NGP Capital Resources Company has entered into an agreement with Oak Hill Advisors pursuant to which OHA will become the Company’s new investment advisor, subject to approval by the Company’s stockholders and other conditions.
OHA is a independent investment firm specializing in a broad range of fixed income investments across a wide spectrum of industries throughout the U.S. and Europe.
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At the closing of the transactions contemplated by the agreement (the "Closing"), OHA will replace NGP Investment Advisor, LP, which has served as the Company’s investment advisor since the Company’s initial public offering in November 2004.
Ken Hersh, Chairman of the Company’s Board of Directors, commented, "This decision is the culmination of a lengthy process to evaluate strategic alternatives, which began in September of last year.
After considering a wide range of alternatives and proposals and a variety of different structures, the Board concluded that the best course of action for the Company is to revise its current investment strategy to phase out its primary reliance on smaller upstream energy companies and focus on the broader middle market debt origination and loan syndication market. We believe that OHA is an excellent choice as the Company’s investment advisor to pursue this new strategy."
OHA has been investing in the credit markets for more than 20 years. The firm currently manages in excess of $23 billion of capital across a broad range of fixed income investments, including high yield bonds, leveraged loans, direct lending, distressed investments, mortgage strategies and corporate structured products.
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By GlobalDataThe firm has approximately 180 employees and is headquartered in New York.
Pursuant to the agreement and subject to the terms and conditions set forth therein, including the approval of the Company’s stockholders:
- OHA will become the investment advisor and administrator for the Company under a new Investment Advisory Agreement and a new Administration Agreement, the terms of which are designed, in part, to decrease management fees and reduce expenses in comparison with the Company’s historical levels;
- The Company’s current Board of Directors will be replaced by a new slate of five directors appointed by OHA, including three independent directors plus Glenn R. August, Founder and Chief Executive Officer of OHA, who will become the Company’s Chairman, and Robert B. Okun, Chief Investment Officer of U.S. Credit and a Senior Partner of OHA;
- The Company will change its name to "OHA Investment Corporation;" and
- An affiliate of OHA will purchase $5 million of the Company’s common stock, of which $1 million will be purchased from the Company at Closing, in newly issued shares at a price equal to the Company’s net asset value per share. The remaining $4 million will be purchased in open market transactions within one year after Closing, or in newly issued shares at the Company’s net asset value per share if not purchased within such one-year period.
"We are very excited about this opportunity to become the Company’s investment advisor and to take this important step in expanding our middle market investing business," stated Mr. August.
"Our long history and proven strategy of investing in below investment grade credit should provide significant opportunities to expand the size of the Company’s portfolio and attract additional capital for future growth."
Okun added, "Since 2002, OHA has invested $3 billion in approximately 100 middle market private capital transactions. Many of these opportunities would have been highly attractive investments for the Company’s portfolio, as we focus our direct lending efforts on consistent, attractive risk-adjusted returns."
Steve Gardner, the Company’s President and Chief Executive Officer, said, "OHA is a well-established, highly respected name in the investment community. Their proven credit investment strategy, and the size and experience of their investment team across a broad geographic and industry footprint will provide opportunities for increased middle market deal flow and efficient growth for the Company. We believe the proposed transactions with OHA will provide excellent opportunities for our stockholders going forward."
The appointment of OHA as the Company’s new investment advisor is subject to the approval of the Company’s stockholders, and the Closing is subject to customary lender and regulatory approvals and the satisfaction of certain customary closing conditions.
The Company intends to file a preliminary proxy statement with the U.S. Securities and Exchange Commission (the "SEC") within the next few days in connection with the stockholder approval process and the Company’s annual meeting. Subject to such approvals, the Company and OHA expect that the transactions contemplated by the agreement will close in September 2014.
Keefe, Bruyette & Woods, a Stifel company, served as financial advisor to the Company in connection with the agreement.
