Chicago Atlantic and Silver Spike Close Loan Portfolio Acquisition and Joint Venture Transactions

Rhea-AI Summary

Chicago Atlantic announced that Silver Spike Investment Corp. (SSIC) has acquired a loan portfolio from Chicago Atlantic Loan Portfolio, (CALP) in exchange for newly issued shares. As a result, CALP and legacy SSIC stockholders now own 72.8% and 27.2% of the company's common stock, respectively. The company has been renamed Chicago Atlantic BDC, Inc., with its ticker symbol changing to "LIEN" effective October 2, 2024.

Additionally, Chicago Atlantic and Silver Spike Capital have formed a joint venture to combine their investment management businesses in the cannabis industry. The company now has net assets of approximately $300 million and investments in 28 portfolio companies. Key management changes include Andreas Bodmeier becoming CEO and Dino Colonna assuming the role of President.

The transactions aim to capitalize on opportunities in private markets, particularly in the rapidly growing cannabis sector, by providing debt capital to lower middle market companies.

Positive

• Acquisition of CALP Loan Portfolio increases net assets to approximately $300 million
• Investments expanded to 28 portfolio companies
• Joint venture combines two leading investment platforms in the cannabis industry
• Potential for growth in providing capital to cannabis operators
• Differentiated source of credit alpha compared to typical BDCs or private credit funds

Negative

• Significant dilution for legacy SSIC stockholders, now owning only 27.2% of the company

Insights

Financial Analyst

The merger of Silver Spike Investment Corp. and Chicago Atlantic's loan portfolio creates a significant player in the cannabis lending space. With net assets of approximately $300 million and investments in 28 portfolio companies, the newly formed Chicago Atlantic BDC, Inc. (ticker: LIEN) becomes the only publicly listed BDC focused on cannabis lending.

This consolidation strengthens their market position and potentially enhances their ability to capitalize on the growing cannabis sector. The joint venture between Chicago Atlantic and Silver Spike Capital combines two leading investment platforms in the industry, which could lead to synergies and improved deal flow.

For investors, this move offers increased exposure to the cannabis lending market through a publicly traded vehicle. However, it's important to note the regulatory risks associated with the cannabis industry. The 72.8% ownership by CALP suggests a significant shift in control and strategy, which investors should monitor closely.

Market Research Analyst

The cannabis industry represents a unique opportunity in the lending space due to regulatory constraints limiting traditional banking services. This merger positions Chicago Atlantic BDC to capitalize on this market inefficiency. The company's focus on lower middle market, non-sponsor companies in niche industries like cannabis could yield higher returns, albeit with increased risk.

The track record of Chicago Atlantic Real Estate Finance, Inc. (REFI) as one of NASDAQ's top-performing commercial mortgage REITs since its 2021 IPO lends credibility to the management team's expertise in this sector. This could attract investor interest and potentially lead to a valuation premium compared to more traditional BDCs.

However, investors should be aware that the cannabis industry's regulatory landscape is evolving, which could impact loan performance and valuations. The concentration risk in a single sector also warrants careful consideration.

Silver Spike Investment Corp. renamed Chicago Atlantic BDC, Inc.

NASDAQ Ticker to be Changed to LIEN

CHICAGO--(BUSINESS WIRE)-- Chicago Atlantic today announced that Silver Spike Investment Corp. (“SSIC” or the “Company”), a specialty finance company that has elected to be regulated as a business development company, acquired a portfolio of loans (the “CALP Loan Portfolio”) from Chicago Atlantic Loan Portfolio, LLC (“CALP”), a Chicago Atlantic-managed fund, in exchange for newly issued shares of the Company’s common stock (the “Loan Portfolio Acquisition”). As a result of the Loan Portfolio Acquisition, CALP and legacy SSIC stockholders own approximately 72.8% and 27.2%, respectively, of the outstanding shares of the Company’s common stock.

The Company is the only publicly listed BDC focused on lending to cannabis companies. As a result of the Loan Portfolio Acquisition, the Company has net assets of approximately $300 million and investments in 28 portfolio companies.

In connection with the Loan Portfolio Acquisition, the Company was renamed Chicago Atlantic BDC, Inc., and its ticker symbol will be changed to “LIEN.” The changes will become effective in the market at the open of business on October 2, 2024.

Separately, Chicago Atlantic today announced that the investment adviser of CALP closed a transaction with Silver Spike Capital, LLC (“SSC” or the “Adviser”), the investment adviser of the Company, pursuant to which a joint venture between Chicago Atlantic and SSC has been created to combine and jointly operate SSC’s, and a portion of Chicago Atlantic’s, investment management businesses (the “Joint Venture”). The Joint Venture combines two leading investment platforms in the cannabis industry. In connection with the Joint Venture, the Adviser has been renamed Chicago Atlantic BDC Advisers, LLC.

The Company’s officers prior to the Loan Portfolio Acquisition, including Scott Gordon (now Executive Chairman of the board of directors of the Company and Co-Chief Investment Officer of the Company) and Umesh Mahajan (now Co-Chief Investment Officer, Chief Financial Officer and Secretary of the Company), will continue to be a part of the Company’s management team. Andreas Bodmeier, Partner at Chicago Atlantic, has assumed the role of Chief Executive Officer of the Company, and Dino Colonna, previously Partner and Co-Head of Credit of SSC, has assumed the role of President of the Company.

“Chicago Atlantic seeks to capitalize on opportunities in private markets by providing debt capital to lower middle market companies, typically non-sponsor, and unique industries facing structural reasons for an insufficient supply of capital,” stated Bodmeier. “The rapidly growing cannabis sector represents a compelling example.”

