Photo: Monika Kozak/ALM

Proskauer Rose advised on Bain Capital Specialty Finance's initial public offering, which raised roughly $145.4 million when the shares began trading last month.

Ropes & Gray represented the underwriters.

The company, which is the finance arm of global asset manager Bain Capital, sold 7.5 million shares and began trading on the New York Stock Exchange on Nov. 15. It is a business development company (BDC) focused on lending to middle-market companies and is managed by an affiliate of Bain Capital Credit.

Proskauer corporate partners Monica Shilling and Nicole Runyan, and senior counsel Lily Desmond and tax partner Martin Hamilton, led the team from Proskauer. The Ropes & Gray team representing the underwriters was led by securities and public companies partner Paul Tropp and counsel Rachel Phillips.

Monica Shilling

“It was a great deal, with a sophisticated client and a group of banks that knew what they were doing,” Shilling said, adding that BDCs have enjoyed increasing popularity and prominence as nonbank lenders over the last 10 to 15 years.

In the interest of carrying out the transaction expeditiously, Shilling said, she and her colleagues filed an amendment to the registration statement with updated numbers the day after filing the 10Q form for the third quarter. Runyan said the team's overall approach was designed to present underwriters with the most appealing opportunity possible.

“We were thinking about, firstly, getting through the SEC registration process, and secondly, looking at the calendar in order to deal with pretty significant volatility in the market,” Runyan said. Besides the stock market's ups and downs, the team had to take into account the midterm election, which was a major market event, as they planned the third-quarter transaction.

“We looked to be as nimble as we could on the SEC front, in terms of getting an updated registration statement filed as soon as financials were available so that we could position the BDC the best possible way when underwriters saw an opening in the market,” Runyan said.

Runyan noted that it was important to maintain an open dialogue with the SEC staff who are reviewing the registration statement, as they must sign off on it before the IPO issuer can go on the road and go public.

“You can't control the market, but you can control your readiness to go the market when underwriters think there's an opening. We worked very hard with the SEC to be as proactive as possible,” Runyan said.

Nicole Runyan

Proskauer said in a statement that it has expanded in the BDC space, and in the past five years has represented approximately half of the 59 publicly traded BDCs. It also said it was involved in the last four BDC IPOs. Shilling said she has been active in the BDC space since 2004, and noted that the practice gained a team of lawyers, including Nicole Runyan from Stroock & Stroock & Lavan, in March 2017. More recently, Proskauer snagged M&A and capital markets lawyer Will Tuttle, who works on many BDC-related deals, from Dechert in August 2018.

The reality is that BDC IPOs at present are not as common as some might wish, with only three in the last three years. The Bain Capital Specialty Finance IPO was the only one this year, the Carlyle Group was the only market player to do one in 2017, and Goldman Sachs was the only firm to do one in 2015, Shilling noted. But the market may be on the verge of dramatic uptick in BDC deals and, in particular, BDC IPOs, she said.

“There are private BDCs, in the sense that they are not listed, they still have to publicly file reports with the SEC. Many of these are entities that have taken in capital and made investments and are positioning themselves for IPOs,” Shilling said.

In addition, there may be an increase in BDC deals because of a change in regulations, Shilling said. In March 2018, the Small Business Credit Availability Act became law, streamlining the reporting requirements for BDCs, granting more flexibility with respect to BDCs' ability to take on debt, and making capital raising quicker and easier.

“This new legislation relaxed requirements, so that BDCs will be able to leverage more than in the past, which I think will drive more interest in the space,” Shilling said. “I'm not sure we've seen the impact of it yet, but we will. It's a great thing for the industry, and something the industry has worked very hard to get.”