Full Circle Capital Corporation entered into a merger agreement with Great Elm Capital Corp., a company formed by Great Elm Capital Group, and funds managed by MAST Capital Management.
The combined company, to be named Great Elm Capital Corp., will apply for listing on NASDAQ under the symbol “GECC”. Great Elm Capital Corp. will elect to be regulated as a business development company (BDC) and expects to be treated as a “regulated investment company” for federal income tax purposes.
Full Circle stockholders are expected to own approximately 38% of the combined Great Elm Capital Corp., based on a proforma net asset value in excess of $190 million as of March 31, 2016.
Full Circle will immediately prior to the completion of the merger, declare a special cash distribution to Full Circle stockholders of approximately $0.22 per share, aggregating to $5 million, or 6% of Full Circle’s March 31, 2016, net asset value.
Upon completion of the merger, highlights of the combined company will include:
– Over $55 million of investable cash (net of transaction costs) and over $165 million of debt instruments in its portfolio, after the contribution of $30 million in cash by Great Elm Capital Group,and the contribution of an approximate $90 million portfolio (market value as of May 31, 2016) of debt instruments from funds managed by MAST Capital;
– An expected initial annualized base distribution rate of approximately 9% of its net asset value, subject to approval by Great Elm Capital Corp.’s Board of Directors;
– The initiation of a $15 million stock repurchase program, subject to liquidity, credit facility, and other considerations, triggered if shares trade below 90% of net asset value;
– A new investment management agreement with Great Elm Capital Management, Inc. with a management fee of 1.50%, reduced from the 1.75% management fee currently paid by Full Circle, and 20% incentive fee above a 7% annualized hurdle rate, subject to a deferral mechanism if the total return on beginning net assets on a rolling three-year basis does not exceed the hurdle rate;
– The parent of Great Elm Capital Management, Inc. will own approximately 15% of the outstanding shares, on a proforma basis; Full Circle’s outstanding senior notes will be assumed by Great Elm Capital Corp.
