Crescent Capital BDC, Inc

As filed with the Securities and Exchange Commission on November 4, 2022

Registration No. 333-

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-14

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933   
Pre-Effective Amendment No.   
Post-Effective Amendment No.   
(Check appropriate box or boxes)   

 

 

Crescent Capital BDC, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

11100 Santa Monica Blvd.

Suite 2000

Los Angeles, California 90025

(Address of Principal Executive Offices)

(310) 235-5900

(Area Code and Telephone Number)

Jason Breaux

President and Chief Executive Officer

Crescent Capital BDC, Inc.

650 Madison Avenue

23rd Floor

New York, NY 10022

(Name and Address of Agent for Service)

 

 

Copies to:

Monica J. Shilling, P.C.

Erin M. Lett

H. Thomas Felix

Kirkland & Ellis LLP

2049 Century Park East, Suite 3700

Los Angeles, CA 90067

Telephone: (310) 552-4200

Fax: (310) 552-5900

 

Christopher Healey

Simpson Thacher & Bartlett LLP

900 G Street, N.W.

Washington, DC 20001

Telephone: (202) 636-5500

Fax: (202) 636-5502

 

 

Approximate Date of Proposed Public Offering: As soon as practicable after this registration statement becomes effective and upon completion of the transactions described in the enclosed document.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission. CCAP may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where such offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED NOVEMBER 4, 2022

FIRST EAGLE ALTERNATIVE CAPITAL BDC, INC.

500 Boylston Street, Suite 1200,

Boston, MA 02116

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

[•], 2022

Dear Stockholder:

You are cordially invited to attend the Special Meeting of Stockholders (the “Special Meeting”) of First Eagle Alternative Capital BDC, Inc., a Delaware corporation (“FCRD”), to be held in-person on [ ], 2022, at [11:00 a.m., Eastern Time], [at the offices of FCRD, located at 500 Boylston Street, Suite 1200, Boston, MA 02116].

The notice of special meeting and the proxy statement/prospectus accompanying this letter provide an outline of the business to be conducted at the Special Meeting. At the Special Meeting, you will be asked to:

 

  (i)

adopt the Agreement and Plan of Merger, dated as of October 3, 2022 (as may be amended from time to time, the “Merger Agreement”), by and among Crescent Capital BDC, Inc. (“CCAP”), Echelon Acquisition Sub, Inc. (“Acquisition Sub”), Echelon Acquisition Sub LLC (“Acquisition Sub 2”), FCRD, and Crescent Cap Advisors, LLC (“CCAP Advisor”), and approve the transactions contemplated thereby, including the Mergers (as defined below) (such proposal collectively, the “Merger Proposal”); and

 

  (ii)

approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal (such proposal, the “FCRD Adjournment Proposal” and together with the Merger Proposal, the “FCRD Proposals”).

FCRD and CCAP are proposing a merger and related transactions pursuant to the Merger Agreement in which Acquisition Sub would merge with and into FCRD, with FCRD continuing as the surviving company (the “First Merger”) and a wholly owned subsidiary of CCAP. Subsequently, FCRD, as the surviving company, will merge with and into Acquisition Sub 2, with Acquisition Sub 2 continuing as the surviving company and a wholly owned subsidiary of CCAP (the “Second Merger” and together with the First Merger, the “Mergers”).

Under the Merger Agreement, on the date which is two days prior to the closing date of the Mergers (the closing date of the Mergers is herein referred to as the “Closing Date“) (the “Determination Date”), each of CCAP and FCRD will deliver to the other a calculation of its estimated net asset value (“NAV”) as of 5:00 p.m. New York City time as of the Determination Date, in each case, as approved by the Board of Directors of FCRD (the “FCRD Board”) or the Board of Directors of CCAP (the “CCAP Board”), as applicable, calculated in good faith and based on certain agreed upon assumptions and methodologies, and applying certain agreed upon adjustments (such calculation with respect to FCRD, the “Closing FCRD Net Asset Value,” and such calculation with respect to CCAP, the “Closing CCAP Net Asset Value”). FCRD and CCAP will update and redeliver such calculations in the event of any material changes between the Determination Date and the Closing Date or if needed to ensure that the calculation is determined within two days (excluding Sundays and holidays) prior to the date and time when the First Merger becomes effective (the “Effective Time”).

Subject to the terms and conditions of the Merger Agreement, at the closing of the First Merger (the “Closing”), CCAP will issue, in respect of all of the issued and outstanding shares of common stock, par value $0.001 per share, of FCRD (“FCRD Common Stock”) (excluding shares held by subsidiaries of FCRD or held, directly or indirectly, by CCAP or Acquisition Sub (“Cancelled Shares”)), in the aggregate, a number of shares of common stock, par value $0.001 per share, of CCAP (“CCAP Common Stock”) equal to 19.99% of the number of shares of CCAP Common Stock issued and outstanding on October 3, 2022 (the “Aggregate Share Consideration”). On the Determination Date, CCAP shall deliver to FCRD a calculation of the amount by which FCRD’s net asset value exceeds the value of the Aggregate Share Consideration (the “Parent Cash Consideration”), as described in the Merger Agreement. The aggregate amount of cash to be paid to FCRD Stockholders shall be an amount equal to the Parent Cash Consideration.

Each person who as of the Effective Time is a record holder of shares of FCRD Common Stock will be entitled, with respect to all or any portion of such shares, to make an election (an “Election”) to receive payment for their shares of FCRD Common Stock in cash, subject to the conditions and limitations set forth in the Merger Agreement. Any record holder of shares of FCRD Common Stock at the record date who does not make an Election will be deemed to have elected to receive payment for their shares of FCRD Common Stock in the form of CCAP Common Stock. For the purpose of making Elections, a record holder of FCRD Common Stock that is a registered clearing agency and which holds legal title on behalf of multiple ultimate beneficial owners shall be entitled to submit elections as if each ultimate beneficial owner were a record holder of FCRD Common Stock.

Each share of FCRD Common Stock (other than a Cancelled Share) with respect to which an Election has been made will be converted into the right to receive an amount in cash equal to the Per Share NAV (as defined below), subject to those adjustments described in the accompanying proxy statement/prospectus under “Questions and Answers About the Special Meeting and the Mergers—Questions and Answers About the Mergers—What will FCRD Stockholders Receive in the Mergers?” and “Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations,” as well as the right to receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration (as defined below).

Each share of FCRD Common Stock (other than a Cancelled Share) with respect to which an Election has not been made will be converted into the right to receive a number of validly issued, fully paid and non-assessable shares of CCAP Common Stock equal to the Exchange Ratio, subject to those adjustments described in the accompanying proxy statement/prospectus under “Questions and Answers About the Special Meeting and the Mergers—Questions and Answers About the Mergers—What will FCRD Stockholders Receive in the Mergers?” and “Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations,” as well as the right to receive an amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration.

The “Per Share NAV” shall mean an amount in cash equal to the Closing FCRD Net Asset Value per share.

The “Exchange Ratio” means the quotient (rounded to four decimal places) of (i) the FCRD Per Share NAV divided by (ii) the CCAP Per Share NAV, as may be adjusted pursuant to the Merger Agreement.

Furthermore, as additional consideration to the holders of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time (excluding any Cancelled Shares), CCAP Advisor will pay or cause to be paid to such holders an aggregate amount in cash equal to $35 million (the “CCAP Advisor Cash Consideration”).

The market value of the merger consideration will fluctuate with changes in the market price of CCAP Common Stock. The FCRD Board urges you to obtain current market quotations of CCAP Common Stock. CCAP Common Stock trades on Nasdaq under the ticker symbol “CCAP.” The following table shows the closing sale prices of CCAP Common Stock, as reported on Nasdaq on October 3, 2022, the last trading day before the execution of the Merger Agreement, and on [•], 2022, the last trading day before printing this document.

 

     Common
Stock

CCAP
 

Closing Sales Price at October 3, 2022

   $ 14.89  

Closing Sales Price at [•], 2022

   $ [ •] 


Your vote is extremely important. At the Special Meeting, you will be asked to vote on the Merger Proposal and, if necessary or appropriate, the FCRD Adjournment Proposal. The approval of the Merger Proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting. You also may be asked to vote to approve the FCRD Adjournment Proposal. The approval of the FCRD Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of FCRD Common Stock present in person or represented by proxy and entitled to vote on the FCRD Adjournment Proposal at the Special Meeting, whether or not a quorum is present.

Abstentions will have the same effect as votes “against” the Merger Proposal. Abstentions will have the same effect as a vote “against” approval of the FCRD Adjournment Proposal. We expect each proposal will be a non-routine matter, and accordingly, we do not expect that any broker non-votes to occur at the Special Meeting. The failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have the same effect as votes “against” the Merger Proposal and will have no effect on the voting outcome of the FCRD Adjournment Proposal. Broker non-votes will have no effect on the voting outcome of the FCRD Adjournment Proposal.

After careful consideration, on the unanimous recommendation of a special committee (the “Special Committee”) of the FCRD Board comprised solely of certain independent directors of the FCRD Board, the FCRD Board approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and recommends that FCRD Stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the FCRD Adjournment Proposal. You can submit a proxy to vote for the FCRD Proposals by following the instructions on the enclosed proxy card and submitting a proxy by Internet or telephone or by signing, dating and returning the proxy card in the postage-paid envelope provided.

It is important that your shares be represented at the Special Meeting. You have the right to receive notice of, and to vote at, the Special Meeting, or any adjournments and postponements of Special Meeting, if you were a stockholder of record of FCRD Common Stock at the close of business on [ ], 2022. Each FCRD Stockholder is invited to attend the Special Meeting. You or your proxyholder will be able to attend the Special Meeting in-person to vote and submit questions. The Special Meeting will be held at [the offices of FCRD, located at 500 Boylston Street, Suite 1200, Boston, MA 02116]. Please follow the instructions on the enclosed proxy card and authorize a proxy via the Internet, by telephone or by mail to vote your shares. FCRD encourages you to submit a proxy to vote via the Internet as it saves FCRD significant time and processing costs. If you are the beneficial owner of your shares, you will need to follow the instructions provided by your broker, bank, trustee or nominee regarding how to instruct your broker, bank, trustee or nominee, or how to obtain a proxy from your broker, bank, trustee or nominee, to vote your shares at the Special Meeting. Voting by proxy does not deprive you of your right to participate in-person at the Special Meeting.

 

 

This proxy statement/prospectus describes the Special Meeting, the Mergers, and the documents related to the Mergers (including the Merger Agreement) that FCRD Stockholders should review before voting on the Merger Proposal and should be retained for future reference. Please carefully read this entire document, including “Risk Factors beginning on page 35 and as otherwise incorporated by reference herein, for a discussion of the risks relating to the Mergers, CCAP and FCRD. FCRD files annual, quarterly and current reports, proxy statements and other information about itself with the SEC. FCRD maintains a website at www.firsteagle.com/FEACBDC and makes all of its annual, quarterly and current reports, proxy statements and other publicly filed information available on or through its website. Information contained on FCRD’s website is not incorporated by reference into this proxy statement/prospectus, and you should not consider information contained on FCRD’s website to be part of this proxy statement/prospectus. You may also obtain such information, free of charge, and make stockholder inquiries by contacting FCRD in writing at 500 Boylston St., Suite 1200, Boston, MA 02116 Attention: Secretary, by calling collect at (800) 450-4424 or by sending an e-mail to sabrina.carlson@firsteagle.com. The SEC also maintains a website at http://www.sec.gov that contains such information.

 

Sincerely yours,

 

SABRINA RUSNAK-CARLSON,

General Counsel, Secretary and Interim Chief Compliance Officer of FCRD

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of CCAP Common Stock to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting to Be Held on [ ], 2022: FCRD’s proxy statement/prospectus and the proxy card are available at [www.proxyvote.com.]

The date of the accompanying proxy statement/prospectus is [•], 2022 and it is first being mailed or otherwise delivered to FCRD Stockholders on or about [•], 2022.

 

First Eagle Alternative Capital BDC, Inc.    Crescent Capital BDC, Inc.
500 Boylston St., Suite 1200    11100 Santa Monica Blvd., Suite 2000
Boston, Massachusetts 02116    Los Angeles, California 90025
(800) 450-4424    (310) 235-5900

 

3


FIRST EAGLE ALTERNATIVE CAPITAL BDC, INC.

500 Boylston St., Suite 1200

Boston, MA 02116

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [__], 2022

 

 

NOTICE OF 2022 SPECIAL MEETING OF STOCKHOLDERS

[500 Boylston Street, Suite 1200,

Boston, MA 02116]

[__], 2022, at [11:00 a.m.], Eastern Time

 

 

Notice is hereby given to the holders of shares of common stock (“FCRD Stockholders”) of First Eagle Alternative Capital BDC, Inc., a Delaware corporation (“FCRD”), that:

A Special Meeting of Stockholders of FCRD (the “Special Meeting”) will be held in-person on [__], 2022, at [11:00 a.m.], Eastern Time, [at the offices of FCRD, located at 500 Boylston Street, Suite 1200, Boston, MA 02116], for the following purposes:

 

  (i)

to adopt the Agreement and Plan of Merger, dated as of October 3, 2022 (as may be amended from time to time, the “Merger Agreement”), by and among Crescent Capital BDC, Inc. (“CCAP“), Echelon Acquisition Sub, Inc. (“Acquisition Sub“), Echelon Acquisition Sub LLC (“Acquisition Sub 2“), FCRD, and Crescent Cap Advisors, LLC (“CCAP Advisor”), and approve the transactions contemplated thereby, including the Mergers (as defined below) (such proposal collectively, the “Merger Proposal”);

 

  (ii)

to approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal (such proposal, the “FCRD Adjournment Proposal” and together with the Merger Proposal, the “FCRD Proposals”).

FCRD and CCAP are proposing a merger and related transactions pursuant to the Merger Agreement in which Acquisition Sub would merge with and into FCRD, with FCRD continuing as the surviving company and a wholly owned subsidiary of CCAP (the “First Merger”). Subsequently, FCRD, as the surviving company, will merge with and into Acquisition Sub 2, with Acquisition Sub 2 continuing as the surviving company and a wholly owned subsidiary of CCAP (the “Second Merger” and together with the First Merger, the “Mergers”).

ON THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE (THE “SPECIAL COMMITTEE”) OF THE BOARD OF DIRECTORS OF FCRD (THE “FCRD BOARD”) COMPRISED SOLELY OF CERTAIN INDEPENDENT DIRECTORS OF THE FCRD BOARD, THE FCRD BOARD APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGERS, AND THE FCRD BOARD RECOMMENDS THAT FCRD STOCKHOLDERS VOTE “FOR” THE MERGER PROPOSAL AND, IF NECESSARY OR APPROPRIATE, “FOR” THE FCRD ADJOURNMENT PROPOSAL.

Enclosed is a copy of the proxy statement/prospectus and proxy card. You have the right to receive notice of, and to vote at, the Special Meeting, or any adjournments and postponements of Special Meeting, if you were a stockholder of record of FCRD Common Stock at the close of business on [__], 2022 (the “FCRD Record Date“). A list of these stockholders will be open for examination by any FCRD Stockholder for any purpose germane to the Special Meeting for a period of ten days prior to the Special Meeting at FCRD’s principal executive office at 500 Boylston Street, Suite 1200, Boston, MA 02116.

 

4


Each FCRD Stockholder is invited to attend the Special Meeting. You or your proxyholder will be able to attend the Special Meeting in-person and may vote and submit questions at the Special Meeting.

If you are a beneficial owner of shares that are held in “street name,” that is they are registered in the name of your broker, bank, trustee or other nominee, you should have received a notice containing voting instructions from your nominee rather than from FCRD. You should follow the voting instructions in the notice to ensure that your vote is counted. Many brokers and banks participate in a program that offers a means to grant proxies to vote shares via the Internet or by telephone. If your shares are held in an account with a broker or bank participating in this program, you may grant a proxy to vote those shares via the Internet or telephonically by using the website or telephone number shown on the instruction form provided to you by your nominee.

In order to vote at the Special Meeting, or any adjournments and postponements of Special Meeting, you must either be a stockholder of record of FCRD Common Stock as of the FCRD Record Date, or you must be a beneficial holder as of the FCRD Record Date and obtain a legal proxy from your broker, bank, trustee, or other nominee. FCRD Stockholders of record will have the opportunity to vote electronically at the Special Meeting after they have checked into the Special Meeting as described above and in the proxy statement/prospectus. If you are a beneficial holder, you must request a legal proxy from your nominee in sufficient time so that it can be obtained, completed and submitted by you and received by FCRD in advance of the Special Meeting.]

The meeting will begin promptly at [11:00 a.m.], Eastern Time, on [ ], 2022. The Special Meeting will be held at [the offices of FCRD, located at 500 Boylston Street, Suite 1200, Boston, MA 02116].

Whether or not you plan to participate in the Special Meeting, FCRD encourages you to vote your shares by following the instructions provided on the enclosed proxy card and voting by Internet or telephone or by signing, dating and returning the proxy card in the postage-paid envelope provided.

Your vote is extremely important to FCRD. In the event there are insufficient votes for a quorum or to approve the Merger Proposal at the time of the Special Meeting, the Special Meeting may be adjourned in order to permit further solicitation of proxies by FCRD.

The Mergers and the Merger Agreement are each described in more detail in this proxy statement/prospectus, which you should read carefully and in its entirety before authorizing a proxy to vote. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus.

 

By Order of the Board of Directors,

 

SABRINA RUSNAK-CARLSON,

General Counsel, Secretary and Interim Chief Compliance Officer of FCRD

Boston, Massachusetts

[•], 2022

To ensure proper representation at the Special Meeting, please follow the instructions on the enclosed proxy card to authorize a proxy to vote your shares via the Internet or telephone, or by signing, dating and returning the proxy card. Even if you vote your shares prior to the Special Meeting, you still may participate in the Special Meeting.

 

5


TABLE OF CONTENTS

 

ABOUT THIS DOCUMENT

     7  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGERS

     8  

SUMMARY OF THE MERGERS

     18  

COMPARATIVE FEES AND EXPENSES

     29  

RISK FACTORS

     34  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     43  

THE SPECIAL MEETING

     45  

THE MERGERS

     48  

DESCRIPTION OF THE MERGER AGREEMENT

     76  

ACCOUNTING TREATMENT

     102  

CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS

     103  

CAPITALIZATION

     120  

PROPOSAL 1: THE MERGER PROPOSAL

     121  

PROPOSAL 2: THE ADJOURNMENT PROPOSAL

     121  

MARKET PRICE INFORMATION

     122  

BUSINESS OF CCAP

     124  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CCAP

     125  

SENIOR SECURITIES OF CCAP

     126  

PORTFOLIO COMPANIES OF CCAP

     131  

MANAGEMENT OF CCAP

     168  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF CCAP

     170  

BUSINESS OF FCRD

     173  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FCRD

     174  

SENIOR SECURITIES OF FCRD

     175  

PORTFOLIO COMPANIES OF FCRD

     177  

MANAGEMENT OF FCRD

     185  

PORTFOLIO MANAGEMENT OF FCRD

     185  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF FCRD

     187  

CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS OF FCRD

     188  

DESCRIPTION OF CAPITAL STOCK OF FCRD

     190  

DESCRIPTION OF CCAP’S CAPITAL STOCK

     194  

DIVIDEND REINVESTMENT PLAN OF CCAP

     201  

FCRD DIVIDEND REINVESTMENT PLAN

     203  

COMPARISON OF STOCKHOLDER RIGHTS

     205  

 

6


REGULATION OF FCRD

     227  

REGULATION OF CCAP

     228  

CUSTODIAN, TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR OF CCAP

     229  

BROKERAGE ALLOCATION AND OTHER PRACTICES

     229  

LEGAL MATTERS

     229  

EXPERTS

     229  

APPRAISAL RIGHTS OF FCRD STOCKHOLDERS

     230  

OTHER MATTERS

     236  

STOCKHOLDERS SHARING AN ADDRESS

     236  

WHERE YOU CAN FIND MORE INFORMATION

     236  

INCORPORATION BY REFERENCE FOR CCAP

     236  

INCORPORATION BY REFERENCE FOR FCRD

     237  

ANNEX A: MERGER AGREEMENT

     238  

ANNEX B: FCRD FAIRENESS OPINION

     239  

 

7


ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form N-14 filed with the U.S. Securities and Exchange Commission (the “SEC”) by Crescent Capital BDC, Inc., a Maryland corporation (“CCAP”) (File No. 333-                ), constitutes a prospectus of CCAP, under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of CCAP common stock, $0.001 par value per share (“CCAP Common Stock”), to be issued to the holders (“FCRD Stockholders”) of shares of common stock, par value $0.001 per share (“FCRD Common Stock”), of First Eagle Alternative Capital BDC, Inc., a Delaware corporation (“FCRD”), pursuant to the Agreement and Plan of Merger, dated as of October 3, 2022 (as may be amended from time to time, the “Merger Agreement”), by and among CCAP, FCRD, Echelon Acquisition Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of CCAP (“Acquisition Sub”), Echelon Acquisition Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of CCAP (“Acquisition Sub 2”), and Crescent Cap Advisors, LLC, a Delaware limited liability company and the external investment adviser to CCAP (“CCAP Advisor”). Pursuant to the Merger Agreement, Acquisition Sub will merge with and into FCRD (the “First Merger”), with FCRD continuing as the surviving corporation and as a wholly-owned subsidiary of CCAP. Subsequently, FCRD, as the surviving corporation, will merge with and into Acquisition Sub 2 (the “Second Merger” and, together with the First Merger, the “Mergers”), with Acquisition Sub 2 continuing as the surviving company and as a wholly-owned subsidiary of CCAP.

This document also constitutes a proxy statement of FCRD under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the Special Meeting of Stockholders of FCRD (the “Special Meeting”), at which FCRD Stockholders will be asked to vote upon the Merger Proposal (as defined below) and, if necessary or appropriate, the Adjournment Proposal (as defined below).

You should rely only on the information contained in this proxy statement/prospectus in determining whether to make an Election. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated                , 2022. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. Neither any mailing of this proxy statement/prospectus to FCRD Stockholders nor the issuance of CCAP Common Stock in connection with the Mergers will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

Except where the context otherwise indicates, information contained in this proxy statement/prospectus regarding CCAP has been provided by CCAP and information contained in this proxy statement/prospectus regarding FCRD has been provided by FCRD.

 

8


QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGERS

The questions and answers below highlight only selected information from this proxy statement/prospectus. They do not contain all of the information that may be important to you. You should carefully read this entire document to fully understand the Merger Agreement and the transactions contemplated thereby (including the Mergers) and the voting procedures for the Special Meeting.

Questions and Answers about the Special Meeting

Why am I receiving these materials?

 

A:

FCRD is furnishing these materials to FCRD Stockholders in connection with the solicitation of proxies by the board of directors of FCRD (the “FCRD Board”) for use at the Special Meeting to be held at [11:00 a.m.], Eastern Time, on [ ], 2022, [at the offices of FCRD, located at 500 Boylston Street, Suite 1200, Boston, MA 02116], and any adjournments or postponements thereof.

This proxy statement/prospectus and the accompanying materials are being sent to stockholders of record of FCRD as of the record date for the Special Meeting on or about [•], 2022, and are available at [www.proxyvote.com].

 

Q:

What items will be considered and voted on at the Special Meeting?

 

A:

At the Special Meeting, FCRD Stockholders will be asked to: (i) adopt the Merger Agreement and approve the transactions contemplated thereby, including the Mergers (such proposal, the “Merger Proposal”); and (ii) approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal (such proposal, the “FCRD Adjournment Proposal” and together with the Merger Proposal, the “FCRD Proposals”). No other matters will be acted upon at the Special Meeting without further notice.

 

Q:

How does the FCRD Board recommend voting on the FCRD Proposals at the Special Meeting?

 

A:

The FCRD Board, based on the unanimous recommendation of the special committee of the FCRD Board (the “Special Committee”) comprised solely of certain independent directors of the FCRD Board who are not “interested persons,” as defined in the Investment Company Act of 1940, as amended (the “Investment Company Act“), of FCRD (the “FCRD Independent Directors”), approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and the FCRD Board recommends that FCRD Stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the FCRD Adjournment Proposal.

 

Q:

If I am an FCRD Stockholder, what is the “Record Date” and what does it mean?

 

A:

The record date for the Special Meeting is [ ], 2022 (the “FCRD Record Date“). The FCRD Record Date was established by the FCRD Board, and only holders of record of shares of FCRD Common Stock at the close of business on the FCRD Record Date are entitled to receive notice of, and vote at, the Special Meeting or any adjournments and postponements of Special Meeting. As of the FCRD Record Date, there were [__] shares of FCRD Common Stock outstanding.

 

Q:

If I am an FCRD Stockholder, how many votes do I have?

 

A:

Each outstanding share of FCRD Common Stock held by a holder of record as of the FCRD Record Date has one vote on each matter to be considered at the Special Meeting.

 

9


Q:

If I am an FCRD Stockholder, how do I vote?

 

A:

If you are a shareholder of record of FCRD as of the record date you may vote your shares of common stock of FCRD on the matters presented at the Special Meeting by any of the following methods:

 

   

Vote by Internet: You may vote via the Internet 24 hours a day, seven days a week, by visiting www.proxyvote.com and following the instructions on your proxy card.

 

   

Vote by Telephone: You may vote via telephone 24 hours a day, seven days a week, by dialing the toll-free number on the instructions included on your proxy card and listening for further directions.

 

   

Vote by Mail: If you received a printed copy of this proxy statement/prospectus, you may complete the enclosed proxy card and sign, date and return it in the enclosed postage-paid envelope.

 

If you are a record holder of FCRD Common Stock, you may authorize a proxy to vote on your behalf by mail or electronically, as described on the enclosed proxy card. Authorizing your proxy will not limit your right to vote in person at the Special Meeting. A properly completed and submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you authorize a proxy without indicating your voting instructions, the proxyholder will vote your shares according to the recommendations of the FCRD Board. Stockholders of record may also vote either via the Internet or by telephone. Specific instructions to be followed by stockholders of record interested in voting via the Internet or telephone are shown on the enclosed proxy card.

 

If you hold shares of FCRD Common Stock in “street name” through a bank, broker, trustee, or other nominee, your bank, broker, trustee, or other nominee will send you separate instructions describing the procedure for voting your shares. If your shares of FCRD Common Stock are held in “street name,” you must obtain a legal proxy, executed in your favor, from the record holder of your shares, such as a bank, broker, trustee, or other nominee, to vote your shares in person at the Special Meeting. If a beneficial shareholder would like to attend the special meeting and cast a vote in person, they may do so by requesting a legal proxy from their bank or broker. Instructions for obtaining a legal proxy are also available at www.proxyvote.com.

 

Important notice regarding the availability of proxy materials for the Special Meeting. FCRD’s proxy statement/prospectus and the proxy card are available at [www.proxyvote.com.]

 

Q:

What if an FCRD Stockholder does not specify a choice for a matter when authorizing a proxy?

 

A:

All properly executed proxies representing shares of FCRD Common Stock at the Special Meeting will be voted in accordance with the directions given. If the enclosed proxy card is signed, dated and returned without any directions given, the shares of FCRD Common Stock will be voted “FOR” each of the FCRD Proposals.

 

Q:

If I am an FCRD Stockholder, how can I change my vote or revoke a proxy after submission?

A: If you are a stockholder of record, you can change your vote or revoke your proxy by:

 

   

delivering a written revocation notice in advance of the Special Meeting, which should be received before 11:59 p.m. Eastern Time on [ ], 2022 to ensure that it is received a sufficient time in advance of the Special Meeting, to FCRD’s Secretary, Sabrina Rusnak-Carlson, at First Eagle Alternative Credit, LLC, 500 Boylston St., Suite 1200, Boston, MA, 02116, Attention: Corporate Secretary;

 

   

submitting a subsequent proxy using the telephone or Internet before 11:59 p.m. Eastern Time on [ ], 2022 (your latest telephone or Internet proxy is the one that will be counted); or

 

10


   

attending and voting during the Special Meeting. Simply logging into the Special Meeting will not, by itself, revoke your proxy.

If you hold shares of FCRD Common Stock through a broker, bank, trustee or nominee, you must follow the instructions you receive from your nominee in order to revoke your voting instructions.

 

Q:

If my shares of FCRD Common Stock are held in a broker-controlled account or in “street name,” will my broker vote my shares for me if I do not provide voting instructions?

 

A:

No. You should follow the instructions provided by your broker on your voting instruction form. It is important to note that your broker will vote your shares only if you provide instructions on how you would like your shares to be voted at the Special Meeting.

 

Q:

What constitutes a “quorum” for the Special Meeting?

