation (NASDAQ: HCAP) (“HCAP”) and
Portman Ridge Finance Corporation (NASDAQ: PTMN) (the “Company” or
“PTMN”) announced today that they have entered into a definitive
agreement under which HCAP will merge with and into PTMN, a
business development company managed by Sierra Crest
Investment Management LLC (“Sierra Crest”), an affiliate
of BC Partners Advisors L.P. (“BC Partners”).
The transaction has been approved by a unanimous
vote of Special Committee of the Board of Directors of HCAP, the
Board of Directors of HCAP (other than directors affiliated with
HCAP’s external investment adviser who abstained from voting) and
the Board of Directors of PTMN. In addition, the Board of
Directors of HCAP will recommend that HCAP stockholders vote in
favor of adoption and approval of the definitive merger agreement,
subject to certain closing conditions.
Transaction Highlights
- The combined company will be
externally managed by Sierra Crest and is expected to have total
assets of approximately $757 million, and a net asset value of
approximately $248 million (each based on September 30, 2020
balance sheets, adjusted for estimated transaction expenses and
PTMN’s recent merger with Garrison Capital Inc.);
- Stockholders should expect to
realize net investment income per share accretion following the
closing of the transaction;
- The transaction is expected to
deliver operational synergies for the combined company as a result
of the pro forma larger scale and elimination of redundant HCAP
expenses;
- Certain significant
stockholders of HCAP have entered into voting support agreements
with PTMN and agreed to vote their HCAP shares in favor of the
transaction, which shares represent in aggregate approximately
31.6% of HCAP’s shares outstanding as of December 22, 2020;
and
- Following the transaction, current
HCAP stockholders are expected to own approximately 16.6% of the
combined company.
In connection with the transaction, HCAP
stockholders will receive aggregate consideration equal to HCAP’s
net asset value at closing. This consideration will be funded using
PTMN shares (valued at 100% of PTMN’s net asset value per share at
the time of closing of the transaction) and, to the extent the
required number of PTMN shares exceeds 19.9% of the issued and
outstanding shares of PTMN common stock immediately prior to the
transaction closing, cash consideration in the amount of such
excess. As described below, HCAP stockholders will have an
opportunity, subject to certain limitations, to elect to receive
either cash or PTMN shares in consideration for their HCAP shares.
Additionally, all HCAP stockholders will receive an additional cash
payment from Sierra Crest of $2.15 million in the aggregate, or
approximately $0.36 per share.
Assuming a transaction based on respective
September 30, 2020 net asset values for HCAP and PTMN, adjusted for
expected transaction expenses and PTMN’s recent merger with
Garrison Capital Inc., the merger transaction (including the Sierra
Crest additional cash payment) currently values HCAP shares at
approximately $10.11 per share which represents 104% of HCAP’s
September 30, 2020 net asset value (net of transaction expenses).
Using PTMN’s closing price of $1.80 on December 22, 2020, the
merger transaction (including the Sierra Crest additional cash
payment) currently values HCAP shares at approximately $7.71 per
share, which represents 79% of HCAP’s September 30, 2020 net asset
value (net of estimated transaction expenses) and a 30%
premium to HCAP’s closing price on December 22, 2020.
If the aggregate merger consideration is to be
paid in cash as well as PTMN stock because of the 19.9% stock
issuance limitation described above, HCAP common stockholders will
have the ability to elect to receive consideration in the form of
cash or stock, with the exchange ratio for the total consideration
to be paid by PTMN in the merger being determined by the net asset
value of HCAP and PTMN as of the closing, calculated as of 5:00
p.m. New York City time two days prior to the closing of the
transaction. While each HCAP stockholder will receive the same per
share consideration, stockholders receiving PTMN shares will
receive a number of PTMN shares equal to the HCAP net asset value
per share as of 5:00 p.m. New York City time two days prior to the
closing of the transaction divided by the volume-weighted average
price of PTMN stock for the 10-trading day period ending two days
prior to the date of the closing. HCAP common stockholders may
receive consideration from PTMN that includes both cash and
stock, depending on their election and the elections of other
stockholders. HCAP stockholders who do not make a stock or cash
election will be deemed to have elected to receive stock in
connection with the merger.
