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Fifth Street Funds $156.5MM Portfolio in Senior Loan Fund Joint Venture

July 02, 2014, 07:46 AM
Filed Under: Industry News

Fifth Street Finance Corp. announced that Senior Loan Fund JV 1, LLC ("SLF JV 1"), a joint venture between FSC and a subsidiary of Kemper Corporation, has initially invested $156.5 million out of its anticipated investment capacity of approximately $300.0 million in a diversified portfolio of senior secured loans. The initial portfolio of assets, sourced through Fifth Street's platform, is funded with leverage of $101.5 million provided by Deutsche Bank AG, New York Branch and equity of $55.0 million, where FSC funded 87.5% and Kemper funded 12.5%.

SLF JV 1 closed on a $200 million revolving credit facility with Deutsche Bank, which should allow the joint venture to utilize leverage up to a ratio of approximately 2x debt-to-equity.

The joint venture should be accretive to FSC's earnings and expands its investment capacity to originate and underwrite middle market loans. FSC believes that funding this initial portfolio of assets should generate a mid-teens return on its investment, which is higher than the return on FSC's current portfolio. FSC expects to continue funding SLF JV 1 to its target size of $300 million through the September quarter.

FSC has ample capacity to grow SLV JV 1 and is in active discussions with several other third parties about additional senior loan fund partnerships.

"We are pleased that SLF JV I has funded its initial portfolio in a timely manner, further demonstrating the value of the joint venture's affiliation with Fifth Street's leading middle-market origination platform," stated FSC's Chief Executive Officer, Leonard M. Tannenbaum, adding, "Funding the initial portfolio and continuing to ramp SLF JV 1 should generate a mid-teens return on our investment and is a key component in driving future earnings growth."

Fifth Street Finance Corp. is a leading specialty finance company that provides custom-tailored financing solutions to small and mid-sized companies, primarily in connection with investments by private equity sponsors.  The company originates and invests in one-stop financings, first lien, second lien, mezzanine debt and equity co-investments.  FSC's investment objective is to maximize its portfolio's total return by generating current income from its debt investments and capital appreciation from its equity investments.

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