Barings BDC, Inc. Completes Merger with Sierra Income Corporation
February 28, 2022 | Luke Schmidt | Blue Vault
On February 25, 2022, Sierra Income Corporation (“Sierra”) completed its previously agreed upon merger with Barings BDC, Inc. (“BBDC”), with BBDC surviving the merger. BBDC will remain externally managed by Barings LLC and is expected to have more than $2.7 billion of assets under management on a pro forma basis.
Pursuant to the merger agreement, for each Sierra common share owned at the time of the merger, shareholders will receive 0.44973 of a BBDC common share and approximately $0.9783641 of cash as transaction support provided by Barings LLC. BBDC will issue approximately 46.0 million shares of BBDC common stock to Sierra stockholders in connection with the merger, resulting in former Sierra stockholders and current BBDC stockholders owning 41.3% and 58.7% of the combined company, respectively.
In addition, following the closing of the merger, Barings LLC and BBDC entered into an updated investment advisory agreement that will increase the incentive fee hurdle rate from 8.00% to 8.25% (annualized). Barings LLC also entered into a credit support agreement with BBDC to protect against net cumulative unrealized and realized losses of up to $100 million on the acquired Sierra investment portfolio over the next 10 years.
In connection with the closing of the merger, the board of directors of BBDC affirmed its commitment to open-market purchases of shares of BBDC’s common stock in an aggregate amount of up to $30 million at then-current market prices at any time shares trade below 90% of BBDC’s then most recently disclosed NAV per share. Any repurchases pursuant to the authorized program will occur during the 12-month period commencing on April 1, 2022.
BBDC is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. BBDC seeks to invest primarily in senior secured loans to private U.S. middle market companies that operate across a wide range of industries. Barings BDC’s investment activities are managed by its investment adviser, Barings LLC, a leading global asset manager based in Charlotte, NC with over $391 billion of AUM firm-wide.
Prior to the merger, Sierra operated as a non-traded business development company that invested primarily in first lien senior secured debt, second lien secured debt and, to a lesser extent, subordinated debt of middle market companies in a broad range of industries with annual revenue between $50 million and $1 billion. As of September 30, 2021, Sierra reported total assets of $635.5 million, including total investments of $544.3 million and cash of $74.9 million. Sierra raised cumulative capital of $978.4 million during its offering period, which began in April of 2012 and ended in July of 2018.
Sources: SEC, Blue Vault