In addition to approval by HCAP stockholders,
the closing of the merger is subject to customary conditions. The
parties currently expect the transaction to be completed in the
second calendar quarter of 2021.
Management Commentary
Ted Goldthorpe, President and Chief Executive
Officer of PTMN and Head of BC Partners Credit, stated, “We
continue to execute on our strategy of targeting consolidation
opportunities that become earnings accretive for shareholders of
both PTMN and the acquired company. We have been proactive in
identifying specific opportunities where our Company can benefit
from greater scale and immediate cost synergies. In past
transactions we have successfully benefitted from achieving greater
scale, which allows PTMN to both increase position sizes while
simultaneously reducing the impact of public company reporting and
other expenses. We believe the combined company will benefit from
having lower financing costs, a lower blended fee structure, a
reduction in public company costs per share and an increased
trading liquidity in the equity.”
Joseph Jolson, Chairman and CEO of HCAP, stated,
“We believe the combination with PTMN represents a favorable
outcome for HCAP investors. As HCAP’s largest non-institutional
shareholder, I have agreed to take stock in the merger and to
lockup my PTMN position for 90 days post-closing to facilitate
greater liquidity for HCAP shareholders who receive shares in the
merger. The transaction is expected to be accretive to net
investment income of the combined company due to material cost
savings, lower investment management fees, and reduced borrowing
costs on HCAP’s contributed assets. Finally, HCAP shareholders who
receive PTMN shares in the merger can expect to receive regular
cash dividends from PTMN on a go-forward basis.”
Transaction Advisors
Keefe, Bruyette & Woods acted as financial
advisor to HCAP’s Special Committee. Dechert LLP served as counsel
to HCAP and HCAP’s Special Committee and Simpson Thacher &
Bartlett LLP served as counsel to PTMN.
Conference Call Details
PTMN and HCAP will host a joint conference call
on Thursday, December 24, 2020 at 8:30 am Eastern Time to discuss
the transaction. All interested persons are invited to
participate on the call and can access the conference call by
dialing (866) 757-5630. International callers can access the
conference by dialing (707) 287-9356. Conference ID is 2625868.
A live audio webcast of the conference call can
be accessed via the Internet, on a listen-only basis by clicking
the following link:
https://edge.media-server.com/mmc/p/swvbuhcy.
The companies will be utilizing an investor
presentation as an accompaniment to the live call, which will be
available on HCAP’s website at
www.harvestcapitalcredit.com and PTMN’s website at
www.portmanridge.com.
About Harvest Capital Credit
Corporation
Harvest Capital Credit Corporation (NASDAQ:
HCAP) provides customized financing solutions to privately held
small and mid-sized companies in the U.S., generally targeting
companies with annual revenues of less than $100 million and annual
EBITDA of less than $15 million. HCAP’s investment objective is to
generate both current income and capital appreciation primarily by
making direct investments in the form of senior debt, subordinated
debt and, to a lesser extent, minority equity investments. HCAP is
externally managed and has elected to be treated as a business
development company under the Investment Company Act of 1940. For
more information about HCAP,
visit www.harvestcapitalcredit.com.
About Portman Ridge Finance
Corporation
Portman Ridge Finance Corporation (NASDAQ:
PTMN) is a publicly traded, externally managed investment company
that has elected to be regulated as a business development company
under the Investment Company Act of 1940. PTMN’s middle market
investment business originates, structures, finances and manages a
portfolio of term loans, mezzanine investments and selected equity
securities in middle market companies. PTMN’s investment activities
are managed by its investment adviser, Sierra Crest Investment
Management LLC, an affiliate of BC Partners Advisors L.P.
PTMN's filings with the SEC, earnings
releases, press releases and other financial, operational and
governance information are available on PTMN's website
at www.portmanridge.com.
