Provides meaningful scale and diversity to CGBD through addition of a Carlyle-managed portfolio Carlyle to exchange CGBD convertible preferred stock for CGBD common stock at NAV, eliminating current 5% – 8% preferred stock dilution overhang Advisors agreed to cover transaction costs in certain circumstances up to a total cap of $5 million NEW YORK, Aug. 05, 2024 (GLOBE NEWSWIRE) -- Carlyle Secured Lending, Inc. (together with its consolidated subsidiaries, "we," "us," "our," "CGBD" or the "Company") (NASDAQ:CGBD), a business development company focused on directly-originated lending to sponsor-backed U.S. middle market companies, has entered into a definitive agreement to acquire Carlyle Secured Lending III ("CSL III"), a private business development company with a similar investment strategy and portfolio. The stock-for-stock transaction will have a floating exchange ratio that has the potential to allow CGBD and CSL III to share the benefits if CGBD is trading above NAV shortly before merger close. Following closing, CGBD is expected to have total assets of over $2.5 billion and net assets of over $1.2 billion.1 "We are excited to announce the merger of CGBD and CSL III, which is designed to have meaningful benefits for investors of both entities," said Justin Plouffe, Chief Executive Officer for CGBD and CSL III. "Given substantial overlap in strategy and portfolio composition, combining CGBD and CSL III into a single, larger, and more liquid vehicle will result in significant stockholder value creation and an enhanced investor experience. We are confident in this transaction's potential to drive greater trading volume, access to an expanded stockholder base, and lower operating and financing costs. There is strong momentum across our direct lending franchise, and we believe bringing CGBD and CSL III together will enable us to build on that momentum." In order to enhance the benefits of the transaction for stockholders, Carlyle Investment Management L.L.C. ("CIM"), a wholly owned subsidiary of Carlyle, has agreed to exchange its shares of CGBD convertible preferred stock for CGBD common stock. The CGBD convertible preferred stock was issued by CGBD as part of an investment Carlyle made to support CGBD during the market dislocation resulting from the COVID pandemic. This exchange will eliminate the dilutive impact of the preferred stock, which has a conversion price of $8.98 compared to CGBD's June 30th NAV per share of $16.95.2 Under the terms of the proposed merger, shareholders of CSL III will receive shares of CGBD based on a ratio determined shortly before merger close (the "Exchange Ratio"). The Exchange Ratio is discussed in more detail below. Merger Benefits The transaction is expected to deliver considerable value and benefits for investors both in the short term and over the longer term, including: Increased scale and liquidity: The proposed merger will increase CGBD's scale meaningfully, with total assets expected to increase to over $2.5 billion at merger close.1 The increased market capitalization of CGBD following the merger is anticipated to provide greater trading liquidity, the potential for more institutional ownership, and a broader investor base than CGBD as a stand-alone company. Elimination of CGBD preferred stock dilution overhang: The exchange of the shares of convertible preferred stock for CGBD common stock at NAV as of the Determination Date will eliminate the risk of dilution from conversion of the shares, which may have led to a $0.79 (or 5%) decrease in CGBD's NAV per share and a $0.04 (or 8%) decrease in quarterly NII per share of CGBD common stock when calculated on a fully diluted basis at the current preferred conversion price of $8.98 as of June 30, 2024. Drives efficiency and debt market access, reduces costs: As a result of the combined company's increased scale, it is expected to be able to access a wider array of debt financing solutions, including in the unsecured debt market, and may potentially receive more attractive terms and pricing than CGBD as a stand-alone company. In addition, cost savings and operational synergies from eliminating redundant expenses are expected to drive a lower expense ratio, resulting in long-term efficiencies from greater scale. Continuation of successful strategy with greater scale and seamless integration: Post-closing, CGBD expects to continue its strategy of lending to U.S. middle market companies, which CGBD defines as companies with approximately $25 million to $100 million of earnings before interest, taxes, depreciation and amortization, supported by financial sponsors, which is opportunistically supplemented with differentiated and complementary lending and investing strategies, which take advantage of the broad capabilities of Carlyle's Global Credit platform while offering risk-diversifying portfolio benefits. This enables CGBD to drive stockholder value by leveraging Carlyle's deep credit expertise and wide origination capabilities to pursue the most compelling relative value opportunities based on the market environment. No material change from CGBD's current portfolio is expected at closing, given CSL III's near complete overlap with CGBD. Accordingly, credit quality is expected to remain strong with improved portfolio metrics given that less than 0.1% of CSL III is on non-accrual and 96% of CSL III's investments are categorized as a 2 risk rating, reflecting the investments are performing as expected. The transaction will also decrease CGBD's concentration in its top 10 investments from 19% to 17%. Substantial adviser support: To support the proposed merger, Carlyle Global Credit Investment Management L.L.C. ("CGCIM"), investment adviser to CGBD, and CSL III Advisor, LLC ("CSL III Advisor" and together with CGCIM, the "Advisors"), investment adviser to CSL III, have agreed to cover merger-related expenses in certain circumstances, up to a total cap of $5 million, to maximize merger benefits for CGBD stockholders and CSL III shareholders. Additionally, CIM's shares of common stock issued as a result of the preferred stock exchange will be subject to a 2-year tiered lock-up, demonstrating its continued long-term commitment to CGBD. The combined company will remain externally managed by CGCIM. The combined company will continue to trade under the ticker CGBD on the Nasdaq Global ...