Nov 13 (Reuters) – Another proposed merger among publicly traded private-credit lenders put consolidation back in focus this week, as quarterly results underscored earnings pressure and falling asset values at some business development companies.
BCP Investment Corporation, a BC Partners affiliate, agreed to acquire Investcorp Credit Management BDC in a transaction valuing the target at 90% of its adjusted net asset value.
The deal reflects smaller lenders’ push for greater scale, lower costs and better access to financing.
The agreement, announced on Wednesday, sent Investcorp shares up about 71% by Thursday’s close, while BCP shares fell about 15.5%.
It came just over two weeks after Ares Capital, the largest publicly traded BDC, agreed to acquire Apollo-affiliated MidCap Financial Investment Corporation in a stock-and-cash deal with an enterprise value of about $2.6 billion.
The transactions point to growing consolidation among listed BDCs, which lend mainly to middle-market private companies and give public-market investors exposure to private credit.
Several trade at steep discounts to reported net asset value, reflecting concerns about credit quality, earnings and the valuation of loans that rarely change hands.
Mergers can cut costs and improve financing, at a time when such discounted share prices make new equity hard to raise.
Investcorp Chief Executive Suhail Shaikh said the lender’s small size had become difficult to manage in current market conditions.
“ICMB’s size and scale have been challenging to navigate,” Shaikh said.
While the agreement values Investcorp at 90% of adjusted NAV at closing, the consideration was worth an estimated $1.38 per share using BCP’s November 9 share price. That represented a 126% premium to Investcorp’s 61-cent closing price that day.
BCP’s latest results illustrate the pressure on smaller lenders. Third-quarter net investment income fell to $4.6 million, or 37 cents a share, from $5.5 million, or 45 cents, in the preceding quarter. Total investment income fell to $13.9 million from $15.2 million as loan repayments continued to outpace new lending.
BCP expects the Investcorp acquisition, due to close in the first quarter of 2027, to lift earnings through cost savings, lower financing costs and portfolio repositioning.
It also plans to slow new investments and use repayments and sale proceeds for debt reduction and share buybacks, while continuing to pursue consolidation opportunities.
Its net asset value per share dropped 9.4% to $13.13 at the end of September from $14.49 three months earlier. BCP recorded $17.5 million in net realised and unrealised investment losses during the quarter.
Credit metrics were mixed. Non-accrual investments — where lenders stop booking regular interest income — fell to 2.8% of the portfolio at fair value from 3.1% in June. On an amortised-cost basis, however, they rose to 6.0% from 5.7%.
Bain Capital Specialty Finance reported a milder decline: quarterly net investment income slipped to 43 cents a share from 44 cents, while NAV fell to $16.49 from $16.65. Its quarterly dividend was unchanged at 42 cents a share, leaving it narrowly covered by income.
(Reporting by Patturaja Murugaboopathy; Editing by Vidya Ranganathan and Hugh Lawson)
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