Portman Ridge Finance, Logan Ridge Finance enter into merger agreement

Portman Ridge Finance (PTMN) and Logan Ridge Finance Corporation (LRFC) have entered into an agreement under which LRFC will merge with and into PTMN, subject to the receipt of certain shareholder approvals and the satisfaction of other closing conditions. Pursuant to the Proposed Merger agreement, Portman Ridge will be the surviving public entity and will continue to trade on the Nasdaq under the symbol “PTMN.” The Boards of Directors of both PTMN and LRFC, on the recommendation of their respective Special Committees consisting solely of certain independent directors, have unanimously approved the Proposed Merger. In addition, the Board of Directors of LRFC will recommend that shareholders of LRFC vote in favor of the Proposed Merger, and the Board of Directors of PTMN will recommend that shareholders of PTMN vote in favor of the issuance of PTMN common stock in connection with the Proposed Merger, in each case, subject to certain conditions. Size & Scale: The Proposed Merger will significantly increase the size and scale of Portman Ridge, which is expected to translate into increased trading volume and improved secondary liquidity, lower operating expenses and potentially greater access to more diverse sources of financing at a lower cost. The combined company will be externally managed by Sierra Crest Investment Management, the current investment adviser to Portman Ridge, and is expected to have total assets in excess of $600 million, and a net asset value of approximately $270M, each based on the Companies’ September 30, 2024 balance sheets, adjusted for estimated transaction expenses, but excluding the impact of the Tax Distribution. Accretive to NAV: Expected to be immediately accretive to PTMN’s NAV by 1.3% upon closing, based on the Companies’ September 30, 2024, NAVs and adjusted for estimated transaction expenses but excluding the impact of the Tax Distribution. Accretive to Core Net Investment Income: Expected to be immediately accretive to the Companies’ NII as result of an expected $2.8 million of annual operating expense efficiencies and the Incentive Fee Waiver. Over the longer term, management of the Companies expects the Proposed Merger to provide further NII accretion through a lower cost of debt and improved financing terms as well as further rotation out of LRFC’s legacy non-yielding equity portfolio into interest-earning assets originated by the BC Partners Credit Platform. In connection with the Proposed Merger, shareholders of LRFC will receive 1.50 newly issued shares of PTMN common stock in exchange for each share of common stock of LRFC. Based on the Fixed Exchange Ratio, using PTMN’s closing price of $16.68 per share on January 24, 2025 and excluding the impact of the Tax Distribution, the merger consideration values LRFC’s shares at $25.02 per share, which represents a 4% premium to LRFC’s January 24, 2025, closing price of $24.00 per share and a 17% premium to LRFC’s closing price of $21.43 per share on September 11, 2024. In addition to approval by shareholders of both PTMN and LRFC, the closing of the Proposed Merger is subject to customary conditions. Further, the merger agreement provides each Special Committee a termination right that allows for either Special Committee to terminate the Proposed Merger if it has determined, reasonably and in good faith, as a result of events or other circumstances occurring or arising after the date of the signing of the Proposed Merger agreement that were not known to the applicable Board of Directors, that the interests of their respective shareholders would be diluted within the meaning of Rule 17a-8 under the Investment Company Act of 1940, as amended, as a result of the Proposed Merger. The parties currently expect the Proposed Merger to be completed in the second calendar quarter of 2025. In connection with and in support of the transaction, only if the Proposed Merger is consummated, PTMN’s external investment adviser, Sierra Crest, has agreed to waive up to $1.5M of incentive fees over eight consecutive quarters following the closing of the Proposed Merger, subject to the satisfaction of certain conditions set forth in the definitive documentation executed between Sierra Crest and PTMN. Prior to the anticipated closing of the Proposed Merger, PTMN and LRFC intend to declare and pay ordinary course quarterly dividends. Subject to the approval of LRFC’s Board of Directors and contingent upon the satisfaction of the closing conditions to the Proposed Merger, LRFC will declare a dividend to LRFC’s shareholders in an amount totaling no less than $1M, but otherwise equal to any undistributed 2024 NII of LRFC estimated to be remaining as of the closing of the Proposed Merger, which management of LRFC currently expects to be between approximately $1M and $1.5M.