On March 11, 2011, THL Credit closed on a three-year $115 million syndicated credit facility led by ING Capital LLC. The facility has an accordion feature that provides for expansion of the facility up to $125 million, subject to customary conditions. The facility will bear interest at a rate of LIBOR plus 3.5% per annum, with no LIBOR floor. "This credit facility significantly expands our investment fairway and our ability to invest at the most attractive risk-adjusted rates of return," noted James K. Hunt, chief executive officer of THL Credit. "We expect to begin drawing on our credit facility after investing our initial public offering proceeds. Future borrowings from the facility are expected to be accretive to our earnings and enhance returns to our shareholders."
In addition to the four new investments and one follow-on investment completed during the fourth quarter, THL Credit closed on three additional transactions totaling $32.3 million in the first quarter of 2011, and has several additional transactions under varying term sheet stages. However, there can be no assurances that such investments will close on these terms or at all.
THL Credit continues to see signs of transactional expansion in the middle market that bodes well for junior capital providers. M&A is still at materially reduced levels from the mid-2000s, but private equity sponsors are pursuing an increasing amount of add-on acquisitions as well as recapitalization and refinancing opportunities for their existing portfolios and are seeking to find new investments for their uninvested capital. Additionally, unsponsored companies also appear to be more willing to use THL Credit's capital for growth and as strategic buyers, which comes after a prolonged period of cost-cutting and debt reduction.Mr. Hunt added, "We continue to look for opportunities to invest in growth-oriented companies with durable balance sheets. We are pleased with the quality of the credits that we have incorporated into our portfolio to date. We remain committed to delivering sustainable returns to our shareholders by building an attractive portfolio yield through careful credit selection."