Content area
Full text
A July 2 Fifth Street Finance Corp. announcement confirmed the initial investment activity of a new joint venture that promises positive implications for both the specialty finance company and its insurance company partner.
Fifth Street Finance, a business development company that originates and invests in first-lien, second-lien and mezzanine debt; one-stop financings; and equity co-investments on behalf of small and midsize entities primarily in connection with investments by private equity sponsors, revealed in May the formation of Senior Loan Fund JV 1 LLC in tandem with Kemper Corp. unit Trinity Universal Insurance Co.
The joint venture had a target size of $300 million and was expected to invest primarily in middle-market and other corporate debt securities. Fifth Street Finance said Senior Loan Fund JV 1 represented an attractive way to expand its ability to fund middle-market, first-lien "unitranche" and second-lien loans in a manner intended to lead to a higher return on equity and net investment income per share for the BDC. For Kemper, meanwhile, the vehicle promised access to higher-yielding investments during a time in which yields are otherwise under pressure. Kemper reported a pretax equivalent annualized book yield of 5.0% in its first-quarter earnings release, down from 5.8% in the year-earlier period, and company officials indicated during a May 9 earnings conference call that they had recently been allocating a majority of "new money" to investments in lower-investment-grade municipal and corporate bonds along with certain higher-yielding private investments.
Fifth Street Finance Chairman and CEO Leonard Tannenbaum previously characterized the joint venture as likely to be "a critical driver of future earnings growth,"...