Barings BDC, Sierra Income complete merger

Barings BDC Inc. closed its merger with Sierra Income Corp.

The combined company, which will remain externally managed by Barings LLC, is expected to have more than $2.7 billion of AUM on a pro forma basis.

Pursuant to the terms of the deal, for each Sierra common share held at the effective time of the merger, shareholders will receive 0.44973 of a Barings BDC common share, and approximately $0.9783641 of cash as transaction support provided by Barings LLC. Barings BDC will issue about 45,996,985 common shares to Sierra shareholders in connection with the merger, resulting in former Sierra shareholders and current Barings BDC shareholders owning 41.3% and 58.7% of the combined company, respectively, at closing, according to a news release.

In addition, following the closing of the merger, Barings LLC and Barings BDC entered into a second amended and restated investment advisory agreement that will increase the incentive fee hurdle rate from 8.00% to 8.25%, annualized. Barings LLC also entered into a credit support agreement with Barings BDC, for the benefit of the combined company, to protect against net cumulative unrealized and realized losses of up to $100.0 million on the acquired Sierra investment portfolio over the next 10 years.

Barings BDC increased the size of its board from eight directors to 10 directors and appointed former Sierra directors Valerie Lancaster-Beal and Stephen Byers as independent members of the board, effective immediately after the closing of the merger.

In connection with the closing of the deal, Barings BDC's board affirmed the company's commitment to open-market purchases of its common shares in an aggregate amount of up to $30.0 million at then-current market prices at any time shares trade below 90% of Barings BDC's then most recently disclosed net asset value per share.

Any repurchases pursuant to the authorized program will occur during the 12-month period starting April 1. Repurchases are expected to be made in accordance with a Rule 10b5-1 purchase plan that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, as well as subject to compliance with Barings BDC's covenant and regulatory requirements, according to the news release.