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Capital Southwest Launches Senior Loan Fund With Main Street Capital

September 11, 2015, 08:02 AM
Filed Under: Industry News

Capital Southwest Corporation announced that it has formed a joint venture with Main Street Capital Corporation to form I-45 SLF LLC, a senior loan fund that will invest primarily in syndicated senior secured loans in the upper middle market.

The initial equity capital commitment to I-45 SLF will total $85 million, consisting of $68 million from CSWC and $17 million from Main Street.  CSWC will own 80% of I-45 SLF and have a profits interest of 75.6%, while Main Street will own 20% and have a profits interest of 24.4%.  I-45 SLF's Board of Managers will make all investment and operational decisions for the fund, and will consist of equal representation from CSWC and Main Street.  It is anticipated that I-45 SLF will enter into a senior credit facility with expected leverage of up to 2x debt-to-equity, the borrowings from which will be used to fund the purchase of senior secured loan assets.  CSWC and Main Street expect to begin funding loans for I-45 SLF later this month.

"We are excited about this opportunity to partner with Main Street, as this joint venture gives us immediate access to their strong established syndicated senior loan origination platform, while leveraging our joint credit expertise in producing attractive risk-adjusted returns," said Bowen Diehl, Chief Investment Officer of CSWC and to-be-named Chief Executive Officer of CSWC after the completion of the spin-off of CSW Industrials, Inc.  "Our investment in I-45 SLF allocates a portion of our capital base to upper middle market syndicated senior secured loans, complementing our lower middle market origination efforts and advancing our investment strategy towards the goal of creating a granular and diversified credit portfolio."

"We are very pleased with the interest from the senior lender community in the credit facility for I-45 SLF," said Michael Sarner, Senior Vice President of CSWC and to-be-named Chief Financial Officer of CSWC after the completion of the spin-off of CSW Industrials, Inc.  "We are currently in discussions on final terms of the I-45 SLF credit facility with a lending partner that we believe will give I-45 SLF the ability to effectively execute its investment plan."

"We believe I-45 SLF is an attractive investment opportunity from a return perspective that allows Capital Southwest to reposition its investment assets while allowing us to leverage our established middle market platform to build additional investment portfolios," said Vince Foster, Chief Executive Officer of Main Street.

Evercore served as financial advisor to CSWC.

Capital Southwest Corporationis a Dallas-based publicly traded business development company ("BDC"), with approximately $775 million in assets. On September 8, 2016, Capital Southwest announced that its Board of Directors approved the spin-off of its industrial products, coatings, sealants and adhesives and specialty chemicals businesses into CSW Industrials, Inc. ("CSWI").  Since its December 2, 2014 initial announcement of its intent to spin-off the industrial businesses of CSWI to the Capital Southwest shareholders, Capital Southwest has focused its new investment activity on senior "unitranche" debt, second lien and subordinated debt, as well as equity co-investments to support the acquisition and growth of middle market companies.

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