 

A:

The presence at the Special Meeting, in-person or represented by proxy, of the holders of a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting will constitute a quorum. Notwithstanding the foregoing, if a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting are not present in person or represented by proxy, the holders of one-third of such shares shall constitute a quorum to the extent permitted by applicable law. Abstentions will be treated as shares present for quorum purposes. Shares held by a broker, bank, trustee or nominee for which the broker, bank, trustee or nominee has not received voting instructions from the beneficial owner as to how to vote such shares and does not have discretionary authority to vote the shares on non-routine proposals will not be treated as shares present for quorum purposes.

 

Q:

What vote is required to approve each of the proposals being considered at the Special Meeting?

 

A:

The affirmative vote of the holders of a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting is required to approve the Merger Proposal. Abstentions and the failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have the same effect as votes “against” the Merger Proposal.

The affirmative vote of the holders of a majority of the shares of FCRD Common Stock present in person or represented by proxy and entitled to vote on the FCRD Adjournment Proposal at the Special Meeting, whether or not a quorum is present, is required to approve the FCRD Adjournment Proposal. Abstentions will have the same effect as a vote “against” approval of the FCRD Adjournment Proposal. The failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have no effect on the outcome of the FCRD Adjournment Proposal.

 

Q:

Do holders of shares of CCAP Common Stock (“CCAP Stockholders”) have a right to vote?

 

A:

No, the transaction is not required to be approved by CCAP Stockholders.

 

Q:

What will happen if the Merger Proposal being considered at the Special Meeting is not approved by the required vote?

 

A:

In the event that FCRD does not achieve a quorum or receives insufficient votes from FCRD Stockholders to approve the Merger Proposal, the Special Meeting may be postponed or adjourned as permitted under FCRD’s By-Laws in order to permit further solicitation of proxies.

 

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If the Mergers do not close because FCRD Stockholders do not approve the Merger Proposal or any of the other conditions to the closing of the Mergers are not satisfied or, if legally permissible, waived, CCAP and FCRD will continue to operate independently under the management of their respective investment advisers, and CCAP’s and FCRD’s respective directors and officers will continue to serve in such roles until their respective successors are duly elected and qualify, or their earlier death, resignation or removal. In addition, neither CCAP nor FCRD will benefit from the expenses incurred in their pursuit of the Mergers and, under certain circumstances, FCRD will be required to reimburse CCAP for its expenses incurred in connection with the Mergers, subject to a maximum reimbursement payment of $1,500,000.

 

Q:

How will the final voting results be announced?

 

A:

Preliminary voting results may be announced at the Special Meeting. Final voting results will be published by FCRD in a current report on Form 8-K within four business days after the date of the Special Meeting.

 

Q:

Are the proxy materials available electronically?

 

A:

FCRD has made the registration statement (of which this proxy statement/prospectus forms a part), the Notice of Special Meeting of Stockholders and the proxy card available to FCRD Stockholders on the Internet. Stockholders may (i) access and review the proxy materials of FCRD, (ii) authorize their proxies, as described in “The Special Meeting—Voting of Proxies” and/or (iii) elect to receive future proxy materials by electronic delivery via the Internet address provided below.

The registration statement (of which this proxy statement/prospectus forms a part), Notice of Special Meeting of Stockholders and the proxy card are available at [www.proxyvote.com].

Pursuant to the rules adopted by the SEC, FCRD furnishes proxy materials by email to those stockholders who have elected to receive their proxy materials electronically. While FCRD encourages stockholders to take advantage of electronic delivery of proxy materials, which helps to reduce the environmental impact of stockholder meetings and the cost associated with the physical printing and mailing of materials, stockholders who have elected to receive proxy materials electronically by email, as well as beneficial owners of shares of FCRD Common Stock held by a broker or custodian, may request a printed set of proxy materials.

 

Q:

Will my vote make a difference?

 

A:

Yes. Your vote is needed to ensure that the FCRD Proposals can be acted upon. Your vote is very important. Your immediate response will help avoid potential delays and may save significant additional expenses associated with soliciting stockholder votes.

 

Q:

Whom can I contact with any additional questions about the Special Meeting?

 

A:

FCRD Stockholders can contact FCRD by calling FCRD collect at (800) 450-4424, by sending an email to FCRD at [ ] , or by writing to FCRD at 500 Boylston St., Suite 1200, Boston, MA, 02116, Attention: Corporate Secretary, or by visiting FCRD’s website at www.firsteagle.com/FEACBDC.

 

Q:

Where can I find more information about CCAP and FCRD?

 

A:

You can find more information about CCAP and FCRD in the documents described under the section entitled “Where You Can Find More Information.

 

Q:

What do I need to do now?

 

A:

CCAP and FCRD urge you to carefully read this entire document, including its annexes. You should also review the documents referenced under “Where You Can Find More Information” and consult with your accounting, legal and tax advisors.

 

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Questions and Answers about the Mergers

 

Q:

What will happen in the Mergers?

 

A:

At the Effective Time (as defined below), Acquisition Sub will be merged with and into FCRD in the First Merger. As of the Effective Time, the separate corporate existence of Acquisition Sub will cease. FCRD will be the surviving corporation of the First Merger and will continue its existence as a corporation under the laws of the State of Delaware until the Second Merger. Subsequently, FCRD, as the surviving corporation in the First Merger, will merge with and into Acquisition Sub 2, with Acquisition Sub 2 as the surviving entity in the Second Merger and a wholly-owned subsidiary of CCAP.

 

Q:

What will FCRD Stockholders receive in the Mergers?

 

A:

Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each FCRD Stockholder shall be entitled to receive with respect to each share of FCRD Common Stock owned by such FCRD Stockholder as of the Determination Date (as defined below) (excluding any shares held by subsidiaries of FCRD or held, directly or indirectly, by CCAP or Acquisition Sub (“Cancelled Shares”)) its portion of the Aggregate Merger Consideration (as defined below), which consists of (a) CCAP Common Stock valued at 100% of the CCAP Per Share NAV in an aggregate number equal to the Closing FCRD Net Asset Value (the “Aggregate Share Consideration”), up to a maximum of 19.99% of outstanding shares of CCAP Common Stock on October 3, 2022 (the “Share Issuance Cap”), (b) cash from CCAP for any amounts not paid in CCAP Common Stock due to the Share Issuance Cap (the “Parent Cash Consideration” and, together with the Aggregate Share Consideration, the “CCAP Aggregate Merger Consideration”) and (c) cash from CCAP Advisor in an amount equal to $35 million (the “CCAP Advisor Cash Consideration”). For more information, see “Description of the Merger Agreement—Merger Consideration” below.

Each person who as of the Effective Time is a record holder of shares of FCRD Common Stock shall be entitled, with respect to all or any portion of such shares, to make an election (an “Election”) to receive each such share’s portion of the CCAP Aggregate Merger Consideration (the “CCAP Merger Consideration”) in cash, subject to the conditions and limitations set forth in the Merger Agreement, including proration and reallocation such that CCAP will issue, in the aggregate, a number of shares of CCAP Common Stock not exceeding the Share Issuance Cap and pay, in the aggregate, an amount of cash not exceeding the Parent Cash Consideration. An “Electing Share” means a share of FCRD Common Stock with respect to which an Election has been effectively made, subject to the conditions and limitations set forth in the Merger Agreement, and not properly revoked or lost. If any record holder of shares of FCRD Common Stock, at the Election Deadline (as defined below), with respect to its shares of FCRD Common Stock, does not properly make an Election or such Election is properly revoked, such share of FCRD Common Stock shall be deemed to have elected to receive payment of the CCAP Merger Consideration for such share of FCRD Common Stock in the form of CCAP Common Stock (any such share, a “Non-Electing Share”). FCRD and CCAP will issue a joint press release at least 10 business days prior to the anticipated Closing Date announcing the anticipated Election Deadline. In addition, if the Aggregate Share Consideration Value (as defined below) is equal to or greater than the Closing FCRD Net Asset Value (as defined below), then each share of FCRD Common Stock shall be deemed to be a Non-Electing Share. For the purpose of making Elections, a record holder of FCRD Common Stock that is a registered clearing agency and whose legal title on behalf of multiple ultimate beneficial owners shall be entitled to submit elections as if each ultimate beneficial owner were a record holder of FCRD Common Stock.

Although the CCAP Aggregate Merger Consideration, which consists of the Aggregate Share Consideration and the Parent Cash Consideration, paid to FCRD Stockholders will equal, in the aggregate, the Closing FCRD Net Asset Value, the CCAP Merger Consideration to be received by an individual FCRD Stockholder for each share of FCRD Common Stock owned by such FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, depending on the Elections made by such FCRD Stockholder and Elections made by other FCRD Stockholders. However, as a result of certain limitations and adjustments pursuant to the terms of the Merger Agreement, including the adjustment mechanisms with respect to Electing Shares and Non-Electing Shares described in “Description of the Merger Agreement—Merger Consideration” and “Description of the Merger AgreementAllocation

 

13


of Merger Consideration and Illustrative Elections and Calculations,” each holder of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time will receive the CCAP Merger Consideration approximately equal to the implied market value of the CCAP Merger Consideration received by other FCRD Stockholders at the Effective Time calculated on the basis of the market value of shares of CCAP Common Stock as of the Determination Date. See “Risk Factors—Risks Relating to the Mergers—The CCAP Merger Consideration received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, and, depending on the Elections made by an FCRD Stockholder and Elections made by other FCRD Stockholders, the CCAP Merger Consideration received may represent a value per share higher or less than the consideration received by other FCRD Stockholders calculated on the basis of the Closing CCAP Net Asset Value.

 

Q:

How do FCRD Stockholders select the type of the CCAP Merger Consideration that such stockholder prefers to receive?

 

A:

A form of election (each, a “Form of Election”) has been provided to record holders of FCRD Common Stock as of the FCRD Record Date. FCRD Stockholders who wish to elect to receive the CCAP Merger Consideration in cash for any or all shares of FCRD Common Stock held by such holder may indicate so on the Form of Election. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee and wish to elect to receive the CCAP Merger Consideration in cash for any or all shares of FCRD Common Stock that you own beneficially, you must direct your intermediary accordingly by following the election instructions you receive from your broker, bank, trustee or other nominee.

FCRD will use its best efforts to make the Form of Election and this proxy statement/prospectus available to all persons who become record holders of FCRD Common Stock during the period between the FCRD Record Date and the Special Meeting. Any such FCRD Stockholder’s Election will be properly made only if the exchange agent (the “Exchange Agent”) has received at its designated office, by 5:00 p.m., New York City time, no later than the business day that is five business days preceding the closing date of the Mergers (the closing date of the Mergers is herein referred to as the “Closing Date”) (such deadline, the “Election Deadline”), a properly completed and signed Form of Election. FCRD and CCAP will issue a joint press release at least [10] business days prior to the anticipated Closing Date announcing the anticipated Election Deadline. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee, the deadline to properly make an Election with respect to such shares of FCRD Common Stock will be set by such broker, bank, trustee or other nominee and may be prior to the Election Deadline. Please contact your broker, bank, trustee or other nominee for more information.

 

Q:

Can FCRD Stockholders change their election after the Form of Election has been submitted?

 

A:

Yes. Any Form of Election may be revoked by the FCRD Stockholder submitting such Form of Election to the Exchange Agent only by written notice received by the Exchange Agent (i) prior to 5:00 p.m., New York City time, on the Election Deadline or (ii) after the date of the Special Meeting, if the Exchange Agent is legally required to permit such revocations and the Effective Time has not occurred prior to such revocation. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee, the process and deadline to revoke any election instruction provided to your intermediary will be established by such broker, bank, trustee or other nominee and may differ from the process and deadline set forth in the immediately preceding sentence. Please contact your broker, bank, trustee or other nominee for more information. In addition, all Forms of Election will automatically be revoked if the Exchange Agent is notified in writing by CCAP and FCRD that the First Merger has been abandoned. Any FCRD Stockholder who has revoked its Form of Election and has not submitted a separate Form of Election by the proper time on the Election Deadline will be deemed not to have made an Election, the shares held by such holder will be treated by the Exchange Agent as Non-Electing Shares.

 

14


The Exchange Agent will have discretion to determine whether or not an election to receive the CCAP Merger Consideration in cash has been properly made or revoked with respect to shares of FCRD Common Stock and when elections and revocations were received by it. If the Exchange Agent determines that any election to receive cash was not properly made with respect to a share of FCRD Common Stock, such share will be treated by the Exchange Agent as a Non-Electing Share. The Exchange Agent will also make all computations as to the allocation and the proration contemplated by the provisions of the Merger Agreement and any such computation will be conclusive and binding on the FCRD Stockholders. The Exchange Agent may, with the mutual agreement of CCAP and FCRD, make such rules as are consistent with the provisions of the Merger Agreement for the implementation of the Elections provided for therein as will be necessary or desirable fully to effect such Elections.

 

Q:

How will the Closing Net Asset Values of CCAP and FCRD be determined?

 

A:

Under the Merger Agreement, on the date which is two days prior to the Closing Date (the “Determination Date”), each of CCAP and FCRD will deliver to the other a calculation of its estimated net asset value (“NAV”) as of 5:00 p.m. New York City time as of the Determination Date (such calculation with respect to FCRD, the “Closing FCRD Net Asset Value,” and such calculation with respect to CCAP, the “Closing CCAP Net Asset Value”), in each case, including reasonable supporting detail, as approved by the board of directors of FCRD (the “FCRD Board”) or the board of directors of CCAP (the “CCAP Board”), as applicable, calculated in good faith and using the same assumptions and methodologies, and applying the same types of adjustments, as agreed by the parties in the Merger Agreement. FCRD and CCAP will update and redeliver the Closing FCRD Net Asset Value or the Closing CCAP Net Asset Value, respectively, and as reapproved by the FCRD Board or CCAP Board, as applicable, in the event that the Closing is subsequently materially delayed or there is a material change to such calculation between the Determination Date and the Closing (including without limitation any dividend declared after the Determination Date but prior to the Closing) or if needed to ensure that the calculation is determined within two days (excluding Sundays and holidays) prior to the Effective Time. Based on such calculations, the parties will calculate (i) the “CCAP Per Share NAV,” which will be equal to (a) the Closing CCAP Net Asset Value divided by (b) the number of shares of CCAP Common Stock issued and outstanding as of the Determination Date, and (ii) the “FCRD Per Share NAV,” which will be equal to (x) the Closing FCRD Net Asset Value divided by (y) the number of shares of FCRD Common Stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares).

 

Q:

Who is responsible for paying the expenses relating to completing the Mergers?

 

A:

In general, all fees and expenses incurred in connection with the Mergers will be paid by the party incurring such fees and expenses, whether or not the Mergers or any of the transactions contemplated in the Merger Agreement are consummated; provided that CCAP will pay all the fees and expenses in respect of the preparation, filing and mailing of this proxy statement/prospectus and the registration statement on Form N-14 (of which this proxy statement/prospectus forms a part) and the conduct of the Special Meeting. However, FCRD will be required to reimburse CCAP and its affiliates for all of their documented out-of-pocket fees and expenses incurred and payable by CCAP, Acquisition Sub or Acquisition Sub 2 or on their behalf in connection with the Merger Agreement and the transactions contemplated thereby, subject to a maximum reimbursement payment of $1,500,000, if the Merger Proposal is not approved by FCRD Stockholders at the Special Meeting in circumstances where FCRD has no obligation to pay to CCAP a termination fee. It is expected that CCAP will incur approximately $[•] and FCRD will incur approximately $[•] of fees and expenses in connection with completing the Mergers.

 

Q:

Will I receive distributions after the Mergers?

 

A:

Each FCRD Stockholder who holds Non-Electing Shares at the Effective Time (whether (a) by not having properly made an election to receive the CCAP Merger Consideration in cash or (b) due to each share of FCRD Common Stock being deemed a Non-Electing Share as a result of the Aggregate Share Consideration being equal to or greater than the Closing FCRD Net Asset Value) or who receives a portion of the CCAP Merger Consideration in shares of CCAP Common Stock pursuant to proration or reallocation as set forth in the Merger Agreement will become a stockholder of CCAP and will receive any future distributions paid to CCAP Stockholders with respect to shares of CCAP Common Stock received in the Mergers.

 

15


Following the Mergers, CCAP intends to continue to make distributions on a quarterly basis to CCAP Stockholders out of assets legally available for distribution. All distributions will be paid at the discretion of the CCAP Board and will depend on CCAP’s earnings, financial condition, maintenance of its status as a “regulated investment company” (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), compliance with applicable business development company (“BDC”) regulations and such other factors as the CCAP Board may deem relevant from time to time. CCAP cannot guarantee that it will pay distributions to stockholders in the future. For a history of the dividends and distributions paid by CCAP since January 1, 2020, see “Market Price Information—CCAP.” For a history of the dividends and distributions paid by FCRD since January 1, 2020, see “Market Price Information—FCRD.

CCAP has adopted a dividend reinvestment plan that provides for reinvestment of CCAP’s distributions on behalf of CCAP’s stockholders, unless a stockholder elects to receive cash as provided below. As a result, if the CCAP Board authorizes, and CCAP declares, a cash distribution, then CCAP Stockholders (including holders of CCAP Common Stock as a result of the Mergers) who have not “opted out” of the CCAP Plan will have their cash distributions automatically reinvested in additional shares of CCAP Common Stock, rather than receiving the cash. If a FCRD Stockholder currently receives dividend payments in cash, and receives CCAP Common Stock as a result of the Mergers, such stockholder will be required to “opt out” of CCAP’s dividend reinvestment plan following the Mergers to continue to receive dividend payments in cash. See “CCAP Dividend Reinvestment Plan” for additional information regarding the CCAP Plan and for instructions as to how to “opt out” of the CCAP Plan.

 

Q:

Are the Mergers subject to any third-party consents?

 

A:

Under the Merger Agreement, FCRD and CCAP have agreed to cooperate with each other and use their respective reasonable best efforts to obtain all necessary actions or non-actions, consents and approvals from third parties to consummate the transactions contemplated by the Merger Agreement, including the First Merger, and to make all necessary and to take all reasonable steps as may be necessary to obtain third party approvals to consummate the transactions contemplated by the Merger Agreement, including the First Merger. There can be no assurance that any permits, consents, approvals, confirmations or authorizations will be obtained or that such permits, consents, approvals, confirmations or authorizations will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following the Mergers.

 

Q:

How does CCAP’s investment objective, strategy and risks differ from FCRD’s?

 

A:

CCAP and FCRD have substantially similar risks as each focuses on making debt investments in middle market companies.

CCAP’s investment objective is to maximize the total return to CCAP’s stockholders in the form of current income and capital appreciation through debt and related equity investments. CCAP invests primarily in secured debt (including first lien, unitranche first lien, and second-lien debt) and unsecured debt (including mezzanine and subordinated debt), as well as related equity securities of private U.S. middle-market companies. CCAP may purchase interests in loans or make debt investments, either (i) directly from CCAP’s target companies as primary market or private credit investments (i.e., private credit transactions), or (ii) primary or secondary market bank loan or high yield transactions in the broadly syndicated “over-the-counter” market (i.e., broadly syndicated loans and bonds). Although CCAP’s focus is to invest in less liquid private credit transactions, CCAP may from time to time invest in more liquid broadly syndicated loans to complement CCAP’s private credit transactions.

FCRD’s investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. FCRD is a direct lender to middle market companies that invests primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, FCRD also makes second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity investments. FCRD’s first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. FCRD also provides advisory services to managed funds.

 

16


Over time, CCAP expects to rotate certain of the investments acquired in the Mergers into investments consistent with CCAP’s investment strategy.

 

Q:

How will the combined company be managed following the Mergers?

 

A:

Acquisition Sub 2, the surviving company resulting from the Mergers, will be a wholly-owned subsidiary of CCAP, subject to the management of CCAP Advisor under the direction of the CCAP Board, and FCRD Common Stock will no longer be publicly traded. The directors of CCAP immediately prior to the Mergers will remain the directors of CCAP and will hold office until their respective successors are duly elected and qualify, or their earlier death, resignation or removal. The officers of CCAP immediately prior to the Mergers will remain the officers of CCAP and will hold office until their respective successors are duly appointed and qualify, or their earlier death, resignation or removal. Following the Mergers, CCAP will continue to be managed by CCAP Advisor, and there are not expected to be any material changes in CCAP’s investment objective or strategy. The investments of FCRD held immediately prior to the Mergers will be held by Acquisition Sub 2 after consummation of the Mergers. See “The Mergers—Interests of Certain Persons Related to FCRD in the Mergers” for information regarding the transition services agreement between CCAP Advisor and FCRD Advisor pursuant to which FCRD Advisor will provide certain consulting services to CCAP Advisor relating to FCRD’s existing investment portfolio subsequent to the Closing Date.

 

Q:

Are FCRD Stockholders able to exercise appraisal rights in connection with the Mergers?

 

A:

Yes. FCRD Stockholders and “beneficial owners” (as defined in Section 262 of the Delaware General Corporation Law (the “DGCL”)) will be entitled to exercise appraisal rights with respect to the First Merger in accordance with Section 262 of the DGCL. For more information, see “Appraisal Rights of FCRD Stockholders and Beneficial Owners” and “Description of the Merger Agreement—Appraisal Rights.

 

Q:

When do the parties expect to complete the Mergers?

 

A:

While there can be no assurance as to the exact timing, or that the Mergers will be completed at all, CCAP and FCRD are working to complete the Mergers as early as the fourth quarter of 2022 or the first quarter of 2023. It is currently expected that the Mergers will be completed promptly following receipt of the FCRD Stockholder Approval (as defined below) at the Special Meeting, along with the satisfaction or (to the extent legally permissible) waiver of the other closing conditions set forth in the Merger Agreement.

 

Q:

Are the Mergers expected to be taxable to FCRD Stockholders?

 

A:

Subject to the discussion below, the Mergers, taken together, may qualify as a “reorganization,” within the meaning of Section 368(a) of the Code. If the Mergers qualify as a reorganization for U.S. federal income tax purposes, U.S. stockholders (as defined in the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers”) who receive a combination of shares of CCAP Common Stock and cash, other than cash in lieu of a fractional share of CCAP Common Stock, in exchange for their FCRD Common Stock, will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount by which the sum of the fair market value of the shares of CCAP Common Stock and cash (other than cash received in lieu of a fractional share of CCAP Common Stock) received by such holder in exchange for its shares of FCRD Common Stock (such cash including the holder’s share of the Parent Cash Consideration and possibly, as discussed below, the holder’s share of the CCAP Advisor Cash Consideration) exceeds such holder’s adjusted basis in its shares of FCRD Common Stock, and (ii) the amount of cash (other than cash received in lieu of a fractional share of CCAP Common Stock) received by such holder in exchange for its shares of FCRD Common Stock (such cash including the holder’s share of the Parent Cash Consideration and possibly, as discussed below, the holder’s share of the CCAP

 

17


  Advisor Cash Consideration). A U.S. stockholder will also recognize gain or loss attributable to any cash received in lieu of a fractional share of CCAP Common Stock in an amount equal to the difference between the amount of cash received and the portion of the basis of the CCAP Common Stock received that is deemed allocable to the fractional share. Generally, any gain recognized upon the exchange will be capital gain, and any such capital gain will be long-term capital gain if the holding period for such shares of FCRD Common Stock is more than one year. Depending on certain facts specific to you, gain could instead be characterized as ordinary dividend income.

With respect to the CCAP Advisor Cash Consideration, there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror and, as a result, the tax consequences of the receipt of the CCAP Advisor Cash Consideration are not entirely clear. CCAP, CCAP Advisor and the Exchange Agent intend to take the position that a U.S. stockholder’s share of the CCAP Advisor Cash Consideration received by such holder is treated as additional merger consideration. It is possible, however, that the Internal Revenue Service (the “IRS”) would assert a contrary position that the U.S. stockholder’s share of the CCAP Advisor Cash Consideration should be treated as taxable ordinary income and not as cash received in exchange for such holder’s FCRD Common Stock. In addition, given the uncertain tax treatment of the CCAP Advisor Cash Consideration, CCAP Advisor or the Exchange Agent, or any other applicable withholding agent, may withhold tax at a rate of 30% from the portion of the CCAP Advisor Cash Consideration paid to a non-U.S. stockholder (as defined in the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers”), unless the non-U.S. stockholder establishes its eligibility for a reduced treaty rate or an exemption.

In addition, the Mergers will not qualify as a reorganization if the fair market value of the CCAP Common Stock received by FCRD Stockholders in the Mergers does not equal or exceed 40% of the aggregate consideration. As noted below under “Description of the Merger AgreementMerger Consideration,” subject to the terms and conditions of the Merger Agreement, upon completion of the Mergers, each FCRD Stockholder will receive, in exchange for each share of FCRD Common Stock (excluding Cancelled Shares), its portion of the Aggregate Merger Consideration consisting of (a) the Aggregate Share Consideration, up to the Share Issuance Cap, (b) the Parent Cash Consideration and (c) the CCAP Advisor Cash Consideration. The amount of CCAP Common Stock and cash to be transferred in the Mergers is subject to adjustments.

If the Mergers do not qualify as a reorganization, U.S. stockholders will be treated as having sold their FCRD Common Stock in a taxable sale and will generally recognize gain or loss equal to the difference between the fair market value of the CCAP Common Stock and cash received (including such holder’s share of the Parent Cash Consideration and possibly, as discussed above, the CCAP Advisor Cash Consideration) and the basis in his or her FCRD Common Stock. This gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the Mergers, the holding period for such shares of FCRD Common Stock is greater than one year. The deductibility of capital losses is subject to limitations. The aggregate tax basis of an FCRD Stockholder in the CCAP Common Stock received in the Mergers will equal its fair market value at the Effective Time, and the holding period for the CCAP Common Stock will begin the day after the Effective Time. For more information, see “Certain Material U.S. Federal Income Tax Consequences of the Mergers.” FCRD Stockholders are urged to consult with their own tax advisors to determine the tax consequences of the Mergers to them.

 

Q:

What happens if the Mergers are not consummated?

 

A:

If the Mergers are not approved by the requisite vote of FCRD Stockholders, or if the Mergers are not completed for any other reason, FCRD Stockholders will not receive any payment for their shares of FCRD Common Stock in connection with the Mergers. Instead, FCRD will remain an independent company. In addition, under circumstances specified in the Merger Agreement, FCRD may be required to pay CCAP a termination fee of approximately $5.556 million or reimburse CCAP and its affiliates for all of their documented out-of-pocket fees and expenses incurred and payable by CCAP, Acquisition Sub or Acquisition Sub 2 or on their behalf in connection with the Merger Agreement and the transactions contemplated thereby, subject to a maximum reimbursement amount of $1.5 million. Similarly, under circumstances specified in the Merger Agreement, CCAP may be required to pay FCRD a termination fee of approximately $7.143 million. See “Description of the Merger Agreement—Termination of the Merger Agreement” and “Description of the Merger Agreement—Termination Fee; Description of the Merger Agreement—Termination Fees—Reimbursement of CCAP Expenses.”

 

 

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SUMMARY OF THE MERGERS

This summary highlights selected information contained elsewhere in this proxy statement/prospectus and may not contain all of the information that is important to you. You should read this entire proxy statement/prospectus carefully, including “Risk Factors” and other information incorporated by reference for a more complete understanding of the Mergers. In particular, you should read the annexes attached to this proxy statement/prospectus, including the Merger Agreement, which is attached as Annex A hereto, as it is the legal document that governs the Mergers. The discussion in this proxy statement/prospectus, which includes the material terms of the Mergers and the principal terms of the Merger Agreement, is subject to, and is qualified in its entirety by reference to, the Merger Agreement. See “Where You Can Find More Information,” “Incorporation by Reference for CCAP” and “Incorporation by Reference for FCRD.” For a discussion of the risk factors you should carefully consider, see the section entitled “Risk Factors” beginning on page 35 for risks related to the Mergers and “Risk Factors” in Part I, Item 1A of both CCAP’s and FCRD’s Annual Reports on Form 10-K for the fiscal year ended December 31, 2021, for general risks related to CCAP and FCRD.

The Parties to the Mergers

Crescent Capital BDC, Inc.

11100 Santa Monica Blvd., Suite 2000

Los Angeles, CA 90025

CCAP is a specialty finance company focused on lending to middle-market companies. CCAP was incorporated under the laws of the State of Delaware on February 5, 2015. On January 30, 2020, CCAP changed its state of incorporation from the State of Delaware to the State of Maryland and, on January 31, 2020, CCAP completed a transaction to acquire Alcentra Capital Corporation in a cash and stock transaction. The CCAP Common Stock was listed and began trading on Nasdaq on February 3, 2020.

