Toronto-based Mount Logan Capital and Santa Monica, California-based Sierra Crest Investment Management have agreed to acquire certain assets from Resource America Inc, a Philadelphia-based asset management firm. No financial terms were disclosed. Also, according to terms of this deal, SCIM will become the investment advisor of the Resource Credit Income Fund, an interval fund that has about US$240 million of assets under management, as of May 31, 2020. Sierra Crest Investment Management is an affiliate of BC Partners Advisors.
Toronto, Ontario–(Newsfile Corp. – June 22, 2020) – Mount Logan Capital Inc. (NEO: MLC) (“Mount Logan,” “our,” “we,” or the “Company”) together with Sierra Crest Investment Management LLC (“SCIM”, an affiliate of BC Partners Advisors L.P.) today announced that they have entered into a definitive agreement (the “Purchase Agreement”), subject to certain approvals, for the acquisition of certain assets from Resource America, Inc. (“Resource” or the “Seller”) and for SCIM to become the investment adviser of the Resource Credit Income Fund (“CIF” or the “Fund”). CIF is a U.S.-based, continuously offered, closed-end interval fund, with approximately $240 million of assets under management as of May 31, 2020, that invests across credit markets including direct credit, private credit, and public credit.
· Expands Mount Logan’s business into the non-traded retail channel, providing a new avenue of growth for the Company
· Provides a high-returning, stable, and recurring asset management fee stream into earnings
· Assets of the Fund are highly complementary with Mount Logan’s existing portfolio, investment mandate, and experience
· The transaction is expected to close in the fourth quarter of 2020 and is subject to approval by the shareholders of CIF
· Expect to retain existing key management members and vendor contracts of the Fund to ensure a seamless transition
Ted Goldthorpe, Chief Executive Officer and Chairman of Mount Logan, noted, “This is a monumental step for Mount Logan in expanding our business to include the economic benefits associated with the management of a large, semi-permanent portfolio of third-party capital. Accordingly, the Company will begin to benefit from meaningful, low volatility, recurring asset management fee streams. We believe the proposed transaction will be highly accretive for Mount Logan and we look forward to maintaining Resource’s momentum with the Fund and further complementing the new fund management with our investment track record and sourcing capabilities.”
Alan Feldman, Chief Executive Officer of Resource, added, “We are pleased to enter into this transaction with Mount Logan and Sierra Crest Investment Management. Their extensive expertise in the credit markets makes CIF a strategic addition to their existing portfolio and we believe it will be synergistic with their overall experience and investment mandate.”
CIF is currently managed by Resource Alternative Advisor, LLC (the “Manager”), a U.S. asset management company that specializes in real estate and credit investments. The Purchase Agreement contemplated that the Manager will seek the approval of the shareholders of the Fund to: (i) elect new trustees to the board of trustees of the Fund; and (ii) replace the existing advisory agreement in respect of the Fund with a new advisory agreement between SCIM and the Fund (the “New Advisory Agreement”), each effective as of the date of closing of the transactions (the “Closing Date”) contemplated by the Purchase Agreement.
The Closing Date is expected to occur in the fourth quarter of 2020.
On the Closing Date, it is expected that Mount Logan will fund SCIM with the gross consideration required by SCIM pursuant to the Purchase Agreement, and that Mount Logan and SCIM will enter into such agreements and transaction documents such that substantially all of the economic benefit derived by SCIM under the New Advisory Agreement will flow to Mount Logan, subject to: (i) a holdback by SCIM of certain expenses to be mutually agreed upon; and (ii) other structural considerations subject to diligence. Financing of the purchase is contemplated to consist of a combination of cash, equity, and/or debt. It is expected that certain members of the existing management team of the Fund will be retained.
As part of the transaction, Mount Logan has agreed to, among other things, guarantee the payment of all financial obligations of SCIM under the Purchase Agreement, including the payment of the purchase price to the Seller.
Virtual Annual Meeting of Shareholders & Transaction Overview
Registered shareholders, duly appointed proxyholders and guests are welcome to join the Company’s virtual only annual meeting of shareholders (the “Meeting”) to be held on Friday, June 26, 2020 at 11:00 a.m. (Eastern time). In addition to the formal business of the meeting, management will provide a brief overview of the business, results of the Company, as well as the proposed transaction described above.
Registered shareholders, duly appointed proxyholders, and guests may attend the Meeting by webcast via the Lumi meeting platform at https://www.web.lumiagm.com/227054027.
For detailed instructions on how to attend the Meeting, please refer to the information contained in the Company’s management information circular dated May 26, 2020 prepared in connection with the Meeting which is available on the Company’s website, www.mountlogancapital.ca, and the Company’s SEDAR profile at www.sedar.com.