Forward-Looking Statements
This press release, as well as statements made
during the conference call, may contain forward-looking statements
that involve substantial risks and uncertainties, including
statements regarding the completion of the transaction between HCAP
and PTMN. We may use words such as "anticipates," "believes,"
"intends," "plans," "expects," "projects," "estimates," "will,"
"should," "may" and similar expressions to identify forward-looking
statements. These forward-looking statements are subject to various
risks and uncertainties. Certain factors could cause actual results
and conditions to differ materially from those projected, including
the uncertainties associated with (i) the timing or likelihood of
the transaction closing, (ii) the expected synergies and savings
associated with the transaction, (iii) the expected elimination of
certain expenses and costs due to the transaction, (iv) the
percentage of HCAP stockholders voting in favor of the transaction,
(v) the possibility that competing offers or acquisition proposals
for HCAP will be made, (vi) the possibility that any or all of the
various conditions to the consummation of the merger may not be
satisfied or waived, (vii) risks related to diverting the
respective management’s attention from HCAP’s and PTMN’s ongoing
business operations, (viii) the risk that stockholder litigation in
connection with the transactions contemplated by the merger
agreement may result in significant costs of defense and liability,
(ix) the future operating results of our portfolio companies or the
combined company, (x) regulatory factors, (xi) changes in regional
or national economic conditions, including but not limited to the
impact of the COVID-19 pandemic, and their impact on the industries
in which we invest, and (xii) other changes in the conditions of
the industries in which we invest and other factors enumerated in
our filings with the SEC. You should not place undue reliance on
such forward-looking statements, which speak only as of the date of
the relevant communication. Neither HCAP nor PTMN undertakes any
obligation to update forward-looking statements made herein or
during the conference call, unless required by law. You should,
therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of the
communication. You should read this communication and the documents
that we reference in this communication completely and with the
understanding that our actual future results may be materially
different from what we expect. We qualify all of our
forward-looking statements by these cautionary statements.
Additional Information and Where to Find
It
In connection with the proposed transaction,
HCAP and PTMN plan to file relevant materials with the SEC,
including a registration statement on Form N-14 (the “Registration
Statement”), which will include a proxy statement on Schedule 14A
for HCAP, which will be mailed to HCAP’s stockholders and a
prospectus for PTMN. The Registration Statement will contain
important information about HCAP, PTMN, the proposed transaction
and related matters. This communication does not constitute an
offer to sell or the solicitation of an offer to buy any securities
or a solicitation of any vote or approval. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933.
STOCKHOLDERS OF HCAP ARE URGED TO READ THE REGISTRATION STATEMENT,
INCLUDING THE PROXY STATEMENT INCLUDED THEREIN, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AND BEFORE MAKING ANY
INVESTMENT OR VOTING DECISION BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT HCAP, PTMN, THE PROPOSED TRANSACTION AND RELATED
MATTERS. Investors and security holders will be able to obtain the
documents filed with the SEC free of charge at the SEC’s web site,
www.sec.gov or, for documents filed by HCAP, from HCAP’s website at
www.harvestcapitalcredit.com and for documents filed by PTMN, from
PTMN’s website at www.portmanridge.com.
Participants in the
Solicitation
HCAP, its directors, certain of its executive
officers and certain employees and officers of HCAP Advisors,
LLC and its affiliates may be deemed to be participants in the
solicitation of proxies in connection with the proposed
transaction. Information about the directors and executive officers
of HCAP is set forth in its proxy statement for its 2020 Annual
Meeting of Stockholders, which was filed with
the SEC on April 21, 2020. PTMN, its directors,
certain of its executive officers and certain employees and
officers of Sierra Crest Investment Management LLC and
its affiliates may be deemed to be participants in the solicitation
of proxies in connection with the proposed transaction. Information
about the directors and executive officers of PTMN is set forth in
its proxy statement for its 2020 Annual Meeting of Stockholders,
which was filed with the SEC on April 29, 2020.
Information regarding the persons who may, under the rules of
the SEC, be considered participants in the solicitation of the
HCAP stockholders in connection with the proposed transaction will
be contained in the Registration Statement, including the proxy
statement included therein, and other relevant materials when such
documents become available. This document may be obtained free of
charge from the sources indicated above.
Contacts:
Portman Ridge Finance Corporation650 Madison
Avenue, 23rd floorNew York, NY 10022info@portmanridge.comTed
GilpinTed.Gilpin@bcpartners.com(212) 891-5007Jeehae LinfordThe
Equity Group Inc.jlinford@equityny.com(212) 836-9615 |
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Harvest Capital Credit CorporationJoseph A.
Jolson Chairman & Chief Executive
Officerjjolson@harvestcaps.com (415) 835-8970 William E.
Alvarez, Jr. Chief Financial
Officer balvarez@harvestcaps.com(212) 906-3589 |
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