Solar Capital announced it has entered into a definitive agreement with SSP Energy Ltd., Quartz Managers LLC and Quantum Strategic Partners Ltd. to acquire Crystal Capital Financial, a commercial finance company focused on providing asset-based and other secured financing solutions. A press release notes Crystal Financial’s management team, including while at prior businesses, has underwritten and closed more than $20 billion of transactions for its clients since 1993.
Solar Capital expects to invest approximately $275 million to effect the acquisition. The current management team of Crystal Financial has committed to lead Crystal Financial going forward and will also make a meaningful investment as part of the transaction. Solar Capital expects that its acquisition of Crystal Financial will be immediately accretive to net investment income.
Crystal Financial currently oversees a directly originated and underwritten, diversified portfolio of 23 loans having a total par value of approximately $400 million at November 30, 2012. Solar Capital believes that Crystal Financial’s business of assisting issuers with unique financing needs offers the potential for attractive returns irrespective of economic or debt capital market conditions.
Solar Capital expects to fund its investment in Crystal Financial with available liquidity, including borrowings under Solar Capital’s existing credit facilities. Solar Capital’s investment, together with Crystal Financial’s current available liquidity under its $275 million credit facility, provides Crystal Financial with significant growth capital. Crystal Financial’s credit facility is expected to have approximately $145 million of borrowings outstanding at closing and is non-recourse to Solar Capital.
Post-closing, Solar Capital expects Crystal Financial to be treated as a pass-through entity for tax purposes and to distribute a substantial portion of its current earnings to Solar Capital on a quarterly basis. Solar Capital expects its investment in Crystal Financial to generate a cash yield consistent with other assets in its portfolio.
“We believe that Crystal Financial offers a compelling opportunity for us to invest in an established business whose management team has an exceptional track record,” said Michael Gross, chairman and CEO of Solar Capital. “We have known the Crystal Financial management team over the course of our careers and have confidence in their long-term strategy for prudently growing their business.”
“We believe that this portfolio company investment offers a highly attractive and diversified senior secured risk-return profile for Solar Capital,” said Bruce Spohler, chief operating officer of Solar Capital. “We expect that our Crystal Financial investment will move us toward our target debt-to-equity ratio while increasing Solar Capital’s net investment income.”
“We are excited about our new relationship with Solar Capital and the growth opportunities it presents,” said Ward Mooney, chief executive officer of Crystal Financial. “Solar Capital’s stable, long-term funding will enhance our ability to provide innovative financing solutions to our clients. The continued independence of our business operations will allow us to remain committed to the core values that have defined our long-term, collaborative partnerships with clients.”
The acquisition is subject to customary closing conditions, including the expiration of the applicable waiting period under the Hart Scott Rodino Act, and is expected to close prior to year end. Deutsche Bank Securities acted as financial advisor to Crystal Financial for the transaction.