NEW YORK, April 14 /PRNewswire-FirstCall/ -- GSC Investment
Corp. (NYSE: GNV), a business development company, today announced
that Saratoga Investment Advisors, LLC and CLO Partners LLC have
agreed to purchase a minority stake in the Company as part of a
$55 million recapitalization plan to
enable the Company to grow its business of lending to middle-market
companies. The Company has been in default under its credit
facility since last July.
The recapitalization plan includes Saratoga and CLO Partners purchasing
approximately 9.8 million shares of common stock of GSC Investment
Corp. for $1.52 per share pursuant to
a definitive stock purchase agreement for a minority investment,
pro forma for the issuance of the new shares, of approximately 37%
of the Company's equity. The closing of the transaction is subject
to the satisfaction of certain conditions including the approval of
certain elements of the transaction by the Company's stockholders.
Saratoga and CLO Partners are
entities wholly or majority owned by Christian L. Oberbeck, Managing Director of
Saratoga Partners, an affiliate of Saratoga.
The recapitalization plan also includes a commitment from
Madison Capital Funding LLC to provide the Company with a
$40 million senior secured revolving
credit facility. Upon the closing of the transaction, the Company
will immediately borrow funds under the new credit facility that,
when added to the $15 million equity
investment, will be sufficient to repay the full amount of the
Company's existing debt and to provide the Company with working
capital thereafter. The closing of the new credit facility is
subject to the execution of definitive documentation and the
satisfaction of certain conditions.
Since July of 2009, the Company has been in default under its
existing credit facility and has received multiple letters from its
lender, Deutsche Bank A.G., New
York Branch, reserving the lender's right to seek remedies
for the existing event of default, including foreclosing on the
collateral securing the existing credit facility. Under such
circumstances involving a foreclosure or similar process, the sale
of fund assets under such conditions could result in materially
lower proceeds than if sold in an orderly manner over a reasonable
period of time. Despite an ongoing effort on the part of the
Company, which included reduction of the Company's existing debt by
more than $20 million since the
default and extensive discussions to reach an independent agreement
with Deutsche Bank to remedy the existing event of default in a
manner satisfactory to both parties, the parties have been unable
to reach a satisfactory resolution without the need for additional
capital. The Company and Deutsche Bank have entered into a
forbearance agreement, where Deutsche Bank waives its rights under
the default for a specified period of time to allow the
recapitalization to close.
Under the terms of the stock purchase agreement and subject to
approval by the Company's stockholders, Saratoga will replace GSC Group as GSC
Investment Corp.'s external investment manager and administrator.
The terms and conditions of the investment advisory and management
agreement with Saratoga, taken as
a whole, will be more favorable to Saratoga than the agreement currently in place
with GSC Group, but the Company believes these terms and conditions
to be consistent with the market for publicly traded, externally
managed business development companies.
Upon transaction close, the Company's current Chief Executive
Officer, Chief Financial Officer and Vice President, Secretary and
Chief Compliance Officer will be replaced by corporate officers of
Saratoga. Mr. Oberbeck will be
appointed CEO and Richard A.
Petrocelli will be appointed CFO and CCO. Saratoga intends to supplement its
capabilities in the management of the Company's investments by
recruiting and hiring additional professionals with experience in
the management of debt investments and collateralized loan
obligations.
Similarly, the Company's GSC Group-affiliated board members will
be replaced by Mssrs. Oberbeck and Petrocelli. The overall size and
composition of the Board of Directors will otherwise remain
unchanged. At closing, the Company will change its name to Saratoga
Investment Corp. The Company headquarters will be in New York City.
Promptly following closing, the Company plans to effect a 1:10
tax-free reverse stock split, pursuant to which each Company
stockholder will receive one share of Company common stock in
exchange for every 10 shares owned at that time. After giving
effect to the minority investment by Saratoga and the 1:10 reverse stock split, the
total number of shares of Company common stock outstanding will be
approximately 2.7 million.
"Since late in the 2008 calendar year, Company management and
our Board have performed a lengthy review of numerous strategic and
refinancing options, in consultation with Stifel Nicolaus, for
curing defaults under the Company's current credit facility while
maximizing stockholder value. We feel that this transaction is the
best alternative for the Company given the current market
conditions and existing credit facility constraints, including the
risk of foreclosure," said Seth M.
Katzenstein, Chief Executive Officer of GSC Investment
Corp.
Mr. Oberbeck, Managing Director of Saratoga Partners, said,
"This new partnership not only cures GSC Investment Corp.'s
existing default, but it will also put the Company on a trajectory
for growth and profitability. The Company can now get back to the
business of lending to companies poised to grow as the economy
recovers."
In a special board meeting on April 9,
2010, GSC Investment Corp.'s Board of Directors unanimously
approved the stock purchase agreement and the transactions
contemplated thereby with Saratoga
and, subject to certain conditions, will recommend its approval and
the approval of certain other elements of the transaction by GSC
Investment Corp.'s stockholders. The Company intends to hold a
special stockholder meeting as soon as practicable to secure
stockholder approval of certain elements of the transaction,
including the issuance of the shares at a price below the net asset
value per share. The transaction is also subject to certain other
closing conditions.
