Logan Ridge Finance (LRFC) M&A Announcement summary

Deal rationale and strategic fit

• Merger creates a larger, more diversified BDC with over $600 million in assets and $270 million in net asset value, focused on first-lien loans to middle-market companies and leveraging the BC Partners Credit Platform.

• Significant overlap in investment strategy and portfolio composition, reducing integration risk and enabling operational efficiencies.

• Combined company will focus on direct origination of senior secured debt, aligning with ongoing consolidation strategy and aiming for strong, sustainable risk-adjusted returns.

• Enhanced scale anticipated to improve trading liquidity, access to lower-cost financing, and market positioning.

• Merger expected to be accretive to both NAV and NII, benefiting shareholders of both entities.

Financial terms and conditions

• Logan Ridge shareholders to receive 1.5 newly issued Portman Ridge shares for each Logan Ridge share, valuing LRFC at $25.02 per share, a 4% premium to recent closing price and 17% premium to pre-catalyst price.

• Merger consideration equals approximately 98% of Logan Ridge's September 30, 2024 NAV.

• Portman Ridge's adviser will waive up to $1.5 million in incentive fees over eight quarters post-closing; Sierra Crest will waive up to $187,500 per quarter for two years.

• Logan Ridge to declare a tax distribution or dividend of $1.0–$1.5 million prior to close, equal to any undistributed 2024 NII.

• Transaction subject to shareholder approval and customary closing conditions, with completion expected in Q2 2025.

Synergies and expected cost savings

• Annual operating expense efficiencies of $2.8 million are anticipated, representing a 27% reduction.

• Immediate realization of cost savings post-closing, primarily from reductions in board, audit, tax, and admin fees.

• Additional cost savings expected from lower liability costs and spreading public company expenses across a larger AUM base.

• No execution risk associated with cost savings; expected to be visible within a quarter of closing.

• Further NII accretion expected through lower debt costs, improved financing, and portfolio rotation.