Business Context and Reporting Period
This Form 8-K, dated January 31, 2020, reports the consummation of the merger between Crescent Capital BDC, Inc. (the "Company") and Alcentra Capital Corporation ("Alcentra Capital"). The transaction was completed on January 31, 2020, via a two-step merger process where Alcentra Capital became a wholly-owned subsidiary of the Company. Following the merger, the Company's common stock began trading on the Nasdaq Global Market under the symbol "CCAP" on February 3, 2020.
Key Financial Metrics and Transaction Terms
- Merger Consideration: Alcentra Capital stockholders received $3.1784 per share in cash (net of a $0.80 final dividend) and 0.4041 shares of the Company's Common Stock for each share of Alcentra Capital common stock held.
- Debt Assumption: The Company assumed $50.3 million in principal amount of Alcentra Capital InterNotes. These unsecured notes bear fixed interest rates ranging from 6.25% to 6.75% with maturities between 12 months and approximately seven years.
- Stock Repurchase Program: The Company authorized a repurchase plan of up to $20.0 million. Repurchases may occur when the stock trades below 90% of the net asset value per share, effective from March 2, 2020, through January 31, 2021.
- Management Fees: The base management fee was reduced from 1.50% to 1.25%. A portion of the fee is waived for 18 months post-merger, resulting in an effective rate of 0.75% during that period. The income-based incentive fee hurdle rate was increased from 6.00% to 7.00% annualized.
Material Changes and New Agreements
The filing details several material changes resulting from the merger:
- Investment Advisory Agreement: A new agreement was entered into with Crescent Cap Advisors, LLC, effective February 1, 2020, incorporating the fee reductions and waivers noted above.
- Administration Agreement: An Amended and Restated Administration Agreement was executed with CCAP Administration LLC to provide administrative services, including office space and financial record maintenance.
- Dividend Reinvestment Plan (DRIP): The DRIP was amended to become an "opt-out" plan for new stockholders post-listing, while pre-listing holders must "opt-in."
- Indemnification: New indemnification agreements were executed with directors, officers, and investment committee members.
Guidance, Outlook, and Risks
The Company issued a press release on February 3, 2020, containing preliminary pro forma estimates of results of operations and financial condition for the combined entity for the year ended December 31, 2019. However, this filing explicitly states that the pro forma information is not "filed" for purposes of the Exchange Act and is not incorporated by reference into other filings.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Risks cited include economic changes, potential operational disruptions due to terrorism or natural disasters, regulatory changes, unexpected transaction costs, and the failure to realize anticipated merger benefits.
Investor Verification Checklist
- Verify the final trading price and volume of CCAP stock on Nasdaq following the February 3, 2020 listing.
- Review the full text of the Amended and Restated Investment Advisory Agreement (Exhibit 10.1) to confirm fee waiver terms and duration.
- Confirm the specific maturity dates and interest rates of the assumed $50.3 million in InterNotes via the Supplemental Indentures (Exhibits 4.1 through 4.29).
- Monitor the execution of the $20.0 million stock repurchase program and its impact on share count.
- Check subsequent filings for the audited pro forma financial statements, as they were not included in this 8-K.