Silver Spike Investment, a specialty finance company that has elected to be treated as a business development company, entered into a definitive agreement with Chicago Atlantic Loan Portfolio (CALP) for the purchase of a portfolio of loans. Silver Spike Investment will acquire the loan portfolio in exchange for newly issued shares of the company’s common stock with a net asset value equal to the value of the loan portfolio, each determined shortly before closing.

The closing of the loan portfolio acquisition is subject to certain customary closing conditions. Assuming satisfaction of the conditions to the transaction, the loan portfolio acquisition is expected to close in mid-2024.

As of Jan. 1, the loan portfolio comprised 24 loans with an aggregate value of approximately $130 million. CALP has agreed to use reasonable best efforts to add four loans with an aggregate value of approximately $43 million to the loan portfolio prior to the closing of the acquisition. Silver Spike Investment and CALP may also agree to the addition of other loans to the loan portfolio prior to the closing of the acquisition. The addition of certain loans to the loan portfolio requires third-party consent, and/or such loans may need to be acquired by CALP, and there can be no assurance that any additional loans will be added to the loan portfolio prior to the closing of the acquisition. Certain loans may also be removed from the loan portfolio upon the agreement of Silver Spike Investment and CALP, or upon the repayment of the loans. The pro-forma information presented herein is based on data from Silver Spike Investment as of Sept. 30, 2023, and CALP data as of Jan. 1.

Based on CALP data as of Jan. 1, following the closing of the loan portfolio acquisition, Silver Spike Investment is expected to have approximately $213 million in net assets and investments in approximately 27 portfolio companies. As of the closing of the loan portfolio acquisition, CALP is expected to own the majority of Silver Spike Investment’s common stock.

The loan portfolio acquisition was unanimously approved by the board of directors of the Silver Spike Investment upon the recommendation of its special committee consisting solely of independent directors, which separately approved the transaction.

Silver Spike Investment’s present officers will continue to be a part of the company’s management team following the loan portfolio acquisition.

“We are very excited to announce the agreement for the loan portfolio acquisition,” Scott Gordon, chairman and CEO of Silver Spike Investment, said. “We believe that the loan portfolio acquisition is a compelling transaction that will enhance value for our stockholders, and we view the loan portfolio acquisition as an important step on our path to achieving greater scale, trading liquidity and access to capital markets for the company.”

Keefe, Bruyette & Woods served as financial advisor and Kramer Levin Naftalis & Frankelserved as legal counsel to the special committee of Silver Spoke Investment’s board. Davis Polk & Wardwell serves as legal counsel to Silver Spoke Investment. Eversheds Sutherland serves as legal counsel to CALP.

Separately, Silver Spike Capital, the investment adviser of Silver Spike Investment, separately entered into a definitive agreement with Chicago Atlantic BDC Holdings, the investment adviser of CALP, pursuant to which a joint venture between Chicago Atlantic and Silver Spike Capital would be created to combine and jointly operate Silver Spike Capital’s, and a portion of Chicago Atlantic’s, investment management businesses, subject to certain company stockholder approvals and customary closing conditions. The joint venture would cause the automatic termination of the existing advisory agreement with Silver Spike Capital. As a result, Silver Spike’s board unanimously approved, upon the recommendation of its special committee, a new investment advisory agreement with Silver Spike Capital to take effect upon closing of the joint venture, subject to company stockholder approval. The new advisory agreement is identical, in all material respects, to the current agreement. Upon closing of the joint venture, Silver Spike Investment would be renamed Chicago Atlantic BDC and Silver Spoke Capital would be renamed Chicago Atlantic BDC Advisers.