Crescent Capital BDC, Inc. current report, 03 October 2022

Full document

Business Context and Reporting Period

Company: Crescent Capital BDC, Inc. (CCAP)
Filing Type: Form 8-K (Current Report)
Date of Report: October 3, 2022
Event: Entry into a Material Definitive Agreement (Agreement and Plan of Merger) with First Eagle Alternative Capital BDC, Inc. (FCRD).

Key Financial Metrics and Transaction Terms

This filing details a proposed merger rather than periodic financial results. Key transaction financials include:

  • Merger Consideration: FCRD shareholders will receive a combination of CCAP common stock and cash. The stock portion is capped at 19.99% of CCAP's outstanding shares as of October 3, 2022. Any shortfall between the stock value and FCRD's closing Net Asset Value (NAV) will be paid in cash.
  • Exchange Ratio: Calculated based on the ratio of FCRD's per-share NAV to CCAP's per-share NAV as of the Determination Date.
  • Advisor Cash Consideration: CCAP Advisor will pay FCRD shareholders an amount equal to $35.0 million divided by the number of FCRD shares outstanding.
  • Secondary Market Support: Sun Life Assurance Company of Canada committed to purchase $20 million of the combined company's common stock post-closing.
  • Termination Fees:
    • FCRD to pay CCAP: $5,555,550 (minus prior expense reimbursements) under specific termination scenarios.
    • CCAP to pay FCRD: $7,142,850 under specific termination scenarios.
    • Expense Reimbursement: If FCRD stockholder approval is not obtained and the FCRD termination fee is not payable, FCRD must reimburse CCAP up to $1,500,000.

Note: The filing does not provide current revenue, profit, cash flow, or debt metrics for either company.

Material Changes and Transaction Structure

The primary material change is the execution of the Merger Agreement. The transaction structure involves two steps:

  1. First Merger: Echelon Acquisition Sub, Inc. merges with and into FCRD, with FCRD surviving as a wholly-owned subsidiary of CCAP.
  2. Second Merger: The surviving FCRD entity immediately merges with and into Echelon Acquisition Sub LLC, with the LLC surviving as a wholly-owned subsidiary of CCAP.

Both boards of directors have approved the agreement. A Voting Agreement was also signed with First Eagle Investment Management LLC (FEIM) covering 5,004,000 shares of FCRD common stock, committing them to vote in favor of the merger.

Guidance, Outlook, and Risks

Outlook: Management anticipates benefits including improved operations, enhanced revenues and cash flow, growth potential, and increased financial strength for the combined company.

Conditions to Closing: The merger is subject to customary conditions, most notably the approval of FCRD stockholders.

Risks and Contingencies:

  • Failure to obtain required stockholder or regulatory approvals.
  • Delays in closing or integration difficulties.
  • Uncertainty regarding the financial performance of the combined entity.
  • Potential stockholder litigation.
  • Changes in laws affecting BDC classification.

Investor Verification Checklist

  • Verify the final Exchange Ratio and cash consideration once the Determination Date NAVs are calculated.
  • Confirm the outcome of the FCRD stockholder vote required to approve the merger.
  • Review the upcoming Registration Statement (Form N-14) and Proxy Statement/Prospectus for detailed financial data and risk factors.
  • Monitor for any competing proposals that could trigger the "no-shop" termination provisions.
  • Check for updates on the $20 million secondary market support program from Sun Life Assurance Company of Canada.