“Our BDC allows investors to access a differentiated source of credit alpha from what is typically found in other BDCs or private credit funds,” continued Gordon. “We are excited about the prospects for further growth within our core activity of providing capital to high-quality operators within the cannabis ecosystem. As one of the largest direct lenders to the sector, we see significant potential to continue playing an important role in shaping the flow of much-needed debt financing to the industry.”

The transactions follow Chicago Atlantic’s successful management of Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI), one of NASDAQ’s highest-performing commercial mortgage real estate investment trusts (REIT) based on total returns since its IPO in 2021.

“This is an accretive opportunity from which all shareholders and team members can benefit,” added John Mazarakis, Partner at Chicago Atlantic, “Silver Spike and Chicago Atlantic share synergistic goals, and we are excited to collaborate, innovate, and drive collective results for the benefit of our shareholders.”

About Chicago Atlantic

Chicago Atlantic is an alternative investment manager focused on industries and companies where demand for capital exceeds traditional supply. The firm’s investment strategies include opportunistic private credit and equity with focuses on loans to esoteric industries, specialty asset-based loans, liquidity solutions and growth and technology finance. Chicago Atlantic closed over $2.2 billion in credit facilities to date. Chicago Atlantic’s team of over 80 professionals has offices in Miami, Florida and Chicago, Illinois. For more information on Chicago Atlantic’s investment opportunities and financing products, visit chicagoatlantic.com.

Forward-Looking Statements

Some of the statements in this communication constitute forward-looking statements because they relate to future events, future performance or financial condition of the Company or the Loan Portfolio Acquisition. The forward-looking statements may include statements as to: future operating results of the Company and distribution projections; business prospects of the Company and the prospects of its portfolio companies; and the impact of the investments that the Company expects to make. In addition, words such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this communication involve risks and uncertainties. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with (i) the ability to realize the anticipated benefits of the Loan Portfolio Acquisition; (ii) risks related to diverting management’s attention from ongoing business operations; (iii) the risk that stockholder litigation in connection with the Loan Portfolio Acquisition may result in significant costs of defense and liability; (iv) changes in the economy, financial markets and political environment, including the impacts of inflation and rising interest rates; (v) risks associated with possible disruption in the operations of the Company or the economy generally due to terrorism, war or other geopolitical conflict (including the current conflict between Russia and Ukraine), natural disasters or global health pandemics, such as the COVID-19 pandemic; (vi) future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); (vii) changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets that could result in changes to the value of the Company’s assets; (viii) elevating levels of inflation, and its impact on the Company, on its portfolio companies and on the industries in which it invests; (ix) the Company’s plans, expectations, objectives and intentions, as a result of the Loan Portfolio Acquisition; (x) the future operating results and net investment income projections of the Company; (xi) the ability of the Adviser to locate suitable investments for the Company and to monitor and administer its investments; (xii) the ability of the Adviser or its affiliates to attract and retain highly talented professionals; (xiii) the business prospects of the Company and the prospects of its portfolio companies; (xiv) the impact of the investments that the Company expects to make; (xv) the expected financings and investments and additional leverage that the Company may seek to incur in the future; (xvi) conditions in the Company’s operating areas, particularly with respect to business development companies or regulated investment companies; (xvii) the realization generally of the anticipated benefits of the Loan Portfolio Acquisition and the possibility that the Company will not realize those benefits, in part or at all; (xviii) the performance of the loans included in the CALP Loan Portfolio, and the possibility of defects or deficiencies in such loans notwithstanding the diligence performed by the Company and its advisors; (xix) the ability of the Company to realize cost savings and other management efficiencies in connection with the Loan Portfolio Acquisition as anticipated; (xx) the reaction of the trading markets to the Loan Portfolio Acquisition and the possibility that a more liquid market or more extensive analyst coverage will not develop for the Company as anticipated; (xxi) the reaction of the financial markets to the Loan Portfolio Acquisition and the possibility that the Company will not be able to raise capital as anticipated; (xxii) the strategic, business, economic, financial, political and governmental risks and other risk factors affecting the business of the Company and the companies in which it is invested as described in the Company’s public filings with the Securities and Exchange Commission (the “SEC”) and (xxiii) other considerations that may be disclosed from time to time in the Company’s publicly disseminated documents and filings. The Company has based the forward-looking statements included in this communication on information available to it on the date of this communication, and it assumes no obligation to update any such forward-looking statements. Although the Company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that the Company may make directly to you or through reports that the Company in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241001828224/en/

Alise M. Edgcomb

AEdgcomb@chicagoatlantic.com

419-202-3988

Source: Chicago Atlantic

FAQ

What is the new name and ticker symbol for Silver Spike Investment Corp. (SSIC)?

Silver Spike Investment Corp. has been renamed Chicago Atlantic BDC, Inc., and its ticker symbol will change to 'LIEN' effective October 2, 2024.

How does the loan portfolio acquisition affect SSIC's ownership structure?

As a result of the acquisition, Chicago Atlantic Loan Portfolio, (CALP) now owns 72.8% of the company's common stock, while legacy SSIC stockholders own 27.2%.

What are the key management changes following the acquisition and joint venture?

Andreas Bodmeier has become CEO, Dino Colonna has assumed the role of President, Scott Gordon is now Executive Chairman and Co-Chief Investment Officer, and Umesh Mahajan continues as Co-Chief Investment Officer, CFO, and Secretary.

How much in net assets does Chicago Atlantic BDC, Inc. now have?

Following the loan portfolio acquisition, the company now has net assets of approximately $300 million.

What is the main focus of Chicago Atlantic BDC, Inc.'s lending activities?

The company focuses on providing debt capital to lower middle market companies, particularly in the rapidly growing cannabis sector.