CCAP’s primary investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments. CCAP seeks to achieve its investment objectives by investing primarily in secured debt (including senior secured first lien, unitranche and senior secured second-lien debt) and unsecured debt (including senior unsecured, mezzanine and subordinated debt), as well as related equity securities of private U.S. middle-market companies. CCAP may purchase interests in loans or make debt investments, either (i) directly from our target companies as primary market or private credit investments (i.e., private credit transactions), or (ii) primary or secondary market bank loan or high yield transactions in the broadly syndicated “over-the-counter” market (i.e., broadly syndicated loans and bonds). Although CCAP’s focus is to invest in less liquid private credit transactions, it may from time to time invest in more liquid broadly syndicated loans and bonds to complement its private credit transactions.

First Eagle Alternative Capital BDC, Inc.

500 Boylston St., Suite 1200

Boston, Massachusetts 02116

(800) 450-4424

FCRD is an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the Investment Company Act. In addition, FCRD has elected to be treated for tax purposes as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. FCRD is also registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

 

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FCRD was incorporated in Delaware on May 26, 2009 under the name THL Credit, Inc. FCRD completed its initial public offering in April 2010. On January 31, 2020, First Eagle Investments, LLC, formerly known as First Eagle Investment Management, LLC (“FEIM”), completed its acquisition of the investment adviser (the “Transaction”) and, in conjunction with the completion of the Transaction, the investment adviser’s name was changed to First Eagle Alternative Credit, LLC (“FEAC” or the “FCRD Adviser”). FCRD’s investment activities are managed by FEAC and supervised by the FCRD Board, a majority of whom are independent of FEAC and its affiliates.

FCRD’s investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of middle market companies. FCRD is a direct lender to middle market companies that invests primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, FCRD makes subordinated debt investments, which may include an associated equity component such as warrants, preferred stock or similar securities, and direct equity co-investments. FCRD may also provide advisory services to managed funds. FCRD defines middle market companies to mean both public and privately-held companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, generally between $5 million and $25 million.

FCRD’s Common Stock is traded on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbol “FCRD.” FCRD’s 5.00% Senior Notes (the “FCRD Notes” or the “Existing Notes”) due in 2026 are traded on the New York Stock Exchange under the ticker symbol “FCRX.”

Echelon Acquisition Sub, Inc.

11100 Santa Monica Blvd., Suite 2000

Los Angeles, CA 90025

Acquisition Sub is a Delaware corporation and a newly formed, wholly owned subsidiary of CCAP. Acquisition Sub was formed in connection with and for the sole purpose of the Mergers.

Echelon Acquisition Sub LLC

11100 Santa Monica Blvd., Suite 2000

Los Angeles, CA 90025

Acquisition Sub is a Delaware limited liability company and a newly formed, wholly owned subsidiary of CCAP. Acquisition Sub 2 was formed in connection with and for the sole purpose of the Mergers.

Crescent Cap Advisors, LLC

11100 Santa Monica Blvd., Suite 2000

Los Angeles, CA 90025

CCAP is externally managed and advised by CCAP Advisor, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). CCAP Advisor directs and executes CCAP’s investment operations and capital raising activities subject to the oversight of the CCAP Board, which sets CCAP’s broad policies.

The CCAP Advisor has entered into a resource sharing agreement with Crescent Capital Group LP (“Crescent”), pursuant to which Crescent provides the CCAP Advisor with experienced investment professionals (including the members of the CCAP Advisor’s investment committee) and access to the resources of Crescent so as to enable the CCAP Advisor to fulfill its obligations under the CCAP’s Investment Advisory Agreement. Through the resource sharing agreement, the CCAP Advisor capitalizes on the deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Crescent’s investment professionals.

Structure of the Mergers

Pursuant to the terms of the Merger Agreement, at the Effective Time, Acquisition Sub will be merged with and into FCRD. FCRD will be the surviving corporation and a wholly owned subsidiary of CCAP and will continue its existence as a corporation under the laws of the State of Delaware. As of the Effective Time, the separate corporate existence of Acquisition Sub will cease. Subsequently, FCRD will merge with and into Acquisition Sub 2, with Acquisition Sub 2 as the surviving entity in the Second Merger and a wholly owned subsidiary of CCAP.

 

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Based on the number of shares of CCAP Common Stock issued and outstanding as of October 3, 2022 and the NAV per share of FCRD Common Stock and CCAP Common Stock as of June 30, 2022, it is expected that, following consummation of the Mergers, current CCAP Stockholders will own approximately 83% of the outstanding CCAP Common Stock and former FCRD Stockholders will own approximately 17% of the outstanding CCAP Common Stock.

Merger Consideration

Under the Merger Agreement, on the Determination Date, each of CCAP and FCRD will deliver to the other a calculation of its estimated NAV as of 5:00 p.m. New York City time as of the Determination Date, in each case, as approved by the FCRD Board or CCAP Board, as applicable, calculated in good faith and based on certain agreed upon assumptions and methodologies, and applying certain agreed upon adjustments. FCRD and CCAP will update and redeliver the Closing FCRD Net Asset Value or the Closing CCAP Net Asset Value, respectively, and as reapproved by the FCRD Board or CCAP Board, as applicable, in the event that the Closing is materially delayed or there is a material change to such calculation between the Determination Date and the Closing Date (including without limitation any dividend declared after the Determination Date but prior to Closing) and as needed to ensure that the calculation is determined within two days (excluding Sundays and holidays) prior to the Effective Time.

Subject to the terms and conditions of the Merger Agreement, at the Closing, CCAP will issue, in respect of all of the issued and outstanding shares of FCRD Common Stock (excluding FCRD treasury shares and all shares of FCRD Common Stock issued and outstanding immediately prior to the Effective Time that are owned by CCAP, Acquisition Sub, FCRD or any wholly-owned subsidiary thereof) in the aggregate, a number of shares of CCAP Common Stock equal to such number of FCRD Common Stock multiplied by the Exchange Ratio (as defined below), provided that in no event will such number of shares of issued CCAP Common Stock exceed 19.99% of the number of shares of CCAP Common Stock issued and outstanding immediately as of October 3, 2022 (the “Aggregate Share Consideration”). In addition, subject to the terms and conditions of the Merger Agreement, at the Closing, CCAP will pay, in respect of all the issued and outstanding shares of FCRD Common Stock (excluding Cancelled Shares) in the aggregate, an amount of cash equal to the value by which the Closing FCRD Net Asset Value exceeds the Aggregate Share Consideration Value (the “Parent Cash Consideration”), calculated in good faith. In addition, at the Closing, each such share of FCRD Common Stock will be entitled to receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration. The “Exchange Ratio” means the quotient (rounded to four decimal places) of (i) the FCRD Per Share NAV divided by (ii) the CCAP Per Share NAV, as may be adjusted pursuant to the Merger Agreement.

Each person who as of the Effective Time is a record holder of shares of FCRD Common Stock will be entitled, with respect to all or any portion of such shares, to make an election (an “Election”) to receive the CCAP Merger Consideration for their shares of FCRD Common Stock in cash, at the rate, and subject to the conditions and limitations, set forth in the Merger Agreement. Any record holder of shares of FCRD Common Stock at the record date who does not make an Election will be deemed to have elected to receive payment for their shares of FCRD Common Stock in the form of CCAP Common Stock. For the purpose of making Elections, a record holder of FCRD Common Stock that is a registered clearing agency and which holds legal title on behalf of multiple ultimate beneficial owners shall be entitled to submit elections as if each ultimate beneficial owner were a record holder of FCRD Common Stock.

Each share of FCRD Common Stock (other than a Cancelled Share) outstanding immediately prior to the Effective Time with respect to which an Election has been made (an “Electing Share”) will be converted into the right to receive an amount in cash equal to the Per Share NAV, subject to certain adjustments as described below, as well as the right to receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration. The “Per Share NAV” shall mean an amount in cash equal to the Closing FCRD Net Asset Value per share. The amount of cash to be paid by CCAP as ultimately determined is referred to as the “Per Share Cash Price.”

Each share of FCRD Common Stock (other than a Cancelled Share) outstanding immediately prior to the Effective Time with respect to which an election has not been made (a “Non-Electing Share”) shall be converted into the right to receive a number shares of CCAP Common Stock, equal to the Exchange Ratio (the “Proposed Stock Issuance Amount”), subject to certain adjustments as described below, as well as the right to

 

21


receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration. The amount of CCAP Common Stock to be issued for each Non-Electing Share as ultimately determined is referred to as the “Per Share Stock Consideration” (and, together with the Per Share Cash Price, the “Per Share Merger Consideration”).

If the product of the Proposed Stock Issuance Amount is greater than the Aggregate Share Consideration, then the shares of CCAP Common Stock constituting the Aggregate Share Consideration will be delivered on a pro rata basis (determined on a whole-share basis) in respect of such Non-Electing Shares, and the remainder of the CCAP Aggregate Merger Consideration will be paid to such stockholders in cash. Any such reduction in the number of Non-Electing Shares will be applied among all stockholders who hold Non-Electing Shares, pro rata based on the aggregate number of Non-Electing Shares held by each such stockholder.

If the amount of cash elected to be received is an amount greater than the Parent Cash Consideration, then the cash constituting the Parent Cash Consideration will be delivered on a pro rata basis in respect of such Electing Shares, and the remainder of the CCAP Aggregate Merger Consideration will be paid to such stockholders in shares of CCAP Common Stock. Any such reduction in the number of Electing Shares shall be applied among all stockholders who hold Electing Shares, pro rata based on the aggregate number of Electing Shares held by each such stockholder.

Although the Merger Consideration (excluding the CCAP Advisor Cash Consideration) paid to FCRD Stockholders will equal, in the aggregate, the Closing FCRD Net Asset Value, the Per Share Merger Consideration to be received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share and, depending on the Elections made by such FCRD Stockholder and Elections made by other FCRD Stockholders, may represent a value per share higher or less than the consideration received by other FCRD Stockholders calculated on the basis of the Closing CCAP Net Asset Value. However, as a result of certain limitations and adjustments pursuant to the terms of the Merger Agreement, including the adjustment mechanisms with respect to Non-Electing Shares described in “Description of the Merger Agreement—Merger Consideration” and “Description of the Merger AgreementAllocation of Merger Consideration and Illustrative Elections and Calculations,” each holder of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time will receive Per Share Merger Consideration approximately equal to the implied market value of the Per Share Merger Consideration received by other FCRD Stockholders at the Effective Time calculated on the basis of the market value of shares of CCAP Common Stock as of the Determination Date. See “Risk Factors—Risks Relating to the Mergers—The Per Share Merger Consideration received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, and, depending on the Elections made by an FCRD Stockholder and Elections made by other FCRD Stockholders, the Per Share Merger Consideration received may represent a value per share higher or less than the consideration received by other FCRD Stockholders calculated on the basis of the Closing CCAP Net Asset Value.

A Form of Election has been or will be provided to record holders of FCRD Common Stock as of the record date for the Special Meeting. FCRD Stockholders who wish to elect to receive the Per Share Cash Price for any or all shares of FCRD Common Stock held by such holder may indicate so on the Form of Election. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee and wish to elect to receive the Per Share Cash Price for any or all shares of FCRD Common Stock that you own beneficially, you must direct your intermediary accordingly by following the election instructions you receive from your broker, bank, trustee or other nominee.

FCRD will use its best efforts to make the Form of Election and this proxy statement/prospectus available to all persons who become record holders of FCRD Common Stock during the period between such record date and the Special Meeting. Any such holder’s election to receive the Per Share Cash Price will be properly made only if the Exchange Agent has received at its designated office, by the Election Deadline, a Form of Election properly completed and signed. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee, the deadline to properly elect to receive the Per Share Cash Price for any or all shares of FCRD Common Stock that you own beneficially will be set by such broker, bank, trustee or other nominee and may be prior to the Election Deadline. Please contact your broker, bank, trustee or other nominee for more information.

 

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Any Form of Election may be revoked by the FCRD Stockholder submitting such Form of Election to the Exchange Agent only by written notice received by the Exchange Agent (i) prior to 5:00 p.m., New York City time, on the Election Deadline or (ii) after the date of the Special Meeting, if the Exchange Agent is legally required to permit such revocations and the Effective Time has not occurred prior to such revocation. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee, the process and deadline to revoke any election instruction provided to your intermediary will be established by such broker, bank, trustee or other nominee and may differ from the process and deadline set forth in the immediately preceding sentence. Please contact your broker, bank, trustee or other nominee for more information.

In addition, all Forms of Election will automatically be revoked if the Exchange Agent is notified in writing by CCAP and FCRD that the First Merger has been abandoned. Any FCRD Stockholder who has revoked their Form of Election and has not submitted a separate Form of Election by the proper time on the Election Deadline will be deemed not to have made an Election, the shares held by such holder will be treated by the Exchange Agent as Non-Electing Shares.

The Exchange Agent will have discretion to determine whether or not an election to receive the Per Share Cash Price has been properly made or revoked with respect to shares of FCRD Common Stock and when elections and revocations were received by it. If the Exchange Agent determines that any election to receive the Per Share Cash Price was not properly made with respect to shares of FCRD Common Stock, such shares will be treated by the Exchange Agent as shares that were Non-Electing Shares. The Exchange Agent will also make all computations as to the allocation and the proration contemplated by the provisions of the Merger Agreement and any such computation will be conclusive and binding on the FCRD Stockholders. The Exchange Agent may, with the mutual agreement of CCAP and FCRD, make such rules as are consistent with the provisions of the Merger Agreement for the implementation of the Elections provided for therein as will be necessary or desirable fully to effect such Elections.

CCAP Advisor Cash Consideration

In connection with the transactions contemplated by the Merger Agreement, as additional consideration to the holders of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time (excluding any Cancelled Shares), CCAP Advisor will pay or cause to be paid to such holders an aggregate amount in cash equal to $35 million (the “CCAP Advisor Cash Consideration”).

Market Price of Securities

Shares of CCAP Common Stock trade on Nasdaq under the symbol “CCAP.” Shares of FCRD Common Stock trade on the Nasdaq under the symbol “FCRD.”

The following table presents the closing sales prices as of the last trading day before execution of the Merger Agreement and the last trading day before the date of this proxy statement/prospectus, and the most recently determined NAV per share of each of CCAP Common Stock and FCRD Common Stock.

 

     CCAP
Common
Stock
    FCRD
Common
Stock
 

NAV per Share as June 30, 2022

   $ 20.69     $ 5.30  

Closing Sales Price as of October 3, 2022

   $ 14.89     $ 2.93  

Closing Sales Price at [•], 2022

   $ [ •]    $ [ •] 

 

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Risks Relating to the Proposed Mergers

The Mergers are subject to, among others, the following risks. FCRD Stockholders should carefully consider these risks before deciding to vote on the proposals to be voted on at the Special Meeting.

 

   

Because the market price of CCAP Common Stock and the NAV per share of CCAP and FCRD will fluctuate, FCRD Stockholders cannot be sure of the market value or exact composition of the Merger Consideration they will receive until the Closing Date.

 

   

The CCAP Merger Consideration received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, and, depending on the Elections made by an FCRD Stockholder and Elections made by other FCRD Stockholders, the CCAP Merger Consideration received may represent a value per share higher or less than the consideration received by other FCRD Stockholders calculated on the basis of the Closing CCAP Net Asset Value.

 

   

Sales of shares of CCAP Common Stock after the completion of the Mergers may cause the market price of CCAP Common Stock to decline.

 

   

Consummation of the Mergers will cause immediate dilution to CCAP Stockholders’ and FCRD Stockholders’ voting interests and may cause immediate dilution to the NAV per share of the combined company’s common stock.

 

   

FCRD Stockholders may receive a form or combination of consideration different from what they elect.

 

   

The combined company may be unable to realize the benefits anticipated by the Mergers, including estimated cost savings and synergies, or it may take longer than anticipated to achieve such benefits.

 

   

The Mergers may trigger certain “change of control” provisions and other restrictions in certain of CCAP’s and FCRD’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.

 

   

The opinion delivered to the FCRD Board and the Special Committee by the FCRD Board’s financial advisor prior to signing the Merger Agreement will not reflect changes in circumstances since the date of such opinion.

 

   

Litigation which may be filed against FCRD or CCAP in connection with the Mergers, regardless of its merits, could result in substantial costs and could delay or prevent the Mergers from being completed.

 

   

Termination of the Merger Agreement could negatively impact FCRD and CCAP.

 

   

Under certain circumstances, FCRD or CCAP may be obligated to pay a termination fee upon termination of the Merger Agreement.

 

   

The Merger Agreement limits FCRD’s ability to pursue alternatives to the Mergers; however, in specified circumstances, FCRD may terminate the Merger Agreement to accept a superior proposal.

 

   

The Mergers are subject to closing conditions, including the FCRD Stockholder Approval, that, if not satisfied or waived, will result in the Mergers not being completed, which may result in material adverse consequences to CCAP’s and FCRD’s business and operations.

 

   

FCRD may waive one or more conditions to the Mergers without resoliciting stockholder approval.

 

   

Certain persons related to FCRD have interests in the Mergers that differ from the interests of FCRD Stockholders.

 

   

CCAP and FCRD will be subject to operational uncertainties and contractual restrictions while the Mergers are pending.

 

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The shares of CCAP Common Stock to be received by FCRD Stockholders as a result of the Mergers will have different rights associated with them than the shares of FCRD Common Stock currently held by them. If the Mergers do not qualify as a reorganization under Section 368(a) of the Code, FCRD Stockholders may be required to pay substantial U.S. federal income taxes.

See the section captioned “Risk Factors—Risks Relating to the Mergers” below for a more detailed discussion of these factors.

Tax Consequences of the Mergers

Subject to the discussion below, the Mergers, taken together, may qualify as a “reorganization,” within the meaning of Section 368(a) of the Code. If the Mergers qualify as a reorganization for U.S. federal income tax purposes, U.S. stockholders (as defined in the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers”) who receive a combination of shares of CCAP Common Stock and cash, other than cash in lieu of a fractional share of CCAP Common Stock, in exchange for their FCRD Common Stock, will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount by which the sum of the fair market value of the shares of CCAP Common Stock and cash (other than cash received in lieu of a fractional share of CCAP Common Stock) received by such holder in exchange for its shares of FCRD Common Stock (such cash including the holder’s share of the Parent Cash Consideration and possibly, as discussed below, the holder’s share of the CCAP Advisor Cash Consideration) exceeds such holder’s adjusted basis in its shares of FCRD Common Stock, and (ii) the amount of cash (other than cash received in lieu of a fractional share of CCAP Common Stock) received by such holder in exchange for its shares of FCRD Common Stock (such cash including the holder’s share of the Parent Cash Consideration and possibly, as discussed below, the holder’s share of the CCAP Advisor Cash Consideration). A U.S. stockholder will also recognize gain or loss attributable to any cash received in lieu of a fractional share of CCAP Common Stock in an amount equal to the difference between the amount of cash received and the portion of the basis of the CCAP Common Stock received that is deemed allocable to the fractional share. Generally, any gain recognized upon the exchange will be capital gain, and any such capital gain will be long-term capital gain if the holding period for such shares of FCRD Common Stock is more than one year. Depending on certain facts specific to you, gain could instead be characterized as ordinary dividend income.

With respect to the CCAP Advisor Cash Consideration, there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror and, as a result, the tax consequences of the receipt of the CCAP Advisor Cash Consideration are not entirely clear. CCAP, CCAP Advisor and the Exchange Agent intend to take the position that a U.S. stockholder’s share of the CCAP Advisor Cash Consideration received by such holder is treated as additional merger consideration. It is possible, however, that the IRS would assert a contrary position that the U.S. stockholder’s share of the CCAP Advisor Cash Consideration should be treated as taxable ordinary income and not as cash received in exchange for such holder’s FCRD Common Stock. In addition, given the uncertain tax treatmemt of the CCAP Advisor Cash Consideration, CCAP Advisor or the Exchange Agent, or any other applicable withholding agent, may withhold tax at a rate of 30% from the portion of the CCAP Advisor Cash Consideration paid to a non-U.S. stockholder (as defined in the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers”), unless the non-U.S. stockholder establishes its eligibility for a reduced treaty rate or an exemption.

In addition, the Mergers will not qualify as a reorganization if the fair market value of the CCAP Common Stock received by FCRD Stockholders in the Mergers does not equal or exceed 40% of the aggregate consideration. As noted below under “Description of the Merger AgreementMerger Consideration,” subject to the terms and conditions of the Merger Agreement, upon completion of the Mergers, each FCRD Stockholder will receive, in exchange for each share of FCRD Common Stock (excluding Cancelled Shares), its portion of the Aggregate Merger Consideration consisting of (a) the Aggregate Share Consideration, up to the Share Issuance Cap, (b) the Parent Cash Consideration and (c) the CCAP Advisor Cash Consideration. The amount of CCAP Common Stock and cash to be transferred in the Mergers is subject to adjustments.

If the Mergers do not qualify as a reorganization, U.S. stockholders will be treated as having sold their FCRD Common Stock in a taxable sale and will generally recognize gain or loss equal to the difference between the fair market value of the CCAP Common Stock and cash received (including such holder’s share of the Parent Cash Consideration and possibly, as discussed above, the CCAP Advisor Cash Consideration) and the basis in his or her FCRD Common Stock. This gain or loss will generally be capital gain or loss, and will be

 

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long-term capital gain or loss if, as of the effective date of the Mergers, the holding period for such shares of FCRD Common Stock is greater than one year. The deductibility of capital losses is subject to limitations. The aggregate tax basis of an FCRD Stockholder in the CCAP Common Stock received in the Mergers will equal its fair market value at the Effective Time, and the holding period for the CCAP Common Stock will begin the day after the Effective Time.

For more information, see “Certain Material U.S. Federal Income Tax Consequences of the Mergers.” FCRD Stockholders are urged to consult with their own tax advisors to determine the tax consequences of the Mergers to them.

Special Meeting of FCRD Stockholders

The Special Meeting will be held on [•], 2022, at [11:00 a.m., Eastern Time], at the [offices of FEAC, located at 500 Boylston Street, Suite 1200, Boston, MA 02116]. At the Special Meeting, holders of FCRD Common Stock will be asked to approve the Merger Proposal and, if necessary or appropriate, the FCRD Adjournment Proposal.

An FCRD Stockholder can vote at the Special Meeting, or any adjournments and postponements thereof, if such stockholder owned shares of FCRD Common Stock at the close of business on the FCRD Record Date. As of that date, there were [•] shares of FCRD Common Stock outstanding and entitled to vote. [•] of such total outstanding shares, or approximately [•]%, were owned beneficially or of record by [•].

FCRD Board Recommendation

The FCRD Board, based on the unanimous recommendation of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and recommends that FCRD Stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the FCRD Adjournment Proposal.

Vote Required

Each outstanding share of FCRD Common Stock held by a holder of record as of the FCRD Record Date has one vote on each matter to be considered at the Special Meeting.

The Merger Proposal

The approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting (“FCRD Stockholder Approval”). Abstentions will have the same effect as votes “against” the Merger Proposal.

The FCRD Adjournment Proposal

The affirmative vote of the holders of a majority of the shares of FCRD Common Stock present in person or represented by proxy and entitled to vote on the FCRD Adjournment Proposal at the Special Meeting, whether or not a quorum is present, is required to approve the FCRD Adjournment Proposal. Abstentions will have the same effect as a vote “against” approval of the FCRD Adjournment Proposal. The failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have no effect on the outcome of the FCRD Adjournment Proposal.

Completion of the Mergers

As more fully described in this proxy statement/prospectus and in the Merger Agreement, the completion of the Mergers depends on a number of conditions being satisfied or, where legally permissible, waived. For information on the conditions that must be satisfied or waived for the Mergers to occur, see “Description of the Merger Agreement—Conditions to Closing the Mergers.” While there can be no assurances as to the exact timing, or that the Mergers will be completed at all, CCAP and FCRD are working to complete the Mergers in the fourth quarter of 2022 or the first quarter of 2023. It is currently expected that the Mergers will be completed promptly following receipt of the FCRD Stockholder Approval at the Special Meeting and satisfaction (or to the extent legally permitted, waiver) of the other closing conditions set forth in the Merger Agreement.

 

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Termination of the Mergers, Termination Fees and Expense Reimbursement

The Merger Agreement contains certain termination rights for CCAP and FCRD, each of which is discussed below in “Description of the Mergers—Termination of the Merger Agreement.” The Merger Agreement provides that, in connection with the termination of the Merger Agreement under specified circumstances, FCRD may be required to pay CCAP, or CCAP may be required to pay FCRD, a termination fee of approximately $5.556 million, or $7.143 million, respectively. See “Description of the Merger Agreement—Termination of the Merger Agreement” for a discussion of the circumstances that could result in the payment of the termination fees.

Under certain circumstances in which FCRD is not required to pay a termination fee to CCAP, FCRD must reimburse CCAP and its affiliates for all of their documented out-of-pocket fees and expenses (including all documented fees and expenses of counsel, financial advisors, accountants, experts and consultants to CCAP, Acquisition Sub, Acquisition Sub 2 and their affiliates) incurred and payable by CCAP, Acquisition Sub or Acquisition Sub 2 or on their behalf in connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of the Merger Agreement and the transactions contemplated thereby, up to a maximum reimbursement payment of $1,500,000.

FCRD Reasons for the Mergers

After considering a variety of strategic alternatives, the FCRD Board, based on the unanimous recommendation of the Special Committee, determined that entering into the Merger Agreement and consummating the transactions contemplated thereby, including the Mergers, is in the best interests of FCRD and FCRD Stockholders. Certain material factors considered by the Special Committee and the FCRD Board in evaluating the Mergers include, among others:

 

   

the financial terms of the Merger Agreement, including that:

 

   

on a market value basis, the transaction, including the CCAP Advisor Cash Consideration from CCAP Advisor, represents an implied market value for FCRD Common Stock of approximately $4.89 per share as of September 30, 2022, which represents approximately 92% of FCRD’s June 30, 2022 NAV per share (adjusted for expected transaction expenses and other purchase accounting adjustments) and a 71% premium to the closing price of FCRD Common Stock on September 30, 2022. This implied market value is based on (i) FCRD’s adjusted June 30, 2022 NAV ($158.7 million, or $5.30 per share of FCRD Common Stock based on the outstanding shares of FCRD Common Stock as of October 3, 2022 (the date of the Merger Agreement), as adjusted for expected transaction expenses), (ii) CCAP’s adjusted June 30, 2022 NAV ($639.2 million, or $20.69 per share of CCAP Common Stock, as adjusted for expected transaction expenses), and (iii) the closing price of CCAP Common Stock on September 30, 2022 (which was the last trading day before entering into the Merger Agreement) of $15.02;

 

   

on an NAV basis, FCRD Stockholders will collectively receive value per share of approximately 113.6% of the NAV per share of FCRD Common Stock, calculated based on (i) FCRD’s adjusted June 30, 2022 NAV (adjusted for expected transaction expenses and other purchase accounting adjustments) and the outstanding shares of FCRD Common Stock as of October 3, 2022 (the date of the Merger Agreement), (ii) the adjusted NAV per share of CCAP Common Stock as of June 30, 2022 (as adjusted for expected transaction expenses), and (iii) taking into account the value of the CCAP Advisor Cash Consideration. The additional 13.6% premium above NAV per share of FCRD Common Stock is a result of the CCAP Advisor Cash Consideration;

 

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CCAP will issue to FCRD Stockholders shares of CCAP Common Stock equal to up to 19.99% of the number of shares of CCAP Common Stock issued and outstanding immediately prior to the Closing, and pay any remainder of the Merger Consideration in cash; and

 

   

FCRD Stockholders will have the option to elect to receive the Merger Consideration in cash, which provides immediate liquidity, or in shares of CCAP Common Stock, subject to adjustment based on the elections of other FCRD Stockholders.

