Investcorp Credit Management US LLC (“Investcorp”), a subsidiary of Investcorp Bank B.S.C., today announced that it has entered into a definitive interest purchase agreement to acquire a majority ownership interest in CM Investment Partners LLC (“CMIP”), the investment adviser to CM Finance Inc (“CM Finance”) (Nasdaq: CMFN), through its purchase of the respective equity positions held by certain funds managed by Cyrus Capital Partners, L.P. (“Cyrus”) and Stifel Venture Corp. (“Stifel”), and newly issued interests in CMIP (the “Transaction”). As a result of the Transaction, Investcorp will become the majority owner of CMIP and Michael Mauer and Christopher Jansen, CMIP’s Co-Chief Investment Officers, will together maintain a minority ownership interest in CMIP.
Simultaneously therewith, Investcorp BDC Holdings Limited entered into a definitive stock purchase and transaction agreement with CM Finance (the “Stock Purchase Agreement”), pursuant to which, during the two year-period following the closing, it will purchase (i) newly issued shares of CM Finance’s common stock in an amount representing 5% of the total outstanding shares of common stock as of the date of the Stock Purchase Agreement, at the most recently determined net asset value per share of CM Finance’s common stock at the time of such purchase, and (ii) shares of CM Finance’s common stock in open-market transactions in an amount representing 5% of the total outstanding shares of common stock as of the date of the Stock Purchase Agreement.
“Investcorp’s acquisition of CMIP is a strategic milestone for us as we expand our credit product offerings by entering a new and dynamic segment of the U.S. market,” said Mohammed Alardhi, Executive Chairman of Investcorp. “Our credit business is one of the primary engines driving our global expansion both organically and inorganically, and is critical to achieving our stated vision of serving investors worldwide with a full array of alternative products and solutions.”
Formed in February 2013 by Michael Mauer and Chris Jansen, CMIP is the investment adviser to CM Finance, which seeks to invest primarily in middle-market companies that have annual revenues of at least $50 million and EBITDA of at least $15 million, focusing on companies with leading market positions, significant asset or franchise values, strong free cash flow and experienced senior management teams.
CM Finance primarily invests in floating rate first lien, second lien and unitranche loans, but also selectively invests in mezzanine loans/structured equity and in the equity of portfolio companies through warrants and other instruments
“We are delighted to announce the acquisition of CMIP, marking our entry into ‘middle-market’ lending in the U.S.,” said Rishi Kapoor, Co-CEO of Investcorp. “We are seeing significant opportunities in this space and we believe that this acquisition will enable us to broaden our footprint in the U.S. credit market and capitalize on these opportunities going forward. It also allows us to reach a new investor segment, as we look to grow our client base including the shareholders of CM Finance and other high-net-worth individuals in the U.S.”
“As we embark on this next phase of CMIP’s evolution, we are pleased to be joining the global Investcorp platform,” said Michael Mauer, Chairman and CEO of CM Finance and Co-Chief Investment Officer of CMIP. “We believe our expertise in middle-market lending will be a strong complement to Investcorp’s existing capabilities and distinguished track record as a top-tier CLO manager and mid-market private equity investor.”
CM Finance’s Board of Directors has unanimously approved the Stock Purchase Agreement and the transactions contemplated thereby, including the new investment advisory agreement (the “New Advisory Agreement”) pursuant to which CMIP will continue to serve as CM Finance’s investment adviser, and recommends that CM Finance’s stockholders approve the New Advisory Agreement. CM Finance intends to hold a special meeting of stockholders as soon as practicable to obtain the requisite stockholder approval, which is required under the Investment Company Act of 1940.
Upon the receiving the requisite approval of the CM Finance stockholders and the subsequent closing of the Transaction, CMIP is expected to join the Investcorp platform and will remain the investment adviser to CM Finance.
The Transaction, which is expected to close in the third quarter of 2019, is subject to customary regulatory requirements and closing conditions.
Raymond James acted as financial advisor to Investcorp on the Transaction.