Certain affiliates of GSC Investment Corp., and its officers and
directors, have entered into a Voting and Support Agreement with
Saratoga and have agreed to vote
their shares of GSC Investment Corp. common stock in favor of the
transactions contemplated by the stock purchase agreement.
A more in-depth discussion of the transaction will be found in
the Company's proxy statement to be filed no later than
May 14, 2010 with the Securities and
Exchange Commission.
Stifel, Nicolaus & Company, Incorporated served as financial
advisor to GSC Investment Corp. in connection with the transaction
and has issued a fairness opinion letter to the Board of Directors
of the Company. Venable LLP served as GSC Investment Corp.'s legal
counsel on Maryland law and
related matters and Davis Polk &
Wardwell LLP served as GSC Investment Corp.'s legal counsel in
connection with the transaction and related matters.
Sutherland, Asbill & Brennan LLP served as Saratoga's legal counsel in connection with
the transaction and related matters.
About GSC Investment Corp.
GSC Investment Corp. is a specialty finance company that invests
primarily in leveraged loans and mezzanine debt issued by U.S.
middle-market companies, high yield bonds and collateralized loan
obligations. It has elected to be treated as a business development
company under the Investment Company Act of 1940. The Company may
also opportunistically invest in distressed debt, debt issued by
non-middle market companies, and equity securities issued by middle
and non-middle market companies. The Company draws upon the support
and investment advice of its external manager, GSC Group, an
alternative asset investment manager that focuses on complex,
credit-driven strategies. GSC Investment Corp. is traded on the New
York Stock Exchange under the symbol "GNV". The closing price of
the Company's common stock on April 14,
2010 was $2.51. The net asset
value per share of the Company's common stock was $3.80 as of November 30,
2009, the date of its most recent publication.
About Saratoga Investment Advisors
Saratoga Investment Advisors is a New
York-based investment firm formed to focus on credit driven
strategies. It is affiliated with Saratoga Partners, a leading
middle-market private equity investment firm with $750 million of committed and invested
institutional equity capital. Saratoga Partners primarily invests
in businesses with strong management teams and valuations of
between $50 million and $500 million,
specializing in companies in manufacturing and business services.
It also has a successful record in special situations and
distressed investing.
Since Saratoga was founded in
1984 as a division of the New York
investment firm Dillon, Read & Co., Inc., it has invested in 35
companies with an aggregate value of more than $3.7 billion. It has been an independent firm
since its spinoff in 1998 after Dillon
Read was acquired by Swiss Bank Corporation (a predecessor
to UBS AG). Saratoga is an
alternative asset investment manager led by its Managing Directors,
Christian Oberbeck, Richard Petrocelli and Charles Phillips.
About Madison Capital Funding LLC
Madison Capital is a finance company focused exclusively on the
corporate financing needs of middle market private equity firms.
Madison Capital provides enterprise-value, leveraged financing for
acquisitions, recapitalizations, MBOs and LBOs. The company was
formed in April 2001 by a group of
experienced professionals drawn from a number of leading investment
banking and lending institutions. Madison Capital is based in
Chicago, Illinois.
Forward Looking Statements
This press release may contain certain forward-looking
statements, including statements with regard to the proposed common
stock purchase and debt financing transactions and other actions
described in this press release, including the reverse stock split.
Words such as "intends," "believes," "expects," "projects," and
"future" or similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
subject to risks and uncertainties, including the satisfaction of
the conditions of the proposed transactions on the proposed
timeframe or at all, and other factors enumerated in the filings
GSC Investment Corp. makes with the SEC. GSC Investment Corp.
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Additional Information and Where to Find It
In connection with the proposed transactions and actions
described in this press release and required stockholder approval,
GSC Investment Corp. will file with the SEC a preliminary proxy
statement and a definitive proxy statement. The proxy statement
will be mailed to the stockholders of GSC Investment Corp. GSC
Investment Corp.'s stockholders are urged to read the proxy
statement and other relevant materials when they become available
because they will contain important information about the proposed
transactions and actions. Investors and security holders may obtain
free copies of these documents (when they are available) and other
documents filed with the SEC at its web site at www.sec.gov.
GSC Investment Corp. and its officers and directors may be
deemed to be participants in the solicitation of proxies from GSC
Investment Corp.'s stockholders with respect to the proposed
transactions. Information about GSC Investment Corp.'s executive
officers and directors and their ownership of GSC Investment Corp.
common stock is set forth in the proxy statement for GSC Investment
Corp. filed with the SEC on May 29,
2009. Investors and security holders may obtain more
detailed information regarding the direct and indirect interests of
GSC Investment Corp.'s executive officers and directors in the
proposed transactions and actions by reading the preliminary and
definitive proxy statements regarding the proposed transactions and
actions, which will be filed with the SEC.
Contact:
|
Debbie
Lombardi
|
|
|
GSC Group
|
|
|
973-593-5438
|
|
|
|
|
|
Roland Tomforde (for
GNV)
|
|
|
Broadgate
Consultants, LLC
|
|
|
212-232-2222
|
|
|
|
|
|
Shade Vaughn (for
Saratoga)
|
|
|
Robert Marston And
Associates, Inc.
|
|
|
212-836-4232
|
|
|
|
SOURCE GSC Investment Corp.