 

   

the consideration of strategic alternatives undertaken by the Special Committee and the FCRD Board;

 

   

the consummation of several strategic objectives, over the course of several years, not materially improving stock performance;

 

   

certain considerations relating to the opportunities for the combined company to provide strategic and business opportunities for its stockholders and to generate additional stockholder value, including that:

 

   

based on the outstanding shares and relative NAV of FCRD Common Stock and CCAP Common Stock outstanding (each as adjusted for expected transaction expenses), as of June 30, 2022, current FCRD Stockholders would own approximately 17% of the outstanding CCAP Common Stock immediately following the completion of the Mergers;

 

   

the combined company will be externally managed by CCAP Advisor and is expected to have total assets of approximately $1.6 billion and NAV of approximately $758 million (based on FCRD’s June 30, 2022 balance sheet and CCAP’s June 30, 2022 balance sheet and taking into account estimated transaction expenses and certain post-closing adjustments;

 

   

following the Mergers, FCRD Stockholders are expected to benefit from (i) access to the full range of resources of Crescent; (ii) investment opportunities originated through the Crescent origination platform; and (iii) the utilization of Crescent’s resources, including relationships and institutional knowledge from over 30 years of private market investing;

 

   

allows FCRD Stockholders to continue to have access to a similar strategy focused on first lien senior secured loans to sponsor-backed borrowers;

 

   

allows FCRD Stockholders to continue to have exposure to LJV I MM CLO LLC (the “CLO”) managed by FEAC;

 

   

the combined company’s investment portfolio following the Mergers will provide additional scale and portfolio diversification, which will position the combined company, among other things, to (i) maintain a focus on first lien senior secured loans to sponsor-backed borrowers; (ii) reduce concentration of the First Eagle Logan JV, LLC (the “Logan JV”) and top ten holdings; (iii) originate larger transactions with increased final hold positions; and (iv) enhance access to lower cost of capital from banks and capital market participants;

 

   

FCRD Stockholders of the combined company will have an ability to participate in the future growth of CCAP, including potential upside if shares of CCAP Common Stock trades higher in the future;

 

   

the Mergers are expected to deliver operational synergies for the combined company as a result of the larger scale and elimination of redundant FCRD expenses following the Mergers;

 

   

FCRD Stockholders are expected to realize net investment income per share accretion following the Closing;

 

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the combined historical performance of FCRD and CCAP and expected ability of the combined entity to make future dividend payments to stockholders are expected to benefit FCRD Stockholders;

 

   

shares of CCAP Common Stock received in exchange for shares of FCRD Common Stock may be more liquid than FCRD Common Stock, given the increased size and diversification of the equity base of the combined company;

 

   

based on a review of CCAP, the belief that CCAP and Crescent have shown the ability to successfully execute this type of merger transaction;

 

   

the commitment by Sun Life Assurance Company of Canada (“Sun Life”) to provide secondary-market support by purchasing $20 million of the combined company’s common stock via a share purchase program over time following the consummation of the Transaction;

 

   

the opinion, dated October 3, 2022, of the financial advisor to the FCRD Board (See “—Opinion of the Financial Advisor to the FCRD Board” below);

 

   

the terms of the Merger Agreement, including that the terms of the Merger Agreement are unlikely to unduly deter third parties from making unsolicited acquisition proposals; and

 

   

the risks and potential negative factors relating to the Merger Agreement.

For a further discussion of the factors considered by the Special Committee and the FCRD Board, see “The Mergers—FCRD Reasons for the Mergers.

Opinion of the Financial Advisor to the FCRD Board

In connection with the Mergers, Keefe, Bruyette & Woods, Inc. (“KBW”), the financial advisor to the FCRD Board, delivered a written opinion, dated October 3, 2022, to the FCRD Board and the Special Committee as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of FCRD Common Stock, collectively as a group, of the Aggregate Merger Consideration (defined as the Parent Cash Consideration, the Aggregate Share Consideration and the CCAP Advisor Cash Consideration, taken together) in the First Merger. The full text of the opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached as Annex B to this document. The opinion was for the information of, and was directed to, the FCRD Board (in its capacity as such) and, as requested by the FCRD Board, the Special Committee (in its capacity as such) in connection with their respective consideration of the financial terms of the Mergers. The opinion did not address the underlying business decision of FCRD to engage in the Mergers or enter into the Merger Agreement or constitute a recommendation to the FCRD Board or the Special Committee in connection with the Mergers, and it does not constitute a recommendation to any holder of FCRD Common Stock or any stockholder of any other entity as to how to vote or act in connection with the Mergers or any other matter (including, with respect to holders of FCRD Common Stock, what election any such stockholder should make with respect to receiving the Per Share Cash Price in lieu of the Per Share Stock Consideration).

FCRD Stockholders and Beneficial Owners Have Appraisal Rights

FCRD Stockholders and “beneficial owners” (as defined in Section 262 of the DGCL) will be entitled to exercise appraisal rights with respect to the First Merger in accordance with Section 262 of the DGCL. For more information, see “Appraisal Rights of FCRD Stockholders and Beneficial Owners” and “Description of the Merger Agreement—Appraisal Rights.

 

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COMPARATIVE FEES AND EXPENSES

The following tables are intended to assist you in understanding the costs and expenses that an investor in CCAP Common Stock and FCRD Common Stock bears directly or indirectly and, based on the assumptions set forth below, the pro forma costs and expenses that an investor in the combined company following the completion of the Mergers may bear directly or indirectly. CCAP and FCRD caution you that some of the percentages indicated in the tables below are estimates and may vary. Except where the context suggests otherwise, whenever this proxy statement/prospectus contains a reference to fees or expenses paid or to be paid by “you,” “CCAP” or “FCRD,” stockholders will indirectly bear such fees or expenses as investors in CCAP, FCRD, or the combined company, as applicable.

 

     CCAP     FCRD     Pro Forma
Combined
Company
 

Stockholder transaction expenses (as a percentage of offering price)

      

Sales load paid by CCAP and FCRD

       (1)        (1)        (1) 

Offering expenses borne by CCAP and FCRD

       (1)        (1)        (1) 

Dividend reinvestment plan expenses

    

Variable
Transaction

Fees

 
 

(2) 

      (2)        (2) 
  

 

 

   

 

 

   

 

 

 

Total stockholder transaction expenses paid by CCAP and FCRD

     None       None       None  
  

 

 

   

 

 

   

 

 

 

 

     CCAP     FCRD     Pro Forma
Combined
Company
 

Estimated annual expenses (as a percentage of net assets attributable to common stock):(3)

      

Base management fees(4)

     2.52     2.64     2.78

Income based fees and capital gains incentive fees(5)

     1.54     0.00     1.58

Interest payments on borrowed funds(6)

     4.12     7.07     4.81

Other expenses(7)

     0.66     3.03     0.59

Acquired fund fees and expenses(8)

     0.09     0.29     0.16
  

 

 

   

 

 

   

 

 

 

Total annual expenses (estimated)(9)

     8.93     13.03     9.92
  

 

 

   

 

 

   

 

 

 

 

(1)

Purchases of shares of CCAP Common Stock or FCRD Common Stock on the secondary market are not subject to sales charges, but may be subject to brokerage commissions or other charges. The table does not include any sales load (underwriting discount or commission) that stockholders may have paid in connection with their purchase of shares of CCAP Common Stock or FCRD Common Stock.

 

(2)

The expenses of the respective dividend reinvestment plan are included in “Other expenses.”

 

The plan administrator’s fees under the CCAP Plan are paid by CCAP. If a participant elects by notice to the plan administrator in advance of termination to have the plan administrator sell part or all of the shares of CCAP Common Stock held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a transaction fee of up to $15.00 plus a $0.10 per share fee from the proceeds.

 

See “CCAP Dividend Reinvestment Plan” and “FCRD Dividend Reinvestment Plan” for more information.

 

 

(3)

“Net assets attributable to common stock” equals net assets at June 30, 2022.

 

For Pro Forma Combined Company, the combined net assets of CCAP and FCRD on a pro forma basis as of June 30, 2022 were used, adjusted for merger related costs.

 

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(4)

CCAP’s base management fee referenced in the table above is estimated by annualizing the actual base management fees incurred during the three months ended June 30, 2022. The base management fee under CCAP’s Investment Advisory Agreement is calculated and payable quarterly in arrears at an annual rate of 1.25% of its average gross assets, including assets purchased with borrowed funds or other forms of leverage, but excluding cash and cash equivalents, and adjusted for share issuances or repurchases. CCAP Adviser has voluntarily waived its right to receive base management fees on CCAP’s investments in Great American Capital Partners II LP (“GACP II”) and WhiteHawk III Onshore Fund LP (“WhiteHawk”) for any period in which these investments remain in the investment portfolio, and such waiver is included in this calculation.

FCRD’s management fee referenced in the table above is based upon the actual amounts incurred during the three months ended June 30, 2022, annualized for the full year. FCRD’s base management fee under the FCRD Investment Management Agreement is calculated at an annual rate of 1.0% of FCRD’s gross assets without deduction for any liabilities and is payable quarterly in arrears. FCRD does not expect to have significant expense accruals at the end of each quarter and accordingly does not expect its other liabilities will have an impact on its base management fee rate in relation to net assets attributable to FCRD Common Stock.

On August 5, 2022, the FCRD Board approved a proposal from the FCRD Advisor to irrevocably waive approximately $1.0 million of the base management fee earned for the three month period ended June 30, 2022. Such waiver is not included in this calculation.

 

(5)

CCAP’s incentive fee referenced in the table above is estimated by annualizing the actual fees incurred during the three months ended June 30, 2022.

CCAP’s incentive fee consists of two parts, one based on income and the other based on capital gains, that are determined independent of each other, with the result that one component may be payable even if the other is not:

 

   

The first part, the “CCAP Income Incentive Fee,” is calculated and payable quarterly in arrears and equals 100% of the pre-incentive fee net investment income for the immediately preceding calendar quarter, if any, that exceeds a preferred return of 1.75% per quarter (7% annualized), but is less than or equal to 2.1212% in the calendar quarter; and 17.5% of the amount of pre-incentive fee net investment income, if any, that exceeds 2.1212% in the calendar quarter provided. The CCAP Advisor has voluntarily waived its right to receive the income incentive fees attributable to the investment income accrued by CCAP as a result of its investments in GACP II and WhiteHawk. CCAP Advisor has also notified the CCAP Board that it intends to voluntarily waive income incentive fees to the extent net investment income falls short of the declared dividend on a full dollar basis through December 31, 2023. Such waiver is not included in this calculation.

 

   

The second part, the capital gains incentive fee, is determined and payable in arrears as of the end of each fiscal year at a rate of 17.5% of CCAP’s realized capital gains, if any, on a cumulative basis from CCAP’s inception through the end of the fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

FCRD’s incentive fee referenced in the table above is estimated by annualizing the actual fees incurred during the three months ended June 30, 2022.

FCRD’s incentive fee also consists of two parts, an incentive fee on ordinary income and an incentive fee on capital gains, that are determined independent of each other, with the result that one component may be payable even if the other is not:

The incentive fee on ordinary income is calculated by reference to FCRD’s aggregate pre-incentive fee net investment income for the most recent trailing twelve quarter period or, if shorter, the number of quarters that have occurred since January 1, 2018 (“Trailing Twelve Quarter Period”). Pre-incentive fee net investment income is expressed as a rate of return on the value of FCRD’s net assets at the beginning of each applicable calendar quarter comprising of the relevant Trailing Twelve Quarter Period. The hurdle amount for incentive fee based on pre-incentive fee net investment income is determined on a quarterly basis and is equal to 2.0%

 

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(8.0% annualized) multiplied by the net asset value attributable to FCRD Common Stock at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarter Period (also referred to as “hurdle rate”). The hurdle amount is calculated after making appropriate adjustments for subscriptions (which includes all issuances of FCRD Common Stock, including issuances pursuant to FCRD’s dividend reinvestment plan) and distributions that occurred during the relevant Trailing Twelve Quarter Period.

The incentive fee based on pre-incentive net investment income for the relevant Trailing Twelve Quarter Period in each calendar quarter is determined as follows:

 

   

The FCRD Advisor receives no incentive fee for any calendar quarter in which FCRD’s pre-incentive fee net investment income does not exceed the hurdle rate.

 

   

Subject to the Incentive Fee Cap (as defined below), the FCRD Advisor receives 100% of FCRD’s pre-incentive fee net investment income for the Trailing Twelve Quarter Period with respect to that portion of the pre-incentive net investment income for such period, if any, that exceeds the hurdle rate but is less than 2.5% (10.0% annualized) (also referred to as the “catch-up” provision); and

 

   

17.5% of FCRD’s pre-incentive fee net investment income for the Trailing Twelve Quarter Period with respect to that portion of the pre-incentive fee net investment income for such quarter, if any, that exceeds 2.5% (10.0% annualized).

The amount of the incentive fee on pre-incentive net investment income paid for a particular quarter equals the excess of the incentive fee so calculated minus the aggregate incentive fees on ordinary income that were paid in respect of the eleven preceding calendar quarters (or if shorter, the appropriate number of preceding quarters incentive fees paid that have occurred since January 1, 2018) included in the relevant Trailing Twelve Quarter Period but not in excess of the FCRD Incentive Fee Cap (as described below).

The FCRD Incentive Fee Cap for any quarter is an amount equal to (a) 20% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarter Period, minus (b) the aggregate incentive fees based on income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarter Period.

“Cumulative Net Return” means (x) pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarter Period minus (y) any Net Capital Loss, if any, in respect of the relevant Trailing Twelve Quarter Period. If, in any quarter, the FCRD Incentive Fee Cap is zero or a negative value, FCRD pays no incentive fee based on income to the FCRD Advisor for such quarter. If, in any quarter, the FCRD Incentive Fee Cap for such quarter is a positive value but is less than the incentive fee based on pre-incentive net investment income that is payable to the FCRD Advisor for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, FCRD pays an incentive fee based on pre-incentive fee net investment income to the FCRD Advisor equal to the FCRD Incentive Fee Cap for such quarter. If, in any quarter, the FCRD Incentive Fee Cap for such quarter is equal to or greater than the incentive fee based on pre-incentive fee net investment income that is payable to the FCRD Advisor for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, FCRD pays an incentive fee based on pre-incentive fee net investment income to the FCRD Advisor equal to the incentive fee calculated as described above for such quarter without regard to the FCRD Incentive Fee Cap.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

The second part, the capital gains incentive fee, is determined and payable in arrears as of the end of each fiscal year at a rate of 17.5% of our realized capital gains, if any, on a cumulative basis from FCRD’s inception through the end of the fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

 

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Following completion of the Mergers, the combined company will be externally managed by CCAP Advisor. The pro forma incentive fees have been calculated in a manner consistent with CCAP’s Investment Advisory Agreement.

 

(6)

For CCAP and FCRD, “Interest payments on borrowed funds” represents interest expenses estimated by annualizing actual amounts incurred for the three months ended June 30, 2022.

For the Pro Forma Combined Company, “Interest payments on borrowed funds” is based on the results for the three months ended June 30, 2022 and the assumption by CCAP of FCRD’s revolving credit agreement and 5.00% notes due 2026 and assumes the costs of borrowings under each respective borrowing facility after the Mergers will remain the same as those costs prior to the Mergers.

 

(7)

For CCAP and FCRD, “Other expenses” referenced in the table above are estimated by annualizing the actual amounts incurred during the three months ended June 30, 2022.

In the case of CCAP, “Other expenses” includes various overhead expenses, professional fees, director fees, and payments under the CCAP Administration Agreement. In the case of FCRD, “Other expenses” includes payments under the FCRD Administration Agreement based on FCRD’s allocable portion of the cost of certain of its officers and their respective staff incurred by the FCRD Administrator in performing its obligations under the FCRD Administration Agreement.

For the Pro Forma Combined Company, “Other expenses” reflects anticipated decreases in duplicative costs such as professional fees for legal, audit and tax fees, directors’ fees, and other redundant administrative and operating expenses.

 

(8)

With respect to “Acquired fund fees and expenses,” CCAP Stockholders and FCRD Stockholders indirectly bear the expenses of underlying funds or other investment vehicles that would be investment companies under section 3(a) of the Investment Company Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the Investment Company Act in which CCAP or FCRD, respectively, invests. Such underlying funds or other investment vehicles are referred to in this proxy statement/prospectus as “Acquired Funds.” This amount includes the estimated annual fees and expenses of Acquired Funds as of June 30, 2022. Future fees and expenses for these Acquired Funds may be substantially higher or lower because certain fees and expenses are based on the performance of the Acquired Funds, which may fluctuate over time.

 

(9)

“Total annual expenses” as a percentage of net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. CCAP and FCRD borrow money to leverage and increase their total assets. The SEC requires that the “Total annual expenses” percentage be calculated as a percentage of net assets (defined as total assets less indebtedness and before taking into account any income based fees or capital gains incentive fees accrued during the period), rather than the total assets, including assets that have been funded with borrowed monies.

Example

The following examples demonstrate the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in FCRD Common Stock, CCAP Common Stock or, following the completion of the Mergers, the combined company’s common stock. In calculating the following expense amounts, each of FCRD and CCAP has assumed that it would have no additional leverage, that none of its assets are cash or cash equivalents and that its annual operating expenses would remain at the levels set forth in the tables above. Transaction expenses related to the Mergers are not included in the following examples.

 

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     1 year      3 years      5 years      10 years  

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return (none of which is subject to the capital gains incentive fee) (1):

           

CCAP

   $ 93.77      $ 269.16      $ 429.55      $ 772.97  

FCRD

   $ 136.82      $ 375.84      $ 575.17      $ 940.42  

The pro forma combined company following the completion of the Mergers

   $ 104.16      $ 295.86      $  467.36      $ 821.15  
     1 year      3 years      5 years      10 years  

You would pay the following expenses on a $1,000 common stock investment, assuming a 5% annual return (all of which is subject to the capital gains incentive fee) (2):

           

CCAP

   $ 102.52      $ 291.68      $ 461.49      $ 813.89  

FCRD

   $ 145.57      $ 396.29      $ 601.39      $ 965.34  

The pro forma combined company following the completion of the Mergers

   $ 112.91      $ 317.87      $ 497.85      $ 857.60  

 

(1)

Assumes no return from net realized capital gains or net unrealized capital appreciation.

(2)

Assumes returns entirely from realized capital gains and thus subject to the capital gain incentive fee.

The foregoing tables are to assist you in understanding the various costs and expenses that an investor in FCRD Common Stock, CCAP Common Stock or, following the completion of the Mergers, the combined company’s common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, performance will vary and may result in a return greater or less than 5%. Because the income portion of the incentive fee under either the FCRD or the CCAP investment advisory agreement is unlikely to be significant assuming a 5% annual return, the second example assumes that the 5% annual return will be generated entirely through net realized capital gains and, as a result, will trigger the payment of the capital gains portion of the incentive fee under the applicable investment advisory agreement. If CCAP were to achieve sufficient returns on its investments, including through the realization of capital gains, to trigger income based fees or capital gains incentive fees of a material amount, its expenses, and returns to its investors, would be higher. Similarly, if FCRD were to achieve sufficient returns on its investments, including through the realization of capital gains, to trigger income based fees or capital gains incentive fees of a material amount, its expenses, and returns to its investors, would be higher.

In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, under certain circumstances, reinvestment of dividends and other distributions under the CCAP Plan may occur at a price per share that differs from net asset value. See “CCAP Dividend Reinvestment Plan” for additional information regarding the CCAP Plan.

Similarly, participants in FCRD’s dividend reinvestment plan receive a number of shares of FCRD Common Stock, determined by dividing the total dollar amount of the dividend payable to a participant by the market price per share of FCRD Common Stock at the close of trading on the dividend payment date, which may be at, above or below net asset value per share of FCRD Common Stock. See “FCRD Dividend Reinvestment Plan” for additional information regarding FCRD’s dividend reinvestment plan.

This example and the expenses in the tables above should not be considered a representation of FCRD’s, CCAP’s or, following the completion of the Mergers, the combined company’s future expenses as actual expenses (including the cost of debt, if any, and other expenses) that it may incur in the future and such actual expenses may be greater or less than those shown.

 

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RISK FACTORS

In addition to the other information included in this proxy statement/prospectus, FCRD Stockholders should carefully consider the risks described below in determining whether to approve the Merger Proposal. The information in “Item 1A. Risk Factors” in Part I of CCAP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in Part II, Item 1A of CCAP’s Quarterly Report for the period ended June 30, 2022 is incorporated herein by reference for general risks related to CCAP. The information in “Item 1A. Risk Factors” in Part I of FCRD’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in Part II, Item 1A of FCRD’s Quarterly Report for the period ended June 30, 2022 is incorporated herein by reference for general risks related to FCRD. The occurrence of any of these risks could materially and adversely affect the business, prospects, financial condition, results of operations and cash flow of CCAP and FCRD and, following the Mergers, the combined company and might cause you to lose all or part of your investment. The risks, as set out below and incorporated by reference herein, are not the only risks CCAP and FCRD and, following the Mergers, the combined company face, and there may be additional risks that CCAP and FCRD do not presently know of or that they currently consider not likely to have a significant impact. New risks may emerge at any time and CCAP and FCRD cannot predict such risks or estimate the extent to which they may affect the business or financial performance of CCAP and FCRD and, following the Mergers, the combined company. See also “Incorporation by Reference for CCAP,” “Incorporation by Reference for FCRD” and “Where You Can Find More Information” in this proxy statement/prospectus.

Risks Relating to the Mergers

Because the market price of CCAP Common Stock and the NAV per share of CCAP and FCRD will fluctuate, FCRD Stockholders cannot be sure of the market value or exact composition of the Merger Consideration they will receive until the Closing Date.

The market value of the Aggregate Merger Consideration may vary from the closing price of CCAP Common Stock on the date the Mergers were announced, on the date that this proxy statement/prospectus was made available to stockholders or the date of the Special Meeting and on the date the Mergers are completed. Any change in the market price of CCAP Common Stock prior to completion of the Mergers will affect the market value of the Aggregate Merger Consideration that FCRD Stockholders will receive upon completion of the Mergers. Additionally, the Merger Consideration will fluctuate as the market price of CCAP Common Stock and the NAV of CCAP and FCRD change prior to the Closing Date.

In addition, because the Election Deadline is 5:00 p.m., New York City time on the fifth business day preceding the Closing Date, FCRD Stockholders must decide whether to approve the Merger Proposal and make their Elections without knowing the actual market value of the shares of CCAP Common Stock they may receive when the Mergers are completed. This value will not be known at the time of the Special Meeting and may be more or less than the current market price of shares of CCAP Common Stock or the price of CCAP Common Stock at the time of Special Meeting or at the time an Election is made. FCRD and CCAP will issue a joint press release at least 10 business days prior to the anticipated Closing Date announcing the anticipated Election Deadline.

FCRD is not permitted to terminate the Merger Agreement or resolicit the vote of its stockholders solely because of changes in the market price of shares of CCAP Common Stock. There will be no adjustment to the Merger Consideration for changes in the market price of shares of CCAP Common Stock. In addition, the U.S. federal income tax treatment of the Mergers will not be known as of the date of the Special Meeting, and the position that the Mergers qualify as a “reorganization” might be challenged by the IRS.

Changes in the market price of CCAP Common Stock may result from a variety of factors, including, among other things:

 

   

significant volatility in the market price and trading volume of securities of publicly traded RICs, BDCs or other companies in CCAP’s sector, which are not necessarily related to the operating performance of these companies;

 

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price and volume fluctuations in the overall stock market from time to time;

 

   

the inclusion or exclusion of CCAP Common Stock from certain indices;

 

   

changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to RICs or BDCs;

 

   

loss of CCAP’s RIC status;

 

   

changes in earnings or variations in operating results;

 

   

changes in the value of CCAP’s portfolio of investments;

 

   

announcements with respect to significant transactions;

 

   

any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

 

   

departure of key personnel of CCAP or CCAP Advisor;

 

   

operating performance of companies comparable to CCAP;

 

   

short-selling pressure with respect to shares of CCAP Common Stock or BDCs generally;

 

   

general economic trends and other external factors;

 

   

loss of a major funding source;

 

   

market assessments of the likelihood that the Mergers will be completed and the timing of completion of the Mergers; and

 

   

market perception of the future profitability of the combined company.

See “Special Note Regarding Forward-Looking Statements” for other factors that could cause the market price of CCAP Common Stock to change. These factors are generally beyond the control of CCAP.

The range of high and low closing sales prices of CCAP Common Stock as reported on Nasdaq for the three months ended September 30, 2022 was a low of $15.02 to a high of $18.10. However, historical trading prices are not necessarily indicative of future performance. FCRD Stockholders should obtain current market quotations for shares of CCAP Common Stock prior to voting their shares of FCRD Common Stock at the Special Meeting.

Furthermore, upon completion of the Mergers, FCRD Stockholders will be entitled to receive for each share of FCRD Common Stock that they own, at the election of each stockholder, subject to certain limitations and adjustment pursuant to the terms of the Merger Agreement, the CCAP Merger Consideration in the form of a combination of CCAP Common Stock and cash, only cash or only CCAP Common Stock. The aggregate proportion of CCAP Common Stock payable as Merger Consideration is fixed and will not be adjusted for changes in the stock prices of either company before the Mergers are completed. Even if an FCRD Stockholder elects to receive all cash in the Mergers, the amount of cash to which such stockholder is entitled will depend on the NAV per share of CCAP Common Stock and the terms of the Merger Agreement described under “Description of the Merger Agreement—Merger Consideration” and “Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations.” As a result, any changes in the market price of CCAP Common Stock will have a corresponding effect on the market value of the Merger Consideration. Neither party, however, has a right to terminate the Merger Agreement based solely (and in and of itself) upon changes in the market price of CCAP Common Stock or FCRD Common Stock.

 

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The CCAP Merger Consideration received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, and, depending on the Elections made by an FCRD Stockholder and Elections made by other FCRD Stockholders, the CCAP Merger Consideration received may represent a value per share higher or less than the consideration received by other FCRD Stockholders calculated on the basis of the Closing CCAP Net Asset Value.

Under the Merger Agreement, at the Effective Time, FCRD Stockholders, in the aggregate, shall be entitled to receive with respect of all of the issued and outstanding shares of FCRD Common Stock as of the Determination Date (excluding Cancelled Shares), the Aggregate Merger Consideration, which consists of (a) the Aggregate Share Consideration, (b) the Parent Cash Consideration and (c) the CCAP Advisor Cash Consideration in an aggregate amount of $35 million.

Although the CCAP Aggregate Merger Consideration, which consists of the Aggregate Share Consideration and the Parent Cash Consideration, paid to FCRD Stockholders will equal, in the aggregate, the Closing FCRD Net Asset Value, the CCAP Merger Consideration to be received by an individual FCRD Stockholder for each share of FCRD Common Stock owned by such FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, depending on the Elections made by such FCRD Stockholder and Elections made by other FCRD Stockholders. However, as a result of certain limitations and adjustments pursuant to the terms of the Merger Agreement, including the adjustment mechanisms with respect to Electing Shares and Non-Electing Shares described in “Description of the Merger Agreement—Merger Consideration and Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations,” each holder of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time will receive the CCAP Merger Consideration approximately equal to the implied market value of the CCAP Merger Consideration received by other FCRD Stockholders at the Effective Time calculated on the basis of the market value of shares of CCAP Common Stock as of the Determination Date.

Because the composition of cash or shares of CCAP Common Stock will vary among individual FCRD Stockholders based on each FCRD Stockholder’s Election and the Elections of other FCRD Stockholders, tax consequences will differ between FCRD Stockholders with respect to the CCAP Merger Consideration each receives. For a summary of the different U.S. federal income tax consequences, see the section of this proxy statement/prospectus entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers.”

Sales of shares of CCAP Common Stock after the completion of the Mergers may cause the market price of CCAP Common Stock to decline.

Based on the number of outstanding shares of CCAP Common Stock as of October 3, 2022 and the NAVs of each of CCAP and FCRD as of June 30, 2022, CCAP would issue approximately 6.2 million shares of CCAP Common Stock pursuant to the Merger Agreement to FCRD Stockholders. Many FCRD Stockholders may decide not to hold the shares of CCAP Common Stock they will receive pursuant to the Merger Agreement. In addition, CCAP Stockholders may decide not to hold their shares of CCAP Common Stock after completion of the Mergers. In each case, such sales of CCAP Common Stock could have the effect of depressing the market price for CCAP Common Stock and may take place promptly following the completion of the Mergers.

CCAP and FCRD may fail to consummate the Mergers. If the Mergers do not close, CCAP and FCRD will not benefit from the expenses incurred in their pursuit.

While there can be no assurances as to the exact timing, or that the Mergers will be completed at all, CCAP and FCRD are working to complete the Mergers as early as the fourth quarter of 2022 or the first quarter of 2023. The consummation of the Mergers is subject to certain conditions, including, among others, the FCRD Stockholder Approval, required regulatory approvals and other customary closing conditions. CCAP and FCRD intend to consummate the Mergers as soon as possible; however, there can be no assurance that the conditions required to consummate the Mergers will be satisfied or waived on the anticipated schedule, or at all. If the Mergers are not completed, CCAP and FCRD will have incurred substantial expenses for which no ultimate benefit will have been received. In addition, under certain circumstances, FCRD will be required to pay CCAP’s expenses incurred in connection with the Mergers, subject to a maximum reimbursement of $1.5 million.

 

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Consummation of the Mergers will cause immediate dilution to CCAP Stockholders’ and FCRD Stockholders’ voting interests and may cause immediate dilution to the NAV per share of the combined company’s common stock.

FCRD Stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective percentage ownership interests in FCRD prior to the Mergers. Consequently, FCRD Stockholders should expect to exercise less influence over the management and policies of the combined company following the Mergers than they currently exercise over the management and policies of FCRD. CCAP Stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective ownership interests in CCAP prior to the Mergers. Consequently, CCAP Stockholders should expect to exercise less influence over the management and policies of the combined company following the Mergers than they currently exercise over the management and policies of CCAP.

If the Mergers are consummated, based on the number of shares of CCAP Common Stock issued and outstanding as of October 3, 2022 and the NAV per share of each of FCRD Common Stock and CCAP Common Stock as of June 30, 2022, it is expected that current CCAP Stockholders will own approximately 83% of the outstanding CCAP Common Stock and former FCRD Stockholders will own approximately 17% of the outstanding CCAP Common Stock immediately following consummation of the Mergers. In addition subject to certain restrictions in the Merger Agreement, CCAP may issue additional shares of CCAP Common Stock (including, subject to certain restrictions under the Investment Company Act, at prices below CCAP Common Stock’s then current NAV per share), all of which would further reduce the percentage ownership of the combined company held by former FCRD Stockholders and current CCAP Stockholders. In addition, the issuance or sale by CCAP of shares of CCAP Common Stock at a discount to NAV poses a risk of economic dilution to stockholders.

FCRD Stockholders may receive a form or combination of consideration different from what they elect.

While each holder of FCRD Common Stock entitled to the Merger Consideration may elect to receive, in connection with the Mergers, the CCAP Merger Consideration in cash, the maximum aggregate number of shares of CCAP Common Stock available for all FCRD Stockholders will be fixed to equal the Aggregate Share Consideration and, accordingly, the aggregate amount of cash available to FCRD Stockholders will be fixed. As a result, depending on the Elections made by other FCRD Stockholders, if a holder of FCRD Common Stock elects to receive cash in connection with the Mergers, such holder will likely receive a portion of its CCAP Merger Consideration in CCAP Common Stock, and if a holder of FCRD Common Stock elects to receive CCAP Common Stock in connection with the Mergers, such holder will likely receive a portion of the CCAP Merger Consideration in cash. See “Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations” for more information. If a holder of FCRD Common Stock does not submit a properly completed and signed Form of Election to the Exchange Agent by the Election Deadline (or otherwise does not properly and timely direct such holder’s intermediary by following the election instructions received from the relevant broker, bank, trustee or other nominee with respect to the Election), then such stockholder will receive its CCAP Merger Consideration in shares of CCAP Common Stock (unless such consideration is adjusted pursuant to the terms of the Merger Agreement based on too many stockholders electing to receive the CCAP Merger Consideration in shares of CCAP Common Stock). No fractional shares of CCAP Common Stock will be issued in the Mergers, and FCRD Stockholders will receive cash in lieu of any fractional shares of CCAP Common Stock.

The combined company may be unable to realize the benefits anticipated by the Mergers, including estimated cost savings and synergies, or it may take longer than anticipated to achieve such benefits.

The realization of certain benefits anticipated as a result of the Mergers will depend in part on the integration of FCRD’s investment portfolio with CCAP’s investment portfolio and the integration of FCRD’s business with CCAP’s business. There can be no assurance that FCRD’s and CCAP’s businesses can be operated profitably or integrated successfully into CCAP’s operations in a timely fashion, or at all. The dedication of management resources to such integration may detract attention from the day-to-day business of CCAP and FCRD, and following the Mergers, of CCAP, and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects, including incurring unexpected costs or delays in connection with such integration and failure of FCRD’s investment portfolio to perform as expected, could have a material adverse effect on financial results of the combined company.

 

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CCAP also expects to achieve certain cost savings and synergies from the Mergers when the two companies have fully integrated their portfolios. It is possible that CCAP’s estimates of the potential cost savings and synergies could turn out to be incorrect. If the estimates turn out to be incorrect or the combined company cannot integrate their investment portfolios and businesses, the anticipated cost savings and synergies may not be fully realized, or realized at all, or may take longer to realize than expected.

The Mergers may trigger certain “change of control” provisions and other restrictions in certain of CCAP’s and FCRD’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.

Certain agreements of FCRD and CCAP or their controlled affiliates will or may require the consent of one or more counterparties in connection with the Mergers. The failure to obtain any such consent may permit such counter-parties to terminate, or otherwise increase their rights or CCAP’s or FCRD’s obligations under, any such agreement because the Mergers may violate an anti-assignment, change of control or similar provision. If this happens, CCAP or FCRD may have to seek to replace that agreement with a new agreement or seek a waiver or amendment to such agreement. CCAP and FCRD cannot assure you that CCAP or FCRD will be able to replace, amend or obtain a waiver under any such agreement on comparable terms or at all.

If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Mergers, including preventing CCAP from operating a material part of FCRD’s business.

In addition, the consummation of the Mergers may violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under CCAP’s or FCRD’s agreements. Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Mergers.

The opinion delivered to the FCRD Board and the Special Committee by the FCRD Board’s financial advisor prior to signing the Merger Agreement will not reflect changes in circumstances since the date of such opinion.

The opinion of the FCRD Board’s financial advisor was delivered to the FCRD Board and the Special Committee on, and was dated, October 3, 2022. Changes in the operations and prospects of FCRD or CCAP, general market and economic conditions and other factors that may be beyond the control of FCRD or CCAP may significantly alter the value of FCRD or CCAP or the price of shares of CCAP Common Stock by the time the Mergers are completed. The opinion does not speak as of the time the Mergers will be completed or as of any date other than the date of such opinion. For a description of the opinion that the FCRD Board and the Special Committee received from the FCRD Board’s financial advisor, see “The Mergers—Opinion of the Financial Advisor to the FCRD Board.”

Litigation which may be filed against FCRD or CCAP in connection with the Mergers, regardless of its merits, could result in substantial costs and could delay or prevent the Mergers from being completed.

From time to time, FCRD and CCAP may be subject to legal actions in connection with the Mergers, including securities class action lawsuits and derivative lawsuits, as well as various regulatory, governmental and law enforcement inquiries, investigations and subpoenas. These or any similar securities class action lawsuits and derivative lawsuits in connection with the Mergers, regardless of their merits, may result in substantial costs and divert management time and resources. An adverse judgment in such cases could have a negative impact on FCRD’s or CCAP’s liquidity and financial condition or could prevent the Mergers from being completed.

 

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Termination of the Merger Agreement could negatively impact FCRD and CCAP.

If the Merger Agreement is terminated, there may be various consequences, including:

 

   

FCRD’s and CCAP’s businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Mergers, without realizing any of the anticipated benefits of completing the Mergers;

 

   

the market price of the FCRD Common Stock or CCAP Common Stock might decline to the extent that the market price prior to termination reflects a market assumption that the Mergers will be completed;

 

   

in the case of FCRD, it may not be able to find a party willing to pay an equivalent or more attractive price than the price CCAP has agreed to pay in the Mergers; and

 

   

the payment of any termination fee or reimbursement of the counterparties’ fees and expenses, if required under the circumstances, could adversely affect the financial condition and liquidity of FCRD or CCAP.

Under certain circumstances, FCRD or CCAP may be obligated to pay a termination fee upon termination of the Merger Agreement.

No assurance can be given that the Mergers will be completed. The Merger Agreement provides for the payment by FCRD or CCAP of a termination fee under certain circumstances. Under circumstances specified in the Merger Agreement, FCRD may be required to pay CCAP a termination fee of approximately $5.556 million or CCAP may be required to pay FCRD a termination fee of approximately $7.143 million. See “Description of the Merger Agreement—Termination of the Merger Agreement” for a discussion of the circumstances that could result in the payment of a termination fee.

The Merger Agreement limits FCRD’s ability to pursue alternatives to the Mergers; however, in specified circumstances, FCRD may terminate the Merger Agreement to accept a superior proposal.

Under the Merger Agreement, FCRD has agreed not to (1) take certain actions to solicit proposals relating to alternative transactions or (2) subject to certain exceptions, including the receipt of a “Superior Proposal” (as such term is defined herein under the heading “Description of the Merger Agreement—Additional Covenants—No Solicitation”), enter into discussions or an agreement concerning, or provide confidential information in connection with, any proposals for alternative transactions. However, in specified circumstances, FCRD may terminate the Merger Agreement and enter into an agreement with a third party who makes a Superior Proposal, subject to certain procedural requirements and the payment to CCAP of a termination fee of approximately $5.556 million.

These provisions, which are typical for transactions of this type, might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of FCRD from considering or proposing such an acquisition even if such potential competing acquiror were prepared to pay consideration with a higher per share market price than the price per share market price to be paid by CCAP pursuant to the Merger Agreement or might result in a potential competing acquiror proposing to pay a lower per share price to acquire FCRD than it might otherwise have proposed to pay.

 

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The Mergers are subject to closing conditions, including the FCRD Stockholder Approval, that, if not satisfied or waived, will result in the Mergers not being completed, which may result in material adverse consequences to CCAP’s and FCRD’s business and operations.

The Mergers are subject to closing conditions, including the FCRD Stockholder Approval, which, if not satisfied, will prevent the Mergers from being completed. The closing condition that FCRD Stockholders approve the First Merger may not be waived under applicable law and must be satisfied for the Mergers to be completed. First Eagle Investment Management LLC (“FEIM”) has entered into a voting agreement with CCAP (the “Voting Agreement”) pursuant to which it has agreed to vote the shares of FCRD Common Stock held by FEIM in favor of the proposals presented at the Special Meeting required to complete the Mergers. If FCRD Stockholders do not approve the First Merger and the Mergers are not completed, the resulting failure of the Mergers could have a material adverse impact on FCRD’s and CCAP’s respective businesses and operations.

In addition to the FCRD Stockholder Approval, the Mergers are subject to a number of other conditions beyond FCRD’s and CCAP’s control that may prevent, delay or otherwise materially adversely affect its completion. Neither FCRD nor CCAP can predict with certainty whether and when these other conditions will be satisfied.

FCRD and CCAP may waive one or more conditions to the Mergers without resoliciting stockholder approval.

Certain conditions to FCRD’s and CCAP’s obligations to complete the Mergers may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of FCRD and CCAP. In the event that any such waiver does not require resolicitation of stockholders, the parties to the Merger Agreement will have the discretion to complete the Mergers without seeking further stockholder approval. The conditions requiring the approval of FCRD’s Stockholders, however, cannot be waived.

Certain persons related to FCRD have interests in the Mergers that differ from the interests of FCRD Stockholders.

Certain FCRD directors and executive officers may have interests in the Mergers that are different from, or in addition to, the interests of FCRD Stockholders. In addition, FEIM entered into the Voting Agreement pursuant to which FEIM has agreed to vote its covered shares of FCRD Common Stock in favor of the Merger Proposal. Further, FEAC has engaged in discussions with Crescent regarding a transition services agreement pursuant to which FEAC would provide certain consulting services to CCAP Advisor relating to FCRD’s existing investment portfolio subsequent to the Closing. The members of the FCRD Board and the Special Committee were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Mergers and in recommending to FCRD’s Stockholders that the First Merger be approved. These interests are described in more detail in the section of this proxy statement/prospectus entitled “The Mergers—Interests of Certain Persons Related to FCRD in the Mergers.”

CCAP and FCRD will be subject to operational uncertainties and contractual restrictions while the Mergers are pending.

Uncertainty about the effect of the Mergers may have an adverse effect on CCAP and FCRD and, consequently, on the combined company following completion of the Mergers. These uncertainties may cause those that deal with CCAP and FCRD to seek to change their existing business relationships with CCAP and FCRD. In addition, the Mergers agreement restricts CCAP and FCRD from taking actions that they might otherwise consider to be in their best interests. These restrictions may prevent CCAP and FCRD from pursuing certain business opportunities that may arise prior to the completion of the Mergers. Please see the sections entitled “Description of the Merger Agreement—Interim Operations of FCRD,” “Description of the Merger Agreement—Interim Operations of CCAP” and “Description of the Merger Agreement—Additional Covenants” for a description of the interim operating covenants to which CCAP and FCRD are subject.

The shares of CCAP Common Stock to be received by FCRD Stockholders as a result of the Mergers will have different rights associated with them than the shares of FCRD Common Stock currently held by them.

The rights associated with FCRD Common Stock are different from the rights associated with CCAP Common Stock. See “Comparison of Stockholder Rights.”

 

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If the Mergers do not qualify as a reorganization under Section 368(a) of the Code, FCRD Stockholders may be required to pay substantial U.S. federal income taxes.

The U.S. federal income tax consequences of the Mergers depend on whether the Mergers qualify as a reorganization within the meaning of Section 368(a) of the Code. The Mergers will not qualify as a reorganization if the fair market value of CCAP Common Stock received by FCRD Stockholders in the Mergers does not equal or exceed 40% of the aggregate consideration. As noted below under “Description of the Merger AgreementMerger Consideration,” the amount of CCAP Common Stock and cash to be transferred in the Mergers is subject to adjustments. Therefore, it will not be known at the time of the Special Meeting whether the Mergers will qualify as a reorganization.

The obligation of FCRD to complete the Mergers is conditioned on the receipt of an opinion from Simpson Thacher & Bartlett LLP, counsel to FCRD (or, if Simpson Thacher & Bartlett LLP is unable or unwilling to render such an opinion, the written opinion of Kirkland & Ellis LLP or another nationally recognized counsel as may be reasonably acceptable to FCRD), generally to the effect that for U.S. federal income tax purposes, the Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, with respect to FCRD and CCAP. The opinion will be based on then-existing law, will be subject to certain assumptions, qualifications and exclusions and will be based in part on the truth and accuracy of certain representations as to factual matters from FCRD and CCAP, as well as certain covenants by those parties. The opinion cannot be relied upon if any of the assumptions, representations or covenants are incorrect, incomplete or inaccurate or are violated in any material respect. In addition, the opinion is based on current law and cannot be relied upon if current law changes with retroactive effect. The opinion of counsel is not binding upon the IRS or the courts, and there is no assurance that the IRS or a court will not take a contrary position. FCRD and CCAP do not intend to request a ruling from the IRS regarding any aspects of the U.S. federal income tax consequences of the Mergers. If the IRS or a court determines that the Mergers should not be treated as described in the opinion, a U.S. stockholder (as defined herein under the heading “Certain Material U.S. Federal Income Tax Consequences of the Mergers”) would generally recognize gain or loss in full for U.S. federal income tax purposes upon the exchange of FCRD Common Stock for CCAP Common Stock and cash in the Mergers. For more information on material U.S. federal income tax consequences of the Mergers, see the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers” beginning on page 103.

The market price of CCAP Common Stock after the Mergers may be affected by factors different from those affecting CCAP Common Stock currently.

The businesses of CCAP and FCRD differ in some respects and, accordingly, the results of operations of the combined company and the market price of CCAP Common Stock after the Mergers may be affected by factors different from those currently affecting the independent results of operations of each of CCAP and FCRD. These factors include:

 

   

a larger stockholder base;

 

   

a different portfolio composition; and

 

   

a different capital structure.

Accordingly, the historical trading prices and financial results of CCAP may not be indicative of these matters for the combined company following the Mergers.

The U.S. federal income tax treatment of the CCAP Advisor Cash Consideration is not entirely clear, and the position taken that the CCAP Advisor Cash Consideration is part of the total cash consideration received by FCRD Stockholders pursuant to the Mergers might be challenged by the IRS.

With respect to the CCAP Advisor Cash Consideration, there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror and, as a result, the tax consequences of the receipt of the CCAP Advisor Cash Consideration are not entirely clear. CCAP, CCAP Advisor and the Exchange Agent intend to take the position that the portion of the CCAP Advisor Cash Consideration received by a U.S. stockholder (as defined in the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers”) is treated as additional merger consideration. It is possible, however, that the IRS would assert a contrary position that the U.S. stockholder’s share of the CCAP Advisor Cash Consideration should be treated as taxable ordinary income and not as cash received in exchange for such holder’s FCRD Common Stock. In addition, given the uncertain tax treatment of the CCAP Advisor Cash Consideration, CCAP Advisor or the Exchange Agent, or any other applicable withholding agent, may withhold tax at a rate of 30% from the portion of the CCAP Advisor Cash Consideration paid to a non-U.S. stockholder (as defined in the section entitled “Certain Material U.S. Federal Income Tax Consequences of the Mergers”), unless the non-U.S. stockholder establishes its eligibility for a reduced treaty rate or an exemption.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains “forward-looking” statements as that term is defined in Section 27A of the Securities Act, and Section 21E of the Exchange Act, as amended by the Private Securities Litigation Reform Act of 1995, including statements regarding the proposed transaction between CCAP and FCRD pursuant to the Merger Agreement. All statements, other than historical facts, including statements regarding the expected timing of the closing of the proposed transaction; the ability of the parties to complete the proposed transaction considering the various closing conditions; the expected benefits of the proposed transaction such as improved operations, enhanced revenues and cash flow, growth potential, market profile and financial strength; the competitive ability and position of the combined company following completion of the proposed transaction; and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) that one or more closing conditions to the transaction, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the proposed transaction, may require conditions, limitations or restrictions in connection with such approvals or that the required approval by the stockholders of FCRD may not be obtained; (2) the risk that the Mergers or other transactions contemplated by the Merger Agreement may not be completed in the time frame expected by CCAP and FCRD or at all; (3) unexpected costs, charges or expenses resulting from the proposed transaction; (4) uncertainty of the expected financial performance of the combined company following completion of the proposed transaction; (5) uncertainty with respect to the trading levels of shares of the combined company’s common stock on NASDAQ; (6) failure to realize the anticipated benefits of the proposed transaction, including as a result of delay in completing the proposed transaction or integrating the businesses of CCAP and FCRD; (7) the ability of the combined company to implement its business strategy; (8) difficulties and delays in achieving synergies and cost savings of the combined company; (9) inability to retain and hire key personnel; (10) the occurrence of any event that could give rise to termination of the Merger Agreement; (11) the risk that stockholder litigation in connection with the proposed transaction may affect the timing or occurrence of the contemplated merger or result in significant costs of defense, indemnification and liability; (12) evolving legal, regulatory and tax regimes; (13) changes in laws or regulations or interpretations of current laws and regulations that would impact CCAP’s classification as a business development company; and (14) changes in general economic and/or industry specific conditions. Some of these factors are enumerated in the filings CCAP and FCRD have made with the SEC, including the factors set forth as “Risk Factors” in CCAP’s and FCRD’s annual reports on Form 10-K for the fiscal year ended December 31, 2021 and subsequent quarterly reports on Form 10-Q, as such factors may be updated from time to time in their periodic filings with the SEC, and elsewhere contained or incorporated by reference in this proxy statement/prospectus.

The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any forward-looking statements speak only as of the date of this proxy statement/prospectus. Except as required by federal securities laws, neither CCAP nor FCRD undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information or development, future events or otherwise. Although neither CCAP nor FCRD undertakes any obligation to update or revise any forward-looking statements, readers are advised to consult any additional disclosures that CCAP or FCRD may make directly to you or through reports that they have filed or 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. This proxy statement/prospectus and documents incorporated by reference into this proxy statement/prospectus contains or may contain statistics and other data that have been obtained from or compiled from information made available by third-party service providers. Neither CCAP nor FCRD has independently verified such statistics or data. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

 

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You should understand that, under Sections 27A(b)(2)(B) of the Securities Act, and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with any offering of securities pursuant to this proxy statement/prospectus, any prospectus supplement or in periodic reports CCAP or FCRD file under the Exchange Act.

 

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THE SPECIAL MEETING

Date, Time and Place of the Special Meeting

The Special Meeting will be held in-person at [11:00 a.m.], Eastern Time, on [ ], 2022 at [__]. This proxy statement/prospectus will be sent to FCRD Stockholders of record as of [ ], 2022 on or about [•], 2022.

Purpose of the Special Meeting

At the Special Meeting, FCRD Stockholders will be asked to approve the Merger Proposal and, if necessary or appropriate, the FCRD Adjournment Proposal.

The FCRD Board, based on the unanimous recommendation of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and recommends that FCRD Stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the FCRD Adjournment Proposal.

Record Date

FCRD Stockholders may vote their shares at the Special Meeting, or any adjournments and postponements thereof, only if they were a stockholder of record at the close of business on [ ], 2022. There were [ ] shares of FCRD Common Stock outstanding on the FCRD Record Date. Each share of FCRD Common Stock outstanding as of the FCRD Record Date is entitled to one vote.

Quorum

The presence at the Special Meeting, in-person or represented by proxy, of the holders of a majority of the outstanding shares of FCRD Common Stock outstanding on the FCRD Record Date will constitute a quorum. Notwithstanding the foregoing, if a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting are not present in person or represented by proxy, the holders of one-third of such shares shall constitute a quorum to the extent permitted by applicable law. Abstentions will be treated as shares present for quorum purposes. Shares held by a broker, bank, trustee or nominee for which the broker, bank, trustee or nominee has not received voting instructions from the record holder as to how to vote such shares and does not have discretionary authority to vote the shares on non-routine proposals will not be treated as shares present for quorum purposes.

Broker Non-Votes

Broker non-votes occur for shares held through a broker, bank, trustee or nominee on behalf of a beneficial holder on “non-routine” matters on which such broker, bank trustee or nominee lacks discretionary authority when the beneficial owner does not provide explicit voting instructions as to how to vote such beneficial holder’s shares to such broker, bank, trustee or nominee as to such matter, and such shares are nevertheless voted on one or more other matters brought before the meeting (including one or more “routine” matters for which a broker, bank, trustee or nominee exercises its discretionary authority) or otherwise present in person or proxy at the meeting. FCRD believes that both of the FCRB Proposals are non-routine and therefore does not expect any broker non-votes to occur at the Special Meeting. As a result, if an FCRD Stockholder holds shares in “street name” through a broker, bank, trustee or nominee, the broker, bank, trustee or nominee will not be permitted to exercise voting discretion with respect to the Merger Proposal or the FCRD Adjournment Proposal. The failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have the same effect as votes “against” the Merger Proposal and will have no effect on the outcome of the FCRD Adjournment Proposal.

 

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Vote Required

Each outstanding share of FCRD Common Stock held by a holder of record as of the FCRD Record Date has one vote on each matter to be considered at the Special Meeting.

The Merger Proposal

The affirmative vote of the holders of a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting is required to approve the Merger Proposal.

Abstentions will have the same effect as votes “against” the Merger Proposal. In addition, the failure to vote will have the same effect as votes “against” the Merger Proposal.

The FCRD Adjournment Proposal

The affirmative vote of the holders of a majority of the shares of FCRD Common Stock present in person or represented by proxy and entitled to vote on the FCRD Adjournment Proposal at the Special Meeting, whether or not a quorum is present, is required to approve the FCRD Adjournment Proposal.

Abstentions will have the same effect as a vote “against” approval of the FCRD Adjournment Proposal. The failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have no effect on the outcome of the Adjournment Proposal.

Voting By Proxies

FCRD encourages FCRD Stockholders to vote by proxy, which means that FCRD Stockholders authorize someone else to vote their shares. Shares represented by proxies will be voted in accordance with FCRD Stockholders’ instructions. If an FCRD Stockholder properly executes and returns a proxy without specifying their voting instructions, such FCRD Stockholder’s shares will be voted in accordance with the FCRD Board’s recommendation, “FOR” each of the FCRD Proposals. If any other business is brought before the Special Meeting, FCRD Stockholders’ shares will be voted at the FCRD Board’s discretion unless FCRD Stockholders specifically state otherwise on their proxy.

An FCRD Stockholder may vote by proxy in accordance with the instructions provided below or by voting in-person during the Special Meeting. An FCRD Stockholder may also authorize a proxy by telephone or through the Internet using the toll-free telephone numbers or web address printed on the proxy card. Authorizing a proxy by telephone or through the Internet requires you to input the control number located on your proxy card. After inputting the control number, you will be prompted to direct your proxy to vote on each proposal. You will have an opportunity to review your directions and make any necessary changes before submitting your directions and terminating the telephone call or Internet link.

 

   

By Internet: [www.proxyvote.com]

 

   

By telephone: [1-800-690-6903 to reach a toll-free, automated touchtone voting line, or 1-888-777-2092 Monday through Friday, 9:00 a.m. until 9:00 p.m. Eastern Time, to reach a toll-free, live operator line.]

 

   

By mail: You may vote by proxy by following the directions and indicating your instructions on the enclosed proxy card, dating and signing the proxy card, and promptly returning the proxy card in the envelope provided, which requires no postage if mailed in the United States. Please allow sufficient time for your proxy card to be received on or prior to the Special Meeting.

If you are the beneficial owner of your shares, you will need to follow the instructions provided by your broker, bank, trustee or nominee regarding how to instruct your broker, bank, trustee or nominee to vote or submit a proxy to vote your shares at the Special Meeting or to provide a proxy authorizing you to vote your shares at the Special Meeting.

 

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Important notice regarding the availability of proxy materials for the Special Meeting. FCRD’s proxy statement/prospectus and the proxy card are available at [www.proxyvote.com.]

Revocability of Proxies

Any proxy authorized pursuant to this solicitation may be revoked by notice from the person giving the proxy at any time before it is exercised. If you are a stockholder of record, you can change your vote or revoke your proxy by:

 

   

delivering a written revocation notice before the Special Meeting, which FCRD advises should be received no later than 11:59 p.m. Eastern Time on [ ], 2022, to ensure that it is received in time for the Special Meeting, to FCRD’s Secretary, Sabrina Rusnak-Carlson, at First Eagle Alternative Credit, LLC, 500 Boylston St., Suite 1200, Boston, MA, 02116, Attention: Corporate Secretary;

 

   

submitting a subsequent proxy using the telephone or Internet before 11:59 p.m. Eastern Time on [ ], 2022 (your latest telephone or Internet proxy is the one that will be used to vote your shares); or

 

   

attending and voting during the Special Meeting. Simply logging into the Special Meeting will not, by itself, revoke your proxy.

If you hold shares of FCRD Common Stock through a broker, bank, trustee or nominee, you must follow the instructions you receive from your nominee in order to revoke your voting instructions.

Solicitation of Proxies

CCAP has agreed to bear all costs of preparing, printing and mailing this proxy statement/prospectus and the applicable accompanying Notice of Special Meeting of Stockholders and proxy card. FCRD intends to use the services of D.F. King & Co., Inc. to assist in the solicitation of proxies. FCRD expects to pay market rates of approximately $12,500 for such services, which will ultimately be borne by CCAP. No additional compensation will be paid to directors, officers or regular employees for such services.

Appraisal Rights

FCRD Stockholders and “beneficial owners” (as defined in Section 262 of the DGCL) will be entitled to exercise appraisal rights with respect to the Merger in accordance with Section 262 of the DGCL. For more information, see “Appraisal Rights of FCRD Stockholders and Beneficial Owners” and “Description of the Merger Agreement—Appraisal Rights.

 

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THE MERGERS

The discussion in this proxy statement/prospectus, which includes the material terms of the Mergers and the principal terms of the Merger Agreement, is subject to, and is qualified in its entirety by reference to, the Merger Agreement, which is attached as Annex A to this proxy statement/prospectus.

General Description of the Mergers

Pursuant to the terms of the Merger Agreement, at the Effective Time, Acquisition Sub will be merged with and into FCRD. FCRD will be the Surviving Corporation and will continue its existence as a corporation under the laws of the State of Delaware as a direct, wholly-owned subsidiary of CCAP. As of the Effective Time, the separate corporate existence of Acquisition Sub will cease. Subsequently, FCRD will merge with and into Acquisition Sub 2, with Acquisition Sub 2 as the surviving entity in the Second Merger. Subject to the terms and conditions of the Merger Agreement, at the Effective Time, each share of FCRD Common Stock issued and outstanding immediately prior to the Effective Time (excluding Cancelled Shares) will be converted into and exchanged for the right to receive the Per Share Merger Consideration, plus any cash in lieu of fractional shares, as well as the right to receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration.

Based on the number of shares of CCAP Common Stock issued and outstanding as of October 3, 2022 and the NAV per share of each of FCRD Common Stock and CCAP Common Stock as of June 30, 2022, it is expected that current CCAP Stockholders will own approximately 83% of the outstanding CCAP Common Stock and former FCRD Stockholders will own approximately 17% of the outstanding CCAP Common Stock immediately following consummation of the Mergers.

Background of the Mergers

At the time of FCRD’s initial public offering (“IPO”) in April 2010, FCRD’s investment strategy focused on investments in privately negotiated debt and equity securities of middle market companies, primarily in junior capital securities, including subordinated, or mezzanine, debt and second lien secured debt, which junior capital could include an associated equity component such as warrants, preferred stock or other similar securities. FCRD expected to generate returns through a combination of contractual interest payments on debt investments, equity appreciation (through options, warrants, conversion rights or direct equity investments) and origination and similar fees.

With over $250 million of net assets as of IPO, FCRD held concentrated hold sizes in junior capital investments as a result of limited capital available outside of FCRD. This investment strategy, together with this small size of FCRD, resulted in volatility in FCRD’s NAV when a particular credit did not perform in accordance with expectations.

In 2015, FCRD shifted its investment focus from junior capital investments to focus primarily in directly originated first lien loan senior secured and second lien loans, including unitranche investments. Further, FCRD communicated its strategy to increase the diversification of its portfolio through co-investments with affiliated managed funds and to rotate out of junior capital and unsponsored investments (“Legacy Assets”). FEAC then reduced its contractual advisory fees and modified the incentive fee calculation to be more stockholder friendly. Further, as the rotation of the Legacy Assets took longer than anticipated, FEAC waived a significant amount of advisory fees to increase alignment with stockholders. However, stock performance continued to be negatively impacted due to the elongated period to rotate out Legacy Assets and related decline in NAV.

In 2020, in connection with the acquisition of THL Credit Advisors LLC (now FEAC) by FEIM, FEAC facilitated the consummation of a $30 million stock issuance at NAV. Additionally, with the aim of reducing the discount of trading price to NAV, in July of 2020, FCRD repurchased approximately $19.5 million of its common stock, or 5,189,026 million shares, representing approximately 14.7% of its outstanding shares, from cash on hand at a price of $3.75 per share, excluding fees and expenses relating to the self-tender offer which price represented 70% of NAV per share based on FCRD’s April 15, 2020 NAV per share.

 

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FEAC then focused on additional initiatives intended to increase net investment income, such as reducing the cost of indebtedness by reducing the interest rate of its credit facility and refinancing its bonds for a lower fixed rate. Further, FEAC refinanced the Logan JV to form the CLO to increase the net investment income distributed to FCRD. While FCRD was successful in implementing these initiatives, FCRD’s stock price continued to trade at a significant discount to its NAV per share.

As a result of shares of FCRD Common Stock consistently trading at a discount to NAV per share, it has limited FCRD’s ability to raise additional equity capital given the constraints under the Investment Company Act on the ability of a BDC to issue shares of its common stock at a price below NAV and the FCRD Board’s general belief that although maintaining the flexibility to issue new shares of FCRD Common Stock at a discount to then-current NAVs could be appropriate under certain circumstances, such an offering at a significant discount to then-current NAVs would be dilutive and was not in the best interests of FCRD or its stockholders. These limitations provided challenges that the FCRD Board has consistently considered in evaluating FCRD’s business and affairs. Additionally, increasing consolidation in the BDC industry and the formation of several new large market entrants has shown that larger BDCs may have certain advantages, including cost efficiencies, increased trading volume and liquidity for stockholders.

On June 1, 2022, the FCRD Board held a virtual special meeting with FEAC, Simpson Thacher and Stradley Ronon Stevens & Young, LLP (“Stradley”), counsel to the FCRD Independent Directors, to discuss the process of pursuing a possible strategic transaction, including a possible merger. Simpson Thacher provided the FCRD Board with an overview of its experience with BDC strategic transactions and discussed the role that Simpson Thacher would play if the FCRD Board pursued a possible strategic transaction. The FCRD Board discussed various potential strategic transaction options, including continuing to operate FCRD on a standalone basis and various sale/merger transactions, including a stock sale, asset sale, merger or reverse merger, as well as other strategic transactions. The FCRD Board determined to further explore these options. Stradley provided the FCRD Board with an overview of the FCRD Board’s proposed role and Simpson Thacher discussed the involvement of FEAC and FCRD’s officers in such circumstances. Stradley and Simpson Thacher also reviewed the Board’s fiduciary duties with respect to a possible strategic transaction. Simpson Thacher also discussed the role that a financial advisor would play if engaged by the FCRD Board to assist in pursuing a strategic transaction. At this meeting, the FCRD Board also discussed a potential confidential auction process, instead of a publicly announced process, to evaluate strategic transaction options and in consultation with FEAC, Simpson Thacher and Stradley, the FCRD Board discussed the merits of both approaches. Simpson Thacher informed the FCRD Board that it is common for a BDC to engage in a confidential process and that any transaction agreement would be negotiated in a manner designed to provide the FCRD Board with appropriate required flexibility to receive and consider competing proposals after a transaction was publicly announced. FEAC recommended that the FCRD Board meet with representatives of Keefe, Bruyette & Woods, Inc. (“KBW”) to consider KBW as a potential financial advisor. Following an executive session of the FCRD Independent Directors, the FCRD Board determined to interview KBW and then determine whether to interview any other potential financial advisors.

On June 2, 2022, members of the FCRD Board, constituting a quorum, met with representatives of KBW at a virtual special meeting, along with Stradley and representatives of FEAC, during which the KBW representatives reviewed KBW’s credentials including an overview of its experience with BDC strategic transactions. The FCRD Board and KBW discussed comparative advantages and disadvantages between a confidential auction process and a public process and the potentially favorable aspects of a targeted, confidential auction process. The FCRD Board also discussed KBW’s proposed fee and other terms of its engagement. The FCRD Independent Directors considered publicly available financial advisor fee levels from other strategic transactions involving BDCs. In an executive session, the FCRD Independent Directors discussed the possibility of forming a special committee in connection with a potential strategic transaction that would review proposals submitted and make a recommendation to the full FCRD Board, and determined to further consider engaging KBW as financial advisor to the FCRD Board. The FCRD Independent Directors requested that KBW provide additional information regarding KBW and comparative financial advisor fee data.

 

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On June 15, 2022, after receipt and consideration of additional information from KBW, the FCRD Board approved via unanimous written consent the engagement of KBW as financial advisor to FCRD and the FCRD Board, including any special committee of the FCRD Board, in connection with a potential strategic transaction, and KBW was subsequently engaged.

On June 15, 2022, Simpson Thacher provided a form of non-disclosure agreement (“NDA”) to FEAC that could be provided to and executed by potential bidders prior to receiving any non-public information related to FCRD or its operations and investments, which included customary “standstill” and related provisions intended to require that bidders submit all bids through FCRD’s official process and not through other avenues (unless such provisions were waived by FCRD). On June 17, 2022, Stradley provided certain comments on the form of NDA, and the form of NDA was then sent to KBW to be provided to potential bidders.

On June 20, 2022, the FCRD Board held a virtual special meeting with representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance to discuss the initiation of a targeted, confidential auction process. Representatives of KBW reviewed a group of 14 potential bidders with the FCRD Board, focusing on eight potential bidders (including CCAP) for the targeted outreach and a ninth potential bidder that it was believed could have significant interest in being part of the process. These nine potential bidders had experience participating in BDC strategic transactions or had recently made acquisitions of business lines or added personnel that had such experience. The remaining five potential bidders did not have such experience but might have strategic interest in a transaction with FCRD. The FCRD Board discussed several factors that could drive the competitiveness of the auction process, including the current scarcity of other BDC acquisition targets and FEAC’s positive reputation and relationships, and discussed other potential parties and the possible benefits and drawbacks of expanding the scope of the confidential auction process to a larger group of potential bidders, including certain potential counterparties not included in the initial group of 14 potential bidders reviewed with KBW. FEAC informed the FCRD Board that it may be possible that a bidder could request that FEAC continue to serve as the collateral manager to the CLO if such bidder does not itself have such expertise or does not want to manage that vehicle. KBW and Simpson Thacher informed the FCRD Board that in recent BDC merger transactions it has been common for the investment advisers of the two BDCs to enter into a transition services agreement separately from the merger agreement between the BDCs, although any such agreement would be solely between FEAC and a successful bidder, the FCRD Board would be informed of any such proposals and the material terms discussed. The FCRD Board directed KBW to commence outreach to eight targeted potential bidders the following day.

On June 28, 2022, KBW provided FEAC with a status update, which was relayed to the FCRD Board on June 29, 2022. Six of the eight potential bidders contacted by KBW had expressed interest in participating in the process, with three signing an NDA and three others having requested an NDA. Two potential bidders had informed KBW that they would not participate in the process. The FCRD Board directed KBW to contact a ninth potential bidder that had previously been discussed with the FCRD Board.

On July 1, 2022, the Nominating and Governance Committee of the FCRD Board met with representatives of Stradley to discuss the confidential auction process and related updates received to date from FEAC and KBW. The Nominating and Governance Committee members also reviewed the possibility of the formation of a special committee of the FCRD Board and the potential compensation schedule of any such committee.

On July 7, 2022, KBW again provided FEAC with a status update, which was relayed to the FCRD Board the same day. Seven potential bidders had signed an NDA, six had been provided access to a virtual data room containing diligence information regarding FCRD, two had hired a financial advisor and two had hired outside counsel. One bidder had not been provided access to the virtual data room yet as the bidder was checking for any potential conflicts it might have.

On July 14, 2022, KBW received non-binding indications of interest from five bidders, including CCAP. A summary of the bids was provided to the FCRD Board on July 15, 2022 in advance of a scheduled call on July 18, 2022.

On July 18, 2022, the FCRD Board held a virtual special meeting with representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance. Representatives of KBW informed the FCRD Board that five initial indications of interest, one of which included two proposals, had been received, that one of the potential bidders had

 

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indicated that it did not intend to submit a proposal and that another potential bidder that previously mentioned a potential conflict had not responded to follow-up communications and had not been provided access to the virtual data room. Representatives of KBW reviewed each bid in detail with the FCRD Board and discussed the implied consideration value of each bid as compared to FCRD’s NAV per share of $6.12 as of March 31, 2022, the most recently available NAV, and market trading price per share of $3.34 as of July 14, 2022, the date of the indications of interest. Below is a summary of the bids as of July 15, 2022:

 

   

Party A had retained outside counsel, and proposed a tax-free reverse triangular merger transaction at a floating exchange ratio of 97% of FCRD’s NAV relative to the acquiring BDC’s stock trading price, resulting in of implied consideration values ranging from $5.92 to $7.17 per share of FCRD Common Stock when calculated based on the acquiring BDC’s volume weighted average stock price (“VWAP”), for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. The consideration would be paid approximately 35% in cash and 65% in stock of the acquiring BDC. Party A also proposed additional consideration in the form of a 10-year credit support agreement of $40 million and a package of additional benefits including advisory fee waivers and purchases of the acquiring BDC’s common stock at NAV by the acquiring BDC’s investment adviser or an affiliate. The acquiring BDC would not require approval from its stockholders for the transaction. Party A also noted that it may seek a transition services agreement with FEAC.

 

   

CCAP had retained a financial advisor and Kirkland & Ellis LLP (“Kirkland) as outside counsel, and proposed a tax-free NAV-for-adjusted-NAV combination transaction with CCAP or a wholly owned subsidiary of CCAP, resulting in implied consideration values ranging from $5.97 to $6.58 per share of FCRD Common Stock when calculated based on CCAP’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price. The proposed consideration would be paid approximately 12.7-14% in cash and 86-87.3% in stock of the acquiring BDC. CCAP’s proposal included a $25 million cash payment from CCAP Advisor to FCRD stockholders and included up to $20 million in post-closing market support through a share purchase program funded by CCAP Advisor’s parent company. The acquiring BDC would not require approval from its stockholders for the transaction.

 

   

Party B had not retained a financial advisor or outside counsel yet, and proposed a tax-free merger whereby FCRD would merge with Party B, with a fixed exchange ratio of 90% of FCRD’s NAV relative to the acquiring BDC’s stock trading price at closing, resulting in implied consideration values ranging from $3.50 to $5.61 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. Party B proposed an all-stock merger, but offered to pay up to 10% of the consideration in cash to cause the merger to be taxable, if determined by the FCRD Board that a taxable transaction was in the best interest of FCRD stockholders. The acquiring BDC would not require stockholder approval for the transaction. Party B also stated that it would expect to enter into a transition services agreement with FEAC.

 

   

Party C, which manages multiple BDCs, had retained a financial advisor and outside counsel, and proposed two possible tax-free merger transactions, each with different BDCs. Both proposed mergers were all-stock mergers, and either potential acquiring BDC would require approval from its stockholders for the transaction.

 

   

For one BDC, Party C proposed a merger with a floating exchange ratio of 74% of FCRD’s NAV relative to the acquiring BDC’s NAV, resulting in implied consideration values ranging from $4.08 to $4.73 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target.

 

   

For the second BDC, Party C proposed a NAV-for-adjusted-NAV merger resulting in implied consideration values ranging from $3.80 to $6.12 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target.

 

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Party D had not retained a financial advisor or outside counsel yet, and proposed a tax-free NAV-for-adjusted-NAV merger resulting in implied consideration values ranging from $4.81 to $6.06 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. The proposed consideration would be paid approximately 5% in cash and 95% in stock of the acquiring BDC. The acquiring BDC would require approval from its stockholders for the transaction.

The FCRD Board discussed the details of each bid and the general consensus was that the three strongest proposals, based on implied consideration value and other factors, were Party A, CCAP and Party B, and that Party D’s proposal also was competitive. The FCRD Board instructed KBW to inform Party A, CCAP and Party B that they had advanced to the second round of the auction process, and that if Party D determined to submit a revised proposal the FCRD Board would consider allowing Party D to advance as well. Following an executive session of the FCRD Independent Directors, Stradley provided an overview of the fiduciary duties of the FCRD Independent Directors, and the FCRD Independent Directors discussed the possibility of the formation of a special committee of the FCRD Board.

On July 18, 2022, the FCRD Board instructed Simpson Thacher to begin drafting a form of a merger agreement to be provided to participants in the second round of the auction process. Following discussions with FEAC, Simpson Thacher, Stradley and KBW, the FCRD Board determined that second round proposals would be due on August 17, 2022, in order to allow bidders to include a markup of the merger agreement with their best and final proposals. The four remaining bidders were provided a second round process letter on July 22.

On July 21, 2022, KBW updated the FCRD Board regarding which bidders had retained financial advisors to date.

On July 23, 2022, Party D submitted a revised initial indication of interest, which was provided to the FCRD Board that same day.

On July 25, 2022, the FCRD Board held a special virtual meeting with representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance to discuss Party D’s revised bid. Representatives of KBW reviewed the changes to Party D’s proposal with the FCRD Board, which changes added a cash payment from the investment adviser of Party D to FCRD stockholders of up to $20 million and increased the cash consideration from Party D, resulting in implied consideration values ranging from $5.66 to $6.74 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. The proposed consideration would be paid approximately 23.5% cash and 76.5% in stock of the acquiring BDC (the cash portion of the proposed consideration was previously 5%). KBW also informed the FCRD Board that Party D had engaged outside counsel for the transaction. After discussing the elements of Party D’s revised bid, FCRD Board instructed KBW to inform Party D that it had advanced to the second round of the auction process. KBW also informed the FCRD Board that it had received communication from Party C that it was considering increasing its proposal by a particular amount, that would result in implied consideration value lower than Party D’s updated indication of interest. After weighing the verbal update to the Party C proposal, the FCRD Board declined to include Party C in the second round of the process. KBW informed the FCRD Board that Party B had engaged a financial advisor.

Between July 26 and August 2, 2022, FEAC met with each of the remaining bidders, except for Party A, in person as part of their diligence processes.

 

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On July 29, 2022, KBW provided an update on the auction process to FEAC, which was relayed to the FCRD Board that same day. In-person diligence sessions had been held with Party B and CCAP, and CCAP’s diligence efforts had been the most comprehensive of the remaining bidders. KBW also informed FEAC that an in-person diligence meeting was being scheduled with Party D early the next week (and such meeting ultimately occurred on August 2, 2022). In addition, Party A had informed KBW that it no longer wished to pursue a merger, but would consider a portfolio purchase transaction at a discount to FCRD’s NAV. After discussions among representatives of KBW, FEAC and Party A, Party A withdrew from the process because its revised proposal would not be competitive.

On August 2, 2022, Stradley provided its input on a draft merger agreement, and the draft merger agreement was provided to the remaining bidders.

On August 5, 2022, a regularly scheduled quarterly meeting was held virtually with representatives of FEAC, Simpson Thacher and Stradley. At the meeting, FEAC provided the FCRD Board with an update on the due diligence process. The FCRD Board approved the formation of a special committee (the “Special Committee”), consisting of James Kern, Edmund Giambastiani, Deborah McAneny and Jane Musser Nelson, each an independent director of the FCRD Board, to review, evaluate, and negotiate the potential acquisition of FCRD. The FCRD Board determined that James Kern would serve as chair of the Special Committee and that each member of the Special Committee would receive per-meeting compensation equal to FCRD’s pre-existing, standard per-meeting compensation amount of $1,500 per meeting attended, without duplication, and reimbursement of all out-of-pocket expenses, if any, for attending meetings of the Special Committee.

On August 17, 2022, second round indications of interest were received from CCAP, Party B and Party D along with each bidder’s comments on the draft merger agreement. A summary of the second round bids was provided to the FCRD Board on August 19, 2022 along with a summary comparing each bidder’s comments to merger agreement.

On August 21, 2022, Stradley provided a memorandum to the Special Committee regarding the fiduciary duties of directors of a Delaware corporation, as well as of the obligations of the independent directors of a business development company regulated under the Investment Company Act.

On August 22, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, FEAC, Simpson Thacher, Stradley and KBW to discuss second round bids and each bidder’s comments on the draft merger agreement. Representatives of KBW reviewed each bid with the Special Committee and discussed the implied consideration value of each bid as compared to FCRD’s NAV per share of $5.30 as of June 30, 2022, which was the most recently calculated NAV, and market trading price per share of $3.30 as of August 17, 2022, which was the date of the second round indication of interest. Below is a summary of the bids as of August 18, 2022:

 

   

CCAP proposed a tax-free NAV-for-NAV transaction resulting in implied consideration values ranging from $5.31 to $6.11 per share of FCRD Common Stock when calculated based on the CCAP’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. The proposed consideration would be paid approximately 31.1% in cash and 68.9% in stock of the acquiring BDC. CCAP’s proposal included a $35 million cash payment from CCAP Advisor to FCRD stockholders and a commitment of $20 million in post-closing market support through a share purchase program funded by CCAP Advisor’s parent company. On a NAV basis, the implied consideration value of CCAP’s revised proposal represented 115.3% of FCRD’s NAV as of June 30, 2022, which represented a premium to NAV. CCAP would not require approval from its stockholders for the transaction. CCAP Advisor also stated that it would expect to enter into a transition services agreement with FEAC and that FEAC would continue to manage the CLO.

 

   

Party B proposed a tax-free merger with a fixed exchange ratio resulting in implied consideration values ranging from $3.97 to $4.96 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. Party B proposed an all-stock merger, but offered to pay up to 10% of the consideration in cash to cause the merger to be taxable, if determined by the FCRD Board that a taxable transaction was in the best interest of FCRD

 

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stockholders. The acquiring BDC would not require approval from its stockholders for the transaction and was internally managed. Party B also stated that it would expect to enter into a transition services agreement with FEAC and that FEAC would continue to manage the CLO. On a NAV basis, the implied consideration value of Part B’s revised proposal represented 93.5% of FCRD’s NAV as of June 30, 2022, which was a discount to NAV. Because the acquiring BDC traded at a premium to NAV, Party B had included a price collar feature in its revised bid, which would fix the exchange ratio in the event the acquiring BDC’s market trading price fell outside of a prescribed range.

 

   

Party D proposed a tax-free NAV-for-NAV merger resulting in implied consideration values ranging from $5.38 to $6.02 per share of FCRD Common Stock when calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. The proposed consideration would be paid approximately 25.8% in cash and 74.2% in stock of the acquiring BDC. Party D’s proposal included a cash payment from the acquiring BDC’s investment adviser to FCRD stockholders of up to $23 million. On an NAV basis, the implied consideration value of Party D’s revised proposal represented 113.6% of FCRD’s NAV as of June 30, 2022, which represented a premium to NAV. The acquiring BDC would require approval from its stockholders for the transaction. Party D also stated that it would expect to enter into a transition services agreement with FEAC and that FEAC would continue to manage the CLO. Party D also stated that it would consider adding an independent director from FCRD to its board of directors after the merger.

At the meeting, representatives of KBW indicated that Party D had called on August 21, 2022 to increase the investment adviser cash payment from $23 million to $26 million. This increase was not reflected in the written summary provided to the FCRD Board on August 19, 2022. Representatives of KBW next discussed each bidder’s proposal and implied consideration value applying a set of standardized assumptions, including $4 million of transaction costs for FCRD, transaction costs stated by each bidder in their latest indication of interest submission and a reduction in FCRD’s NAV of $2.2 million due to repayment of deferred financing costs, as advised per FEAC. Applying these standardized assumptions, representatives of KBW indicated that CCAP’s proposal represented implied consideration values ranging from $5.48 to $6.27 per share of FCRD Common Stock, Party B’s proposal represented implied consideration values ranging from $3.87 to $4.83 per share of FCRD Common Stock and Party D’s proposal represented implied consideration values ranging from $5.30 to $5.93 per share of FCRD Common Stock, in each case when implied considerations values were calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target.

Simpson Thacher discussed with the Special Committee each bidder’s comments on the draft merger agreement and compared the three bidders’ comments on certain material points, noting that one bidder did not submit a complete set of comments. Simpson Thacher stated that CCAP was the only bidder to offer FCRD stockholders the ability to make an election to receive all or a portion of the merger consideration in cash or stock. Simpson Thacher reported that CCAP expected certain stockholders to enter into a voting support agreement in connection with a merger, while the other bidders did not indicate such a requirement. Simpson Thacher also stated that Party D was the only bidder that required its stockholders to approve a merger. Two bidders, CCAP and Party B had made material changes to the provisions in the draft merger agreement regarding the ability of the FCRD Board to change its recommendation to FCRD stockholders and/or consider competing proposals from third parties, and the impact of these changes was discussed with the Special Committee. Simpson Thacher also reported that these same two bidders had proposed lower caps on directors and officers insurance premiums for tail policy coverage than in the original draft merger agreement. Simpson Thacher discussed the closing conditions in each bidder’s merger agreement comments, noting that CCAP had proposed that certain consents related to the Logan JV would be a closing condition, along with FCRD receiving a legal opinion that the merger qualified as a tax-free reorganization, the latter of which was favorable to FCRD and would protect FCRD from being required to close the transaction in the event that CCAP’s NAV declined significantly relative to FCRD’s NAV. With respect to termination fees, Simpson Thacher reported that CCAP and Party B had removed the reverse termination fee provision in the original draft merger agreement that would require the bidder to pay a termination fee to FCRD in certain circumstances.

 

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Stradley noted that it had previously provided a memorandum to the FCRD Independent Directors regarding the fiduciary duties of the directors and discussed the fiduciary obligations with the Special Committee. Following this discussion, the Special Committee instructed KBW to request clarification from CCAP on four points prior to entering into an exclusivity agreement: (i) removal of the closing condition regarding consents related to the Logan JV; (ii) resetting the insurance premium for directors and officers tail insurance to the limitation in the original draft merger agreement; (iii) retaining a reverse termination fee that CCAP would pay to FCRD in certain circumstances; and (iv) confirmation that FEIM is the only stockholder that CCAP would require to enter into a voting agreement as a condition of signing the merger agreement. Simpson Thacher was instructed to prepare a draft exclusivity agreement to be provided to CCAP.

On August 23, 2022, an updated summary of second round indications of interest reflecting Party D’s increased investment adviser cash payment, and an update regarding discussions with CCAP were provided to the FCRD Board on August 24, 2022. Simpson Thacher also provided a draft exclusivity agreement to Stradley and then Kirkland, CCAP’s outside counsel, and received minor comments from Kirkland the same day.

On August 24, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, as well as representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance. Representatives of KBW again discussed each bidder’s proposal and implied consideration value based on the same standardized assumptions from the meeting on August 19, 2022 but with updated VWAP information. CCAP’s proposal represented implied consideration values ranging from $5.50 to $6.27 per share of FCRD Common Stock, Party B’s proposal represented implied consideration values ranging from $3.97 to $4.96 per share of FCRD Common Stock and Party D’s proposal represented implied consideration values ranging from $5.48 to $6.12 per share of FCRD Common Stock, in each case when implied consideration values were calculated based on the acquiring BDC’s VWAP for various periods, most recent reported book value per share and median research analysts’ consensus stock price target. The Special Committee discussed the characteristics of the CCAP and Party D bids other than price, noting that CCAP offered higher trading volume and liquidity for FCRD stockholders and that both bidders’ stock traded below NAV. The Special Committee also discussed that CCAP would not require approval from its stockholders to close the transaction but Party D would require approval from its stockholders to be a closing condition. KBW and Simpson Thacher discussed the four points on which the Special Committee had requested clarification from CCAP, indicating that CCAP had agreed to: (i) remove any closing condition related to consents related to the Logan JV; (ii) accept the original proposed premium cap for directors and officers tail insurance policy coverage; (iii) consider a reverse termination fee to be paid by CCAP to FCRD in certain circumstances; and (iv) require a voting support agreement only from First Eagle prior to entering into the merger agreement. The Special Committee determined that FCRD should proceed with entry into an exclusivity agreement with CCAP. Simpson Thacher and Kirkland exchanged certain minor comments to the proposed exclusivity agreement, which also were shared with Stradley.

On August 25, 2022, the FCRD Board, by unanimous written consent, and based on the unanimous recommendation of the Special Committee, approved FCRD entering into an exclusivity agreement with CCAP and the parties executed the exclusivity agreement that day, with an exclusivity period through September 15, 2022. Simpson Thacher provided the FCRD Board with a summary of key issues related to CCAP’s comments on the draft merger agreement included with their second-round indication of interest, in advance of the Special Committee meeting the next day.

On August 26, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, as well as representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance, to discuss material topics and issues related to CCAP’s comments on the draft merger agreement and the process that the Special Committee should expect with respect to each turn of the merger agreement. The Special Committee requested that Simpson Thacher work with Stradley and FEAC to prepare and circulate to the FCRD Board an updated summary of key issues related to the merger agreement with proposed responses to CCAP’s comments on the draft merger agreement that reflected the feedback provided by the Special Committee. The Special Committee also instructed FEAC, Simpson Thacher and Stradley to engage in reverse due diligence on CCAP and CCAP Advisor, with a particular focus on valuation, legal and regulatory issues.

 

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On August 30, 2022, Simpson Thacher provided a list of FCRD’s legal and regulatory reverse due diligence information requests about CCAP and CCAP Advisor to Kirkland, which reflected information requests from FEAC and Stradley. KBW separately provided CCAP with a list of FCRD’s business and valuation reverse due diligence information requests that same day. Simpson Thacher, Stradley and FEAC received access to a virtual data room with information about CCAP and CCAP Advisor on September 2, 2022.

On September 6, 2022, Simpson Thacher received a revised draft of the merger agreement from Kirkland.

On September 9, 2022, FEAC and Mr. Kern, in his capacity as chair of the Special Committee, held a reverse due diligence session with CCAP management and CCAP Advisor to discuss business and valuation information. Following the reverse diligence session, representatives of FEAC held a legal and regulatory diligence session with Kirkland.

On September 9, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, as well as representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance, to discuss reverse due diligence findings and the latest draft of the merger agreement. FEAC and Mr. Kern provided the Special Committee with their respective reverse due diligence assessments. Simpson Thacher also provided the Special Committee with its preliminary reverse due diligence findings. Simpson Thacher summarized the key revisions proposed by CCAP in the latest draft of the merger agreement. The Special Committee discussed approaches to determining the mix of merger consideration, and instructed Simpson Thacher to add a mechanism for FCRD stockholders to elect to receive all or a portion of the merger consideration in the form of cash or CCAP stock, as initially offered by CCAP. The Special Committee provided feedback and direction on certain material points, including interim operating covenant restrictions, closing conditions, termination fee amounts and expense reimbursement provisions. Simpson Thacher also informed the Special Committee that negotiations had been initiated between FEAC and CCAP regarding a transition services agreement and certain documentation related to FEAC’s continued management of the Logan JV following the merger.

On September 11, 2022, Simpson Thacher provided Kirkland with an updated draft of the merger agreement, reflecting the Special Committee’s feedback.

On September 14, 2022, following discussions with Kirkland regarding the cash/stock election mechanic, Simpson Thacher provided Kirkland a further revised draft of the merger agreement reflecting revisions to the election mechanic.

On September 15, 2022, the exclusivity agreement between FCRD and CCAP Advisor was extended until September 23, 2022, in light of the parties’ continued negotiation of the merger agreement.

On September 19, 2022, Simpson Thacher received revisions to the interim operating covenants section of the merger agreement from Kirkland, and on September 22, 2022 Kirkland and Simpson Thacher corresponded regarding certain additional minor changes to the merger agreement.

On September 20, 2022, Simpson Thacher provided Kirkland with revisions to certain representations and covenants in the merger agreement.

On September 21, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, as well as representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance, to discuss a possible second extension of the exclusivity agreement with CCAP. FEAC provided the Special Committee with an update on the topics still being negotiated with CCAP. At this meeting, the FCRD Independent Directors determined that Mr. Kern would receive a one-time payment of $7,000 for his service as chair of the Special Committee. In executive session, Stradley reviewed its reverse due-diligence review on behalf of the Special Committee, including a review of CCAP and CCAP Advisor’s compliance and governance structure and the information considered by the CCAP board in approving their advisory contract.

On September 23, 2022, the exclusivity agreement between FCRD and CCAP was extended until September 30, 2022, in light of the parties’ continued negotiation of the merger agreement.

On September 24, 2022, Simpson Thacher received a revised draft of the merger agreement from Kirkland.

 

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On September 26, 2022, following a phone call involving representatives of CCAP, FCRD, Simpson and Kirkland, Simpson Thacher received a further revised draft of the merger agreement.

On September 28, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, as well as representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance, to discuss remaining material open points of negotiation in the merger agreement, focusing on termination fees, expense reimbursement provisions, interim operating covenants and closing conditions. Simpson Thacher presented the Special Committee with the latest proposals from CCAP and solicited feedback from the Special Committee on these points.

On September 29, 2022, Simpson Thacher updated the FCRD Board on the remaining merger agreement issues and requested feedback on remaining open items.

After the members of the FCRD Board reviewed and considered these issues, on September 30, 2022, Simpson Thacher sent a revised draft and separate further revisions to the merger agreement to Kirkland.

On October 1, 2022, representatives of FCRD, CCAP Advisor, Simpson Thacher and Kirkland spoke regarding the remaining open negotiation points, and the parties reached business agreement on these points in principle. Later that day, Simpson Thacher received a revised version of the merger agreement from Kirkland.

On October 2, 2022, Simpson Thacher provided Kirkland with a revised version of the merger agreement and both counsels held a call to discuss certain changes to the merger agreement.

On October 3, 2022, the Special Committee held a special virtual meeting with those directors who were not members of the Special Committee, as well as representatives of FEAC, Simpson Thacher, Stradley and KBW also in attendance, for the Special Committee to consider recommending the approval of the merger agreement to the FCRD Board. At this meeting, KBW reviewed the financial aspects of the proposed Mergers and rendered an opinion to the FCRD Board and the Special Committee to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the Aggregate Merger Consideration (defined as the Parent Cash Consideration, the Aggregate Share Consideration and the CCAP Advisor Cash Consideration, taken together) in the proposed First Merger was fair, from a financial point of view, to the holders of FCRD Common Stock, collectively as a group, as more fully described in the section entitled “—Opinion of the Financial Advisor to the FCRD Board” below. Separately, representatives of KBW also reviewed and discussed CCAP’s fee structure as compared to the fee structure for FCRD and selected BDCs. Also at this meeting, Simpson Thacher discussed recent changes to the Merger Agreement and the resolution of the final open items in the Merger Agreement. In addition, FEAC reported that, as previously discussed with the Special Committee, CCAP had proposed that FEAC would remain as collateral manager to the CLO and would receive the collateral management fee set forth in the underlying CLO documentation for staying in that role, and CCAP Advisor would enter into a transition services agreement with FEAC under which FEAC would receive $750,000 paid over four quarters and would be reimbursed by CCAP Advisor for certain investment advisory fees rebated to the Logan JV after closing of the merger. The Special Committee was informed that the merger agreement would not include any provisions requiring that FEAC continue to serve as collateral manager to the CLO or enter into a transition services agreement with CCAP Advisor. Additionally, FEAC reported that FEIM would be entering into a voting support agreement, pursuant to which First Eagle would (i) grant an irrevocable proxy to CCAP and vote (or direct the shares subject to the agreement to vote) in favor of the transaction, and any other matter contemplated as necessary or advisable to the consummation of the transaction at a special stockholder meeting held by FCRD, (ii) agree not to vote in favor of any competing proposal, alternative acquisition agreements, or any proposal, transaction, agreement or action that would, or could reasonably be expected to, prevent, impede, frustrate, interfere with, delay, postpone or adversely affect the transaction or change in any manner the voting rights of any class of shares of FCRD, and (iii) agree to not, directly or indirectly, transfer, sell, offer, exchange, assign, pledge, convey any legal or beneficial ownership interest in or otherwise dispose of, or encumber any of the shares subject to the agreement or enter into any contract, option, or other agreement with respect to, or consent to, a transfer of, any of the shares or their voting or economic interest therein other than in connection with the transaction until the earlier of (a) the closing date, or (b) the termination of the merger agreement. The Special Committee met in executive session with representatives of KBW outside the presence of FEAC to further discuss KBW’s financial presentation. The Special Committee arose from executive session, and noted that

 

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they were prepared to recommend approval of the merger agreement via written consent. The Special Committee subsequently recommended the approval of the merger agreement to the FCRD Board via unanimous written consent, and the FCRD Board unanimously approved the merger agreement via written consent that same day. Throughout the course of the day, Simpson Thacher and Kirkland exchanged multiple versions of the merger agreement until all open drafting issues were resolved and Simpson Thacher provided Kirkland with an execution version of the merger agreement which was then executed by each of the parties thereto.

FCRD Reasons for the Mergers

As previously disclosed, the Special Committee and FCRD Board reviewed a variety of strategic alternatives that they believed would enhance value for FCRD Stockholders.

In evaluating the merger proposal from CCAP, the Special Committee and FCRD Board, including the FCRD Independent Directors, consulted with and received the advice of FCRD’s management, KBW, Stradley, and Simpson Thacher. In reaching its decision, the Special Committee and FCRD Board considered a number of factors, including the factors described in this section, and, as a result, unanimously determined that entering into the Merger Agreement and consummating the transactions contemplated thereby, including the Mergers, are in the best interests of FCRD and FCRD Stockholders.

The following discussion of the information and factors considered by the Special Committee and FCRD Board is not intended to be exhaustive. However, it includes all of the material factors considered by them in evaluating the Mergers. In view of the complexity and the large number of factors considered, the Special Committee and FCRD Board did not find it practicable to, and did not attempt to, quantify or assign any relative or specific weight individually to the various factors. Rather, they based their recommendation or approval, as applicable, on the totality of the information presented to and considered by them, including the duration, robustness and outcome of the competitive processes of seeking strategic alternatives for FCRD, and concluded that, overall, the positive factors of the Mergers to FCRD Stockholders outweigh the risks and potential negative factors related to the Mergers.

Financial Terms of the Merger Agreement with CCAP. Assuming a transaction based on respective June 30, 2022 net asset values for CCAP ($639.2 million, or $20.69 per share) and FCRD ($158.7 million, or $5.30 per share), taking into account certain estimated transaction expenses and post-closing adjustments and subject to the election mechanics described herein, the closing price of FCRD and CCAP Common Stock on October 3, 2022 (the date of the Merger Agreement), and the outstanding shares of FCRD Common Stock and CCAP Common Stock as of October 3, 2022, the Special Committee and FCRD Board considered the financial terms of the Merger Agreement, including that:

 

   

on a market value basis as of October 3, 2022, the date the Special Committee and the FCRD Board approved the Merger Agreement, the transaction, including the CCAP Advisor Cash Consideration from CCAP Advisor, represented an implied market value for FCRD Common Stock of approximately $5.54 per share, which represents approximately 104.5% of FCRD’s June 30, 2022 NAV per share (adjusted for expected transaction expenses and other purchase accounting adjustments) and a 66% premium to the closing price of FCRD Common Stock on October 3, 2022;

 

   

on an NAV basis, FCRD Stockholders will collectively receive value per share of approximately $6.02 per FCRD share, representing a premium of 14% to FCRD’s net asset value per share of $5.30 as of June 30, 2022. The 14% premium above NAV per share of FCRD Common Stock is a result of the CCAP Advisor Cash Consideration;

 

   

CCAP will issue to FCRD Stockholders shares of CCAP Common Stock equal to 19.99% of the number of shares of CCAP Common Stock issued and outstanding immediately as of the date of the Merger Agreement, and pay the remainder of the Merger Consideration in cash;

 

   

FCRD Stockholders will have the option to elect to receive the Merger Consideration in cash, which provides immediate liquidity and certainty of value to FCRD Stockholders, or in shares of CCAP Common Stock, subject to adjustment based on the elections of other FCRD Stockholders; and

 

   

the commitment from Sun Life to provide secondary-market support by purchasing $20 million of the combined company’s common stock via a share purchase program over time following the consummation of the Mergers.

 

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Thorough Review of Strategic Alternatives. The Special Committee and FCRD Board considered the results of the thorough review of strategic alternatives, including the following:

 

   

the FCRD Board reviewed a range of options, including continuing to operate FCRD on a standalone basis and various sale/merger transactions, including a stock sale, asset sale, merger or reverse merger, as well as other strategic transactions;

 

   

the FCRD Board directed KBW to contact, or coordinate the response to, nine potential strategic partners during the confidential auction process, seven of which executed confidentiality agreements, and reviewed with KBW five initial indications of interest received from parties participating in the process (including on initial indication of interest that presented two options to merge with different BDCs);

 

   

the FCRD Board directed KBW to coordinate with four of the initial bidders for second round proposals and reviewed with KBW three updated indications of interest, each of which improved upon the terms presented in the applicable party’s initial indication of interest and two of which had implied consideration value at the time presented that represented a premium to FCRD’s June 30, 2022 NAV;

 

   

the beliefs of the Special Committee and FCRD Board formed based on a review of the results of the confidential auction process, which were evaluated with the assistance of FCRD’s management, KBW, Stradley, and Simpson Thacher, that the Mergers are more favorable to FCRD Stockholders than other opportunities and alternatives reasonably available to FCRD, taking into account the potential risks, rewards and uncertainties associated with each alternative, including, among other opportunities and alternatives, the following: (i) pursuing business combinations with entities other than CCAP; (ii) pursuing a full liquidation of FCRD; and (iii) continuing to operate FCRD on a standalone basis;

 

   

the beliefs of the Special Committee and FCRD Board, which beliefs were formed after consultation with FCRD’s management, KBW, Stradley, and Simpson Thacher, that prolonging the discussions with CCAP or continuing to solicit interest from additional third parties would be unlikely to lead to a better offer and could have resulted in the loss of CCAP’s proposed offer;

 

   

the fact that FEIM has entered into a Voting Agreement with CCAP such that the covered shares of FCRD Common Stock owned by FEIM will be voted in favor of the Merger, contributing to the likelihood of obtaining the required stockholder approval for the Merger Proposal;

 

   

CCAP’s obligation to complete the Mergers is not conditioned upon receipt of financing, and each of CCAP and CCAP Advisor has represented that it will have sufficient cash or sources of cash to enable it to pay its respective amounts due at the Closing; and

 

   

CCAP Stockholder approval is not required for the Mergers, contributing to additional likelihood of closing the transaction with CCAP.

Strategic and Business Considerations. The Special Committee and FCRD Board considered the various opportunities for the combined company to provide strategic and business opportunities for the FCRD Stockholders who receive shares of CCAP Common Stock in the First Merger and to generate additional stockholder value for such FCRD Stockholders, including that:

 

   

based on the outstanding shares and relative NAV of FCRD Common Stock and CCAP Common Stock outstanding (each as adjusted for expected transaction expenses), as of June 30, 2022 with respect to FCRD, current FCRD Stockholders would own approximately 17% of the outstanding CCAP Common Stock immediately following the completion of the Mergers;

 

   

the combined company will be externally managed by CCAP Advisor and is expected to have total assets in excess of $1.6 billion, and NAV of approximately $758 million (based on FCRD’s and CCAP’s respective NAV as of June 30, 2022, and taking into account estimated transaction expenses and certain post-closing adjustments);

 

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following the Mergers, FCRD Stockholders who continue to hold shares of the combined company following the Closing are expected to benefit from (i) access to the full range of resources of CCAP Advisor; (ii) investment opportunities consisting of the same investment strategy originated through the CCAP Advisor platform; and (iii) the utilization of CCAP Advisor’s resources, including relationships and institutional knowledge from over 30 years of private market investing;

 

   

the combined company’s investment portfolio following the Mergers will provide additional scale and portfolio diversification, which will position the combined company, among other things, to (i) maintain a focus on first lien senior secured loans to sponsor-backed borrowers; (ii) reduce concentration of the Logan JV and top ten holdings; (iii) originate larger transactions with increased final hold positions; and (iv) enhance access to lower cost of capital from banks and capital market participants;

 

   

FCRD Stockholders who continue to hold shares of the combined company following the Closing will have an ability to participate in the future growth of CCAP, including potential upside if shares of CCAP Common Stock trades higher in the future;

 

   

the Mergers are expected to deliver operational synergies for the combined company as a result of the larger scale and elimination of redundant FCRD expenses following the Mergers;

 

   

FCRD Stockholders who continue to hold shares of the combined company following the Closing are expected to realize net investment income per share accretion following the Closing;

 

   

the combined historical performance of FCRD and CCAP and expected ability of the combined entity to make future dividend payments to stockholders are expected to benefit FCRD Stockholders who continue to hold shares of the combined company following the Closing;

 

   

shares of CCAP Common Stock received in exchange for shares of FCRD Common Stock may be more liquid than FCRD Common Stock, given the increased size and diversification of the equity base of the combined company;

 

   

based on a review of CCAP, the belief that CCAP and CCAP Advisor have shown the ability to successfully execute this type of merger transaction;

 

   

CCAP Advisor, which serves as the investment adviser to CCAP, will serve as investment adviser to the combined company post-closing and, as a result, FCRD Stockholders who continue to hold shares of the combined company following the Closing will:

 

   

as compared to FEAC’s current 1.00% management fee on gross assets, experience an increase to the base management fee under the CCAP Investment Advisory Agreement calculated at an annual rate of 1.25% of the combined company’s average gross assets, excluding cash and cash equivalents, but including assets purchased with borrowed amounts; and

 

   

as compared to the current 17.5% income-based incentive fee and 17.5% capital gains fee under the FCRD Investment Advisory Agreement, experience no change from CCAP’s 17.50% Income-Based Fee and 17.50% Capital Gains Fee under the CCAP Investment Advisory Agreement other than the fact that the CCAP Advisory Agreement does not include a look-back provision with respect to the income incentive fee.

 

   

FCRD’s knowledge of CCAP’s business, operations, financial condition, earnings and prospects, taking into account the results of FCRD’s and FEAC’s business and legal due diligence review of CCAP’s operations, its portfolio companies and other corporate and financial matters and the review conducted by FCRD and FEAC uncovered no significant issues.

Opinion of the Financial Advisor to the FCRD Board. The Special Committee and FCRD Board considered the opinion, dated October 3, 2022, of KBW to the FCRD Board and the Special Committee as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of FCRD Common Stock, collectively as a group, of the Aggregate Merger Consideration (defined as the Parent Cash Consideration, the Aggregate Share Consideration and the CCAP Advisor Cash Consideration, taken together) in the First Merger, as more fully described below in the section entitled “ Opinion of the Financial Advisor to the FCRD Board.”

Terms of the Merger Agreement. The Special Committee and FCRD Board considered the terms and conditions of the Merger Agreement and the course of negotiations thereof, including:

 

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the fact that the Merger Agreement is unlikely to unduly deter third parties from making unsolicited acquisition proposals given that:

 

   

the Merger Agreement does not preclude FCRD from responding to and negotiating with respect to certain unsolicited acquisition proposals from third parties made prior to the time that FCRD Stockholders approve the Merger Proposal if any such third party makes an unsolicited acquisition proposal that the FCRD Board determines in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or could reasonably be expected to lead to a “superior proposal” (as defined in the Merger Agreement) and that the failure of the FCRD Board to respond to such proposal would reasonably be expected to be inconsistent with the fiduciary duties of the FCRD Board under the DGCL; and

 

   

if, prior to the time that FCRD Stockholders approve the Merger Proposal, the FCRD Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that an unsolicited acquisition proposal constitutes a superior proposal, then the FCRD Board can terminate the Merger Agreement in order to substantially concurrently enter into a binding definitive agreement with respect to such superior proposal if the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties under the DGCL, provided that, concurrently with such termination, FCRD will pay CCAP a termination fee of approximately $5.556 million, which the Special Committee and FCRD Board believe is reasonable and would not preclude or substantially impede a possible superior proposal from being made, especially in light of the strategic alternatives review process undertaken by FCRD.

 

   

the belief that the Merger Agreement includes customary terms, including customary non-solicitation, closing and termination provisions;

 

   

the fact that the consideration and negotiation of the Merger Agreement was conducted through extensive arm’s-length negotiations under the oversight of the Special Committee, which is composed solely of certain FCRD Independent Directors; and

 

   

the fact that the Merger Agreement includes a reverse termination fee of approximately $7.143 million, or approximately 4.5% of FCRD’s NAV as of June 30, 2022.

Risks and Potential Negative Factors. The Special Committee and FCRD Board considered the risks and potential negative factors relating to the Merger Agreement, including:

 

   

the fact that changes in the NAV of FCRD and CCAP before the completion of the Mergers may affect the amount and composition of the Aggregate Merger Consideration (as defined below) to be received by FCRD Stockholders, and changes in the market price of CCAP Common Stock may affect the market value of the Aggregate Share Consideration to be received by FCRD Stockholders;

 

   

the restrictions in the Merger Agreement on FCRD’s ability to respond to and negotiate certain unsolicited acquisition proposals from third parties, the requirement that FCRD pay CCAP an approximate $5.56 million termination fee if the Merger Agreement is terminated under certain circumstances and the risk that such restrictions and termination fee may discourage third parties that might otherwise have an interest in a business combination with, or acquisition of, FCRD from making unsolicited acquisition proposals;

 

   

the fact that there can be no assurance that the combined company will succeed or otherwise achieve its projected financial results;

 

   

the possibility that the consummation of the Mergers may be delayed or not occur at all, and the possible significant adverse impact that such event would have on FCRD and its business;

 

   

the existence of restrictions on the conduct of FCRD’s business during the period between execution of the Merger Agreement and the closing thereof, which may delay or prevent FCRD from undertaking business opportunities that may arise during such time which, absent the Merger Agreement, FCRD might otherwise have pursued;

 

   

the potential disruption to FCRD’s business that may result from the announcement of the Mergers and the resulting distraction of management’s attention from day-to-day operation of the business;

 

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the fact that the income-based incentive fee under the CCAP Investment Advisory Agreement is subject to a 1.75% quarterly hurdle rate as opposed to 2% under the FCRD Investment Advisory Agreement and is not subject to a three-year total return look-back requirement similar to the provision included in the FCRD Investment Advisory Agreement;

 

   

the risk that FCRD Stockholders may vote down the Merger Proposal at the Special Meeting; and

 

   

the fact that FCRD will be required to pay termination fees to, or reimburse expenses of, CCAP if the Merger Agreement is terminated under certain circumstances.

The foregoing list does not include all the factors that the Special Committee and the FCRD Board considered in approving the Mergers and the Merger Agreement and recommending that FCRD Stockholders approve the Merger Proposal.

Interests of Certain Persons Related to FCRD in the Mergers

Concurrently with the parties’ entry into the Merger Agreement, CCAP also entered into a Voting Agreement with FEIM, which owned an aggregate of approximately 5,004,422 of the outstanding shares of FCRD Common Stock as of October 3, 2022. Pursuant to the Voting Agreement, FEIM has agreed to vote its covered shares of FCRD Common Stock (i) in favor of the approval of the Merger Agreement and any other matters necessary for consummation of the other transactions contemplated by the Merger Agreement and any other action that is presented by FCRD for a vote of the FCRD Stockholders in furtherance thereof and (ii) against (A) any action, proposal, agreement, recapitalization, reorganization, liquidation, dissolution, amalgamation, merger, sale of assets or other business combination or transaction between or involving FCRD and any other person that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the First Merger or any of the other transactions contemplated by the Merger Agreement, (B) any proposal, transaction, agreement or action that would constitute, or could reasonably be expected to result in, a breach of any covenant, representation or warranty or any other obligation or agreement of FCRD under the Merger Agreement or of FEIM under the Voting Agreement or (C) any proposal, transaction, agreement or action that would, or could reasonably be expected to, prevent, impede, frustrate, interfere with, delay, postpone or adversely affect the Mergers or any of the other transactions contemplated by the Merger Agreement, in contravention of the terms and conditions set forth in the Merger Agreement or change in any manner the voting rights of any class of shares of FCRD (including any amendment or other change to the FCRD Certificate of Incorporation or the FCRD Bylaws).

As disclosed above, CCAP Advisor and FEAC have engaged in discussions regarding a transition services agreement pursuant to which FEAC would provide certain information and non-investment advisory services to CCAP Advisor relating to certain portions of FCRD’s existing investment portfolio subsequent to the Closing. CCAP Advisor and FEAC have entered into a transaction services agreement pursuant to which, as more fully set forth therein, FEAC would receive a total of $750,000 paid over four quarters following the Closing. Pursuant to the transition services agreement, FEAC also will be reimbursed by CCAP Advisor for certain rebates that FEAC may pay to the CLO following the Closing.

The FCRD Board Recommendation

The FCRD Board, based on the unanimous recommendation of the Special Committee, approved the Merger Agreement and the transactions contemplated thereby, including the Mergers, and recommends that FCRD Stockholders vote “FOR” the Merger Proposal and, if necessary or appropriate, “FOR” the FCRD Adjournment Proposal.

Opinion of the Financial Advisor to the FCRD Board

The FCRD Board engaged Keefe, Bruyette & Woods, Inc. (“KBW”) to render financial advisory and investment banking services to it, including an opinion to the FCRD Board and, as requested by the FCRD Board, the Special Committee as to the fairness, from a financial point of view, to the holders of FCRD Common Stock, collectively as a group, of the Aggregate Merger Consideration (defined as the Parent Cash Consideration, the Aggregate Share Consideration and the CCAP Advisor Cash Consideration, taken together) in the proposed First Merger. The FCRD Board selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the Mergers. As part of its investment banking business, KBW is regularly engaged in the valuation of business development company securities in connection with mergers and acquisitions.

 

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As part of its engagement, representatives of KBW attended the meeting of the Special Committee held on October 3, 2022 at which the Special Committee evaluated the proposed Mergers. At this meeting, KBW reviewed the financial aspects of the proposed Mergers and rendered an opinion to the FCRD Board and the Special Committee to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the Aggregate Merger Consideration in the proposed First Merger was fair, from a financial point of view, to the holders of FCRD Common Stock, collectively as a group. The FCRD Board, based on the unanimous recommendation of the Special Committee, approved the Merger Agreement following this meeting via written consent that same day.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this document and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the FCRD Board (in its capacity as such) and, as requested by the FCRD Board, the Special Committee (in its capacity as such) in connection with their respective consideration of the financial terms of the Mergers. The opinion addressed only the fairness, from a financial point of view, of the Aggregate Merger Consideration in the First Merger to the holders of FCRD Common Stock, collectively as a group. It did not address the underlying business decision of FCRD to engage in the Mergers or enter into the Merger Agreement or constitute a recommendation to the FCRD Board or the Special Committee in connection with the Mergers, and it does not constitute a recommendation to any holder of FCRD Common Stock or any stockholder of any other entity as to how to vote or act in connection with the Mergers or any other matter (including, with respect to holders of FCRD Common Stock, what election any such stockholder should make with respect to receiving the Per Share Cash Price in lieu of the Per Share Stock Consideration), nor does it constitute a recommendation regarding whether or not any such stockholder should enter into a voting, stockholders’, or affiliates’ agreement with respect to the Mergers or exercise any dissenters’ or appraisal rights that may be available to such stockholder.

KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

At the direction of FCRD and without independent verification, KBW relied upon and assumed for purposes of its analyses and opinion, that the FCRD Per Share NAV (defined as the amount equal to (i) the Closing FCRD Net Asset Value divided by (ii) the number of shares of FCRD Common Stock issued and outstanding as of the Determination Date) would be $4.85, the CCAP Per Share NAV (defined as the amount equal to (i) the Closing CCAP Net Asset Value divided by (ii) the number of shares of CCAP Common Stock issued and outstanding as of the Determination Date) would be $20.48 and the Closing FCRD Net Asset Value (defined as the net asset value of FCRD as of 5:00 p.m. New York City time as of the Determination Date) would be approximately $145.0 million and that, as a result thereof, the Aggregate Share Consideration would equal 19.99% of the number of shares of CCAP Common Stock outstanding as of the date of the Merger Agreement and the Parent Cash Consideration would be approximately $18.6 million.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of FCRD and CCAP and bearing upon the Mergers, including, among other things:

 

   

a draft of the Merger Agreement, dated October 3, 2022 (the most recent draft then made available to KBW);

 

   

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended December 31, 2021 of FCRD;

 

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the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2022 and June 30, 2022 of FCRD;

 

   

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended December 31, 2021 of CCAP;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2022 and June 30, 2022 of CCAP;

 

   

certain other interim reports and other communications of FCRD and CCAP provided to their respective stockholders; and

 

   

other financial information concerning the respective businesses and operations of FCRD and CCAP furnished to KBW by FCRD and CCAP or which KBW was otherwise directed to use for purposes of its analysis.

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

 

   

the historical and current financial position and results of operations of FCRD and CCAP;

 

   

the assets and liabilities of FCRD and CCAP;

 

   

the nature and terms of certain other merger transactions and business combinations in the business development company industry;

 

   

a comparison of certain financial and stock market information for FCRD and CCAP with similar information for certain other companies the securities of which are publicly traded;

 

   

financial and operating forecasts and projections of FCRD that were prepared by FCRD management, provided to KBW and discussed with KBW by such management, and used and relied upon by KBW at the direction of such management and with the consent of the FCRD Board; and

 

   

financial and operating forecasts and projections of CCAP that were prepared by CCAP management, provided to KBW and discussed with KBW by such management, and used and relied upon by KBW based on such discussions, at the direction of FCRD management and with the consent of the FCRD Board.

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the business development company industry generally. KBW also participated in discussions that were held with the respective managements of FCRD and CCAP regarding the respective past and current business operations, regulatory relations, financial condition and future prospects of FCRD and CCAP and such other matters as KBW deemed relevant to its inquiry. In addition, KBW considered the results of the efforts undertaken by FCRD, with KBW’s assistance, to solicit indications of interest from third parties regarding a potential transaction with FCRD.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to or discussed with it or that was publicly available and did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon the management of FCRD as to the reasonableness and achievability of the financial and operating forecasts and projections of FCRD referred to above (and the assumptions and bases therefor), and KBW assumed that such forecasts and projections were reasonably prepared and represented the best currently available estimates and judgments of such management and that such forecasts and projections would be realized in the amounts and in the time periods estimated by such management. KBW further relied, with the consent of FCRD, upon CCAP management as to the reasonableness and achievability of the financial and operating forecasts and projections of CCAP referred to above (and the assumptions and bases therefor), and KBW assumed that such forecasts and projections were reasonably prepared and represented the best currently available estimates and judgments of CCAP management and that such forecasts and projections would be realized in the amounts and in the time periods estimated by such management.

 

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It is understood that the foregoing financial information of FCRD and CCAP that was provided to KBW was not prepared with the expectation of public disclosure and that all such information was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions and, in particular, the widespread disruption, extraordinary uncertainty and unusual volatility arising from global tensions and political unrest, economic uncertainty, inflation, and the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions) and, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the respective managements of FCRD and CCAP, and with the consent of the FCRD Board, that all such information provided a reasonable basis upon which KBW could form its opinion, and KBW expressed no view as to any such information or the assumptions or bases therefor. Among other things, such information assumed that the ongoing COVID-19 pandemic could have an adverse impact, which was assumed to be limited, on FCRD and CCAP. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either FCRD or CCAP since the date of the last financial statements of each such entity that were made available to KBW. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of FCRD or CCAP, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of FCRD or CCAP under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Such estimates are inherently subject to uncertainty and should not be taken as KBW’s view of the actual value of any companies or assets.

KBW assumed, in all respects material to its analyses:

 

   

the Mergers and any related transactions would be completed substantially in accordance with the terms set forth in the Merger Agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft reviewed by KBW and referred to above), with no adjustments to the Aggregate Merger Consideration and no other consideration or payments in respect of FCRD Common Stock;

 

   

the representations and warranties of each party in the Merger Agreement and in all related documents and instruments referred to in the Merger Agreement were true and correct;

 

   

each party to the Merger Agreement and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

 

   

there were no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the Mergers or any related transactions and all conditions to the completion of the Mergers and any related transactions would be satisfied without any waivers or modifications to the Merger Agreement or any of the related documents; and

 

   

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the Mergers and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of FCRD, CCAP or the pro forma entity, or the contemplated benefits of the Mergers.

KBW assumed that the Mergers would be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of FCRD that FCRD relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to FCRD, CCAP, Acquisition Sub, Acquisition Sub 2, the Mergers and any related transaction, and the Merger Agreement. KBW did not provide advice with respect to any such matters.

 

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KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, to holders of FCRD Common Stock, collectively as a group, of the Aggregate Merger Consideration in the First Merger. KBW expressed no view or opinion as to any other terms or aspects of the Mergers or any term or aspect of any related transaction, including without limitation, the form or structure of the Mergers (including the form and structure of the Aggregate Merger Consideration or the allocation thereof between cash and stock) or any such related transaction, any consequences of the Merger or any such related transaction to FCRD, its stockholders, creditors or otherwise (including any aspect of any future dividends payable in respect of CCAP Common Stock issued in the first merger), or any terms, aspects, merits or implications of any employment, consulting, voting, support, stockholder, escrow or other agreements, arrangements or understandings contemplated or entered into in connection with the Mergers or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of the opinion and the information made available to KBW through the date of the opinion. There has been significant volatility in the stock and other financial markets arising from global tensions and political unrest, economic uncertainty, inflation, and the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW expressed no view or opinion as to any differences in the actual amounts of the FCRD Per Share NAV, the CCAP Per Share NAV and the Closing FCRD Net Asset Value from the amounts thereof that KBW was directed to assume for purposes of its analyses and opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

 

   

the underlying business decision of FCRD to engage in the Mergers or enter into the Merger Agreement;

 

   

the relative merits of the Mergers as compared to any strategic alternatives that are, have been or may be available to or contemplated by FCRD, the FCRD Board or the Special Committee;

 

   

the fairness of the amount or nature of any compensation to any of FCRD’s officers, directors or employees, or any class of such persons, relative to the compensation to the holders of FCRD Common Stock;

 

   

the effect of the Mergers or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of FCRD (other than the holders of FCRD Common Stock, collectively as a group, solely with respect to the Aggregate Merger Consideration (as described in KBW’s opinion) and not relative to the consideration to be received by holders of any other class of securities) or holders of any class of securities of CCAP or any other party to any transaction contemplated by the Merger Agreement;

 

   

whether CCAP has sufficient cash, available lines of credit or other sources of funds to enable it to pay the Parent Cash Consideration to the holders of FCRD Common Stock at the closing of the First Merger;

 

   

whether CCAP Advisor has sufficient cash, available lines of credit or other sources of funds to enable it to pay the CCAP Advisor Cash Consideration to the holders of FCRD Common Stock at the closing of the First Merger;

 

   

any elections by holders of FCRD Common Stock to receive the Per Share Cash Price in lieu of the Per Share Stock Consideration or the actual allocation between cash and shares of CCAP Common Stock among such holders (including, without limitation, any reallocation thereof as a result of proration pursuant to the Merger Agreement);

 

   

any adjustment (as provided in the Merger Agreement) to the Parent Cash Consideration assumed for purposes of KBW’s opinion (whether relating to payment of tax dividends or otherwise);

 

   

the actual value of CCAP Common Stock to be issued in the First Merger;

 

   

the prices, trading range or volume at which CCAP Common Stock or FCRD Common Stock would trade following the public announcement of the Mergers or the prices, trading range or volume at which CCAP Common Stock would trade following the consummation of the Mergers;

 

   

any advice or opinions provided by any other advisor to any of the parties to the Mergers or any other transaction contemplated by the Merger Agreement; or

 

   

any legal, regulatory, accounting, tax or similar matters relating to FCRD, CCAP, their respective stockholders, or relating to or arising out of or as a consequence of the Mergers or any related transaction, including whether or not the Mergers would qualify as a tax-free reorganization for United States federal income tax purposes.

 

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In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, FCRD and CCAP. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the FCRD Board and the Special Committee in making its determination to recommend the approval by the FCRD board of directors of the Merger Agreement and the Mergers. Consequently, the analyses described below should not be viewed as determinative of the decision of the FCRD Board and the Special Committee with respect to the fairness of the merger consideration. The type and amount of consideration payable in the first merger were determined through negotiation between FCRD and CCAP and the decision of FCRD to enter into the Merger Agreement was solely that of the FCRD Board and the Special Committee.

The following is a summary of the material financial analyses presented by KBW to the FCRD Board and the Special Committee in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the FCRD Board and the Special Committee, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

Implied Transaction Value for the Mergers. KBW calculated an implied transaction value for the proposed Mergers of $146.3 million in the aggregate, or $4.89 per share of FCRD Common Stock, based on an assumed Parent Cash Consideration of approximately $18.6 million, the CCAP Advisor Cash Consideration of $35.0 million and the implied value of an assumed Aggregate Share Consideration equal to 19.99% of the number of shares of CCAP Common Stock outstanding as of the date of the Merger Agreement using the closing price of CCAP Common Stock on September 30, 2022. This implied transaction value for the proposed Mergers was used to calculate implied transaction multiples and those multiples were compared to the ranges of multiples found in the financial analyses described below.

Selected Companies Analysis of FCRD. Using publicly available information, KBW compared, among other things, the market performance of FCRD and 17 selected publicly traded, externally managed business development companies with market capitalizations less than $500 million. Growth/total return and cannabis business development companies were excluded from the selected companies.

The selected companies were as follows (shown by column in descending order of market capitalization):

 

CION Investment Corporation    Stellus Capital Investment Corporation
PennantPark Floating Rate Capital Ltd.    Portman Ridge Finance Corporation
Fidus Investment Corporation    Monroe Capital Corporation
Gladstone Investment Corporation    Oxford Square Capital Corp.
PennantPark Investment Corporation    OFS Capital Corporation
Gladstone Capital Corporation    Great Elm Capital Corp.
WhiteHorse Finance, Inc.    Investcorp Credit Management BDC, Inc.
BlackRock Capital Investment Corporation    Logan Ridge Finance Corporation
Saratoga Investment Corp.   

 

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To perform this analysis, KBW used market price information as of September 30, 2022, reported NAV per share data as of the end of the most recent completed quarterly period available (which in the case of FCRD was June 30, 2022) and latest twelve-month period available (“LTM”) reported net investment income (“NII”) per share. KBW also used calendar years 2022 and 2023 earnings per share (“EPS”) estimates taken from consensus “street estimates” of FCRD and the selected companies.

KBW’s analysis showed the following concerning the market performance of FCRD and the selected companies (excluding the impact of the LTM NII multiple and calendar years 2022 and 2023 EPS multiples for one of the selected companies, which multiples were considered to be not meaningful because they were negative or greater than 40.0x), as well as certain corresponding implied transaction multiples for the proposed transaction based on the implied transaction value for the proposed Mergers of $146.3 million in the aggregate:

 

              Selected Companies  
     Proposed
Transaction
     FCRD      Low      25th
Percentile
     Average      Median      75th
Percentile
     High  

Price / NAV per share

     0.92x        0.54x        0.48x        0.57x        0.72x        0.74x        0.82x        0.93x  

Price / LTM NII per share

     12.4x        7.2x        2.7x        6.5x        8.7x        8.2x        10.0x        16.3x  

Price / CY2022E EPS

     11.6x        6.8x        4.4x        7.2x        8.3x        7.9x        9.7x        13.3x  

Price / CY2023E EPS

     10.4x        6.1x        6.0x        7.1x        8.1x        7.5x        9.2x        13.1x  

KBW then applied a range of price-to-NAV per share multiples of 0.57x to 0.82x derived from the 25th percentile and 75th percentile multiples of the selected companies to the June 30, 2022 NAV of FCRD, a range of price-to-LTM NII per share multiples of 6.5x to 10.0x derived from the 25th percentile and 75th percentile multiples of the selected companies to the LTM NII of FCRD for the twelve-month period ended June 30, 2022, and a range of price-to-estimated calendar year 2023 EPS multiples of 7.1x to 9.2x derived from the 25th percentile and 75th percentile multiples of the selected companies to the calendar year 2023 estimated earnings of FCRD taken from consensus “street estimates” of FCRD. This analysis indicated the following ranges of implied aggregate equity value of FCRD, as compared to the implied transaction value for the proposed Mergers of $146.3 million in the aggregate:

 

     Implied Aggregate Equity Value Ranges
of FCRD
Based on NAV of FCRD as of June 30, 2022    $89.8 million to $130.1 million
Based on LTM NII of FCRD for the twelve-month period ended June 30, 2022    $76.5 million to $118.0 million
Based on CY2023E Earnings of FCRD    $99.8 million to $129.1 million

No company used as a comparison in the above selected companies analysis is identical to FCRD. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Companies Analysis of CCAP. Using publicly available information, KBW compared, among other things, the market performance of CCAP and 21 selected publicly traded, externally managed business development companies with market capitalizations above $300 million. Growth/total return and cannabis business development companies were excluded from the selected companies.

 

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The selected companies were as follows (shown by column in descending order of market capitalization):

 

Ares Capital Corporation    Bain Capital Specialty Finance, Inc.
FS KKR Capital Corp.    SLR Investment Corp.
Owl Rock Capital Corporation    MidCap Financial Investment Corporation
Blackstone Secured Lending Fund    BlackRock TCP Capital Corp.
Prospect Capital Corporation    Carlyle Secured Lending, Inc.
Golub Capital BDC, Inc.    CION Investment Corporation
Goldman Sachs BDC, Inc.    PennantPark Floating Rate Capital Ltd.
Sixth Street Specialty Lending, Inc.    Fidus Investment Corporation
New Mountain Finance Corporation    Gladstone Investment Corporation
Oaktree Specialty Lending Corporation    PennantPark Investment Corporation
Barings BDC, Inc.   

To perform this analysis, KBW used market price information as of September 30, 2022 and reported NAV per share data as of the end of the most recent completed quarterly period available (which in the case of CCAP was June 30, 2022) and reported LTM NII per share. KBW also used calendar years 2022 and 2023 EPS estimates taken from consensus “street estimates” of CCAP and the selected companies.

KBW’s analysis showed the following concerning the market performance of CCAP and the selected companies:

 

            Selected Companies  
     CCAP      Low      25th
Percentile
     Average      Median      75th
Percentile
     High  

Price / NAV per share

     0.73x        0.53x        0.66x        0.77x        0.78x        0.87x        1.00x  

Price / LTM NII per share

     8.4x        5.9x        7.5x        8.9x        8.2x        9.0x        16.3x  

Price / CY2022E EPS

     8.4x        5.7x        7.7x        8.3x        8.2x        8.8x        13.3x  

Price / CY2023E EPS

     8.2x        6.1x        7.3x        7.9x        7.8x        8.1x        13.1x  

No company used as a comparison in the above selected companies analysis is identical to CCAP. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Transactions Analysis. KBW reviewed publicly available information related to 24 selected acquisitions of U.S. business development companies announced since the beginning of 2008.

The selected transactions were as follows:

 

Acquirer

  

Acquired Company

Oaktree Specialty Lending Corporation    Oaktree Strategic Income II, Inc.
SLR Investment Corp.    SLR Senior Investment Corp.
Barings BDC Inc.    Sierra Income Corporation
Portman Ridge Finance Corp    Harvest Capital Credit Corp
FS KKR Capital Corp.    FS KKR Capital Corp. II
Oaktree Specialty Lending Corp    Oaktree Strategic Income Corp
Barings BDC, Inc.    MVC Capital, Inc.
Portman Ridge Finance Corp    Garrison Capital
Goldman Sachs BDC, Inc.    Goldman Sachs Middle Market Lending Corp.
Crescent Capital BDC, Inc.    Alcentra Capital Corp.
Portman Ridge Finance Corp    OHA Investment Corp
East Asset Management, LLC    Rand Capital Corporation
Golub Capital BDC, Inc.    Golub Capital Investment Corporation
FS Investment Corporation    Corporate Capital Trust, Inc.
Benefit Street Partners LLC; Barings    Triangle Capital Corporation
TCG BDC, Inc.    NF Investment Corp.
CĪON Investment Corporation    Credit Suisse Park View BDC, Inc.
MAST Capital Mgmt LLC; Great Elm Capital Group Inc.    Full Circle Capital Corporation
Ares Capital Corporation    American Capital, Ltd.
PennantPark Floating Rate Capital Ltd.    MCG Capital Corporation
Saratoga Investment Corp.    GSC Investment Corp.
Ares Capital Corporation    Allied Capital Corporation
Prospect Capital Corporation    Patriot Capital Funding, Inc.
Highland Credit Strategies Fund    Highland Distressed Opportunities, Inc.

 

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For each selected transaction, KBW derived the following implied transaction statistics, in each case based on the merger consideration value paid for the acquired company (including contributions by external managers) and using financial data based on the acquired company’s then latest publicly available financial statements prior to the announcement of the respective transaction (adjusted to reflect any announced pre-closing adjustments):

 

   

Price to NAV per share of the acquired company; and

 

   

Price to LTM NII per share of the acquired company.

KBW also reviewed the price per common share paid for the acquired company for the 17 selected transactions involving publicly traded acquired companies as a premium/(discount) to the closing price of the acquired company one day and 30 days prior to the announcement of the respective transaction (expressed as percentages and referred to as the one day market premium and the 30 day market premium). The resulting transaction multiples for the selected transactions were compared with the corresponding transaction multiples for the proposed transaction based on the implied transaction value for the proposed Mergers of $146.3 million in the aggregate and using historical financial information for FCRD as of and for the LTM period ended June 30, 2022 and the closing prices of FCRD Common Stock on September 30, 2022 and August 22, 2022.

KBW’s analysis showed the following concerning the proposed Mergers and the selected transactions (excluding the impact of the price-to-LTM NII per share of three of the selected transactions, which multiples were considered to be not meaningful because they were negative):

 

           Selected Transactions  
     Proposed
Mergers
    Low     25th
Percentile
    Average     Median     75th
Percentile
    High  

Price / NAV Per Share

     0.92x       0.40x       0.69x       0.82x       0.85x       1.00x       1.16x  

Price / LTM NII Per Share

     12.36x       2.44x       7.85x       10.35x       10.15x       11.45x       30.17x  

One Day Market Premium

     71.0     (39.9 )%      (1.5 )%      19.2     23.8     35.7     105.2

30 Day Market Premium

     49.5     (22.3     (3.8 )%      31.6     19.6     32.6     158.4

KBW applied a range of price-to-NAV per share multiples of 0.69x to 1.00x derived from the 25th percentile and 75th percentile multiples of the selected transactions to the June 30, 2022 NAV of FCRD and a range of price-to-LTM NII per share multiples of 7.8x to 11.5x derived from the 25th percentile and 75th percentile multiples of the selected transactions to the LTM NII of FCRD for the twelve-month period ended June 30, 2022. This analysis indicated the following ranges of implied aggregate equity value of FCRD, as compared to the implied transaction value for the proposed Mergers of $146.3 million in the aggregate:

 

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     Implied Aggregate Equity Value
Ranges of FCRD
 

Based on June 30, 2022 NAV of FCRD

   $ 110.0 million to $158.7 million  

Based on LTM NII of FCRD for the twelve-month period ended June 30, 2022

   $ 92.9 million to $135.5 million  

No company or transaction used as a comparison in the above selected transactions analysis is identical to FCRD or the proposed Mergers. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Dividend Discount Analysis of FCRD. KBW performed a dividend discount analysis of FCRD on a standalone basis to estimate ranges for the implied equity value of FCRD. In this analysis, KBW used financial and operating forecasts and projections relating to net investment income, dividends and net assets of FCRD that were provided by FCRD management. KBW assumed discount rates ranging from 13.0% to 15.0%. Ranges of values were derived by adding (i) the present value of the estimated future dividends of FCRD over the period from the assumed closing date of the proposed transaction through December 31, 2025 and (ii) the present value of FCRD’s implied terminal value at the end of such period. KBW derived implied terminal values using two methodologies, one based on December 31, 2025 estimated NAV per share multiples and the other based on calendar year 2025 estimated dividend yields. Using implied terminal values for FCRD calculated by applying a terminal multiple range of 0.70x to 1.00x to FCRD’s estimated NAV as of December 31, 2025, this analysis resulted in a range of implied aggregate equity value of FCRD of approximately $108.7 million to $147.4 million per share, as compared to the implied transaction value for the proposed Mergers of $146.3 million. Using implied terminal values for FCRD calculated by applying a terminal dividend yield range of 9.0% to 11.0% to FCRD’s calendar year 2025 estimated dividends, this analysis resulted in a range of implied aggregate equity value of FCRD of approximately $121.7 million to $147.6 million, as compared to the implied transaction value for the proposed Mergers of $146.3 million.

The dividend discount analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including NAV and dividend assumptions, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or expected values of FCRD.

Dividend Discount Analysis of CCAP. KBW performed a dividend discount analysis of CCAP on a standalone basis to estimate ranges for the implied equity value of CCAP. In this analysis, KBW used financial and operating forecasts and projections relating to net investment income, dividends and net assets of CCAP that were provided by CCAP management. KBW assumed discount rates ranging from 10.5% to 12.5%. Ranges of values were derived by adding (i) the present value of the estimated future dividends of CCAP over the period from the assumed closing date of the proposed transaction through December 31, 2026 and (ii) the present value of CCAP’s implied terminal value at the end of such period. KBW derived implied terminal values using two methodologies, one based on December 31, 2026 estimated NAV per share multiples and the other based on calendar year 2026 estimated dividend yields. Using implied terminal values for CCAP calculated by applying a terminal multiple range of 0.80x to 1.00x to CCAP’s estimated NAV per share as of December 31, 2026, this analysis resulted in a range of implied value per share of CCAP Common Stock of approximately $15.77 to $19.57 per share, as compared to the closing price of CCAP Common Stock on September 30, 2022 of $15.02. Using implied terminal values for CCAP calculated by applying a terminal dividend yield range of 8.5% to 10.5% to CCAP calendar year 2026 estimated dividends, this analysis resulted in a range of implied value per share of CCAP Common Stock of approximately $15.01 to $18.40 per share, as compared to the closing price of CCAP Common Stock on September 30, 2022 of $15.02.

The dividend discount analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including NAV per share and dividend assumptions, terminal values and discount rates. The analysis did not purport to be indicative of the actual values or expected values of CCAP or the pro forma combined company.

 

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Relative Contribution Analysis. KBW analyzed the relative standalone contribution of CCAP and FCRD to various pro forma balance sheet and income statement items of the combined entity. This analysis did not include purchase accounting adjustments. To perform this analysis, KBW used (i) historical balance sheet and income statement information for CCAP and FCRD as of and for the twelve-month period ended June 30, 2022, and (ii) financial and operating forecasts and projections of CCAP and FCRD provided by CCAP management and FCRD management, respectively. The results of KBW’s analysis are set forth in the following table, which also compares the results of KBW’s analysis with the implied pro forma ownership percentages of CCAP and FCRD stockholders in the combined company based on the issuance in the First Merger of assumed Aggregate Share Consideration equal to 19.99% of the number of shares of CCAP Common Stock outstanding as of the date of the Merger Agreement and also hypothetically assuming 100% stock consideration (with and without the hypothetical inclusion of additional shares of CCAP Common Stock in lieu of the CCAP Advisor Cash Consideration) in the proposed First Merger for illustrative purposes:

 

     CCAP     FCRD  
     as a % of     as a % of  
     Total     Total  

Pro Forma Ownership (Shares)

    

Based on Aggregate Share Consideration(1)

     83.3     16.7

Assuming 100% Stock Consideration(2)

     81.3     18.7

Assuming 100% Stock Consideration plus Additional Shares in lieu of CCAP Advisor Cash Consideration(3)

     76.6     23.4

Balance Sheet:

    

Total Assets

     77.4     22.6

Investments

     77.8     22.2

Total Debt

     74.6     25.4

Net Asset Value

     80.1     19.9

Income Statement:

    

LTM Net Investment Income

     81.7     18.3

CY2023E Net Investment Income

     78.9     21.1

 

(1)

Based on issuance of assumed Aggregate Share Consideration equal to 19.99% of the number of shares of CCAP Common Stock outstanding as of the date of the Merger Agreement.

(2)

Assumed all shares of FCRD Common Stock exchanged for shares of CCAP Common Stock at an illustrative NAV to NAV exchange ratio, adjusted for transaction-related costs and certain purchase accounting adjustments, of 0.2367x.

(3)

Assumed all shares of FCRD Common Stock exchanged for shares of CCAP Common Stock at an illustrative NAV to NAV exchange ratio, adjusted for transaction-related costs and certain purchase accounting adjustments, of 0.2367x, plus additional shares of CCAP Common Stock equal to the CCAP Advisor Cash Consideration divided by the closing price of CCAP Common Stock on September 30, 2022.

Miscellaneous. KBW acted as financial advisor to the FCRD Board in connection with the proposed transaction and did not act as an advisor to or agent of any other person. As part of its investment banking business, KBW is regularly engaged in the valuation of business development company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. Further to existing sales and trading relationships between (i) FCRD and each of KBW and a KBW broker-dealer affiliate and (ii) CCAP and a KBW broker-dealer affiliate, and otherwise in the ordinary course of KBW and its affiliates’ broker-dealer businesses, KBW and its affiliates may from time to time purchase securities from, and sell securities to, FCRD, its external investment adviser, CCAP and CCAP Advisor. In addition, as market makers in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of FCRD and CCAP for its and their own accounts and for the accounts of its and their respective customers and clients.

 

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Pursuant to the KBW engagement agreement, FCRD agreed to pay KBW a cash fee equal to $2,000,000, $250,000 of which became payable to KBW with the rendering of KBW’s opinion and the balance of which is contingent upon the consummation of the First Merger. FCRD also agreed to reimburse KBW for reasonable out-of-pocket expenses and disbursements incurred in connection with its engagement and to indemnify KBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. In addition to the present engagement, during the two years preceding the date of KBW’s opinion, KBW provided investment banking and financial advisory services to FCRD and received compensation for such services. KBW acted as (i) book-running manager in FCRD’s May 2021 notes offering and (ii) a joint book-running manager in FCRD’s November 2021 notes offering, for which KBW received aggregate fees (including underwriting discounts) of approximately $2.45 million from FCRD. During the two years preceding the date of KBW’s opinion, KBW provided investment banking and financial advisory services to CCAP and received compensation for such services. KBW acted as a joint bookrunner in CCAP’s November 2021 equity offering, for which KBW received an aggregate fee (including underwriting discounts) or approximately $270,000 from CCAP. During the two years preceding the date of KBW’s opinion, KBW did not provide investment banking or financial advisory services to CCAP Advisor. KBW may in the future provide investment banking and financial advisory services to FCRD, its external investment adviser, CCAP or CCAP Advisor and receive compensation for such services.

Certain Prospective Financial Information Provided by FCRD and CCAP

FCRD and CCAP provided KBW with certain prospective financial information indicating, among other things, estimates and judgments of FCRD and CCAP management as to future financial and operating performance.

The prospective financial information included in this document has been prepared by, and is the responsibility of, FEAC as FCRD’s management. PricewaterhouseCoopers LLP has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this document relates to FCRD’s previously issued financial statements. It does not extend to the prospective financial information and should not be read to do so.

The prospective financial information with respect to CCAP included in this document has been prepared by, and is the responsibility of, CCAP Advisor as CCAP’s management. Ernst & Young LLP has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto. The Ernst & Young LLP report included in this document relates to CCAP’s previously issued financial statements. It does not extend to the prospective financial information and should not be read to do so.

The following is a summary of the prospective financial information prepared or provided by FEAC (as FCRD management) with respect to FCRD and by CCAP Advisor (as CCAP management) with respect to CCAP based solely on the information available to FEAC and CCAP Advisor, respectively, at that time. This prospective financial information was finalized in October 2022.

Neither FCRD nor FEAC was involved in the preparation of the prospective financial information relating to CCAP, nor does either FCRD or FEAC express any opinion regarding such information.

Neither CCAP nor CCAP Advisor was involved in the preparation of the prospective financial information relating to FCRD, nor does either CCAP or CCAP Advisor express any opinion regarding such information.

Standalone Projections - Values in millions

 

     2023(1)      2024      2025      2026  

FCRD Projected Net Investment Income:

   $ 11.1      $ 14.6      $ 14.3      $ —    

FCRD Projected Dividend Distributions:

   $ 10.8      $ 14.4      $ 14.4      $ —    

CCAP Projected Net Investment Income:

   $ 40.9      $ 53.3      $ 52.7      $ 52.8  

CCAP Projected Dividend Distributions:

   $ 38.0      $ 50.7      $ 50.7      $ 50.7  

 

(1)

Covers the period from April 1, 2023 through December 31, 2023 and, with respect to CCAP, has been derived from full calendar year 2023 information provided by CCAP Advisor.

 

     12/31/23      12/31/24      12/31/25      12/31/26  

FCRD Net Assets:

   $ 159.1      $ 159.3      $ 159.3      $ —    

CCAP Net Assets:

   $ 641.8      $ 644.4      $ 646.4      $ 648.6  

As a matter of course, neither CCAP nor FCRD makes public long-term projections as to their future financial results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates. The prospective financial information set forth above was prepared for internal use and not with a view to public disclosure. However, FEAC and CCAP Advisor, respectively, prepared certain unaudited forecasted financial information regarding FCRD and CCAP, respectively, which was made available to the Special Committee and KBW in connection with the Special Committee’s evaluation of the proposed Mergers and KBW was authorized and directed by FCRD to use and rely upon such information for purposes of the financial analyses performed in connection with KBW’s opinion. The prospective financial information contained and discussed herein was prepared for internal use and not with a view to public disclosure and is being included only because the prospective financial information was provided to the Special Committee and KBW. The projections and prospective financial information included herein are not being provided to influence the decision of FCRD Stockholders to vote for the Merger Proposal.

 

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The prospective financial information was not prepared with a view to compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information does not purport to present operations in accordance with U.S. generally accepted accounting principles, and neither FCRD’s nor CCAP’s registered public accounting firm has not examined, compiled or otherwise applied procedures to the prospective financial information and, accordingly, assumes no responsibility for such information.

The prospective financial information provided by FCRD and CCAP, respectively, was based solely on the information available to their management at that time. The inclusion of the prospective financial information in this document should not be regarded as an indication that the prospective financial information will be necessarily predictive of actual future results, and the forecasts should not be relied upon as such. Neither FCRD or CCAP nor any other person makes any representation to any security holders regarding the ultimate performance of FCRD or CCAP compared to the prospective financial information set forth above.

Although presented with numerical specificity, the prospective financial information is not fact and reflects numerous assumptions and estimates as to future events made by management of FCRD and CCAP, respectively, that were believed to be reasonable at the time the prospective financial information was prepared and other factors such as industry performance and general business, economic, regulatory, market and financial conditions, as well as factors specific to the business of CCAP or FCRD, all of which are difficult to predict and many of which are beyond their control. Other persons attempting to project the future results of CCAP and FCRD, as applicable, will make their own assumptions that could result in projections materially different than those above. In addition, the prospective financial information does not take into account any circumstances or events occurring after the date that they were prepared and, accordingly, does not give effect to the Mergers or any changes to the operations or strategy of CCAP that may be implemented after the consummation of the Mergers. Further, the prospective financial information does not take into account the effect of any failure to occur of the Mergers. Accordingly, there can be no assurance that the prospective financial information will be realized, and actual results could vary significantly from those reflected in the prospective financial information.

Neither CCAP nor FCRD intends to update or otherwise revise the prospective financial information to reflect circumstances existing after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the prospective financial information are shown to be in error.

The above prospective financial information are forward-looking statements. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. The prospective financial information included above is not being included to influence your decision whether to vote for the Merger Proposal but because the prospective financial information were provided to the Special Committee and the FCRD Board.

Regulatory Approvals Required for the Mergers

The obligations of CCAP and FCRD to complete the Mergers are subject to the satisfaction or, where permissible, waiver of certain conditions, including the condition that CCAP Common Stock to be issued as part of the Merger Consideration has been approved for listing by Nasdaq and that the registration statement on Form N-14 (of which this proxy statement/prospectus forms a part) has become effective under the Securities Act. CCAP and FCRD have agreed to cooperate with each other and use their reasonable best efforts to obtain all actions, non-actions, clearances, waivers, consents, approvals, authorizations, licenses, permits or orders from any governmental or regulatory authority necessary to consummate the Mergers.

There can be no assurance that such regulatory approvals will be obtained, that such approvals will be received on a timely basis or that such approvals will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Mergers.

 

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Third-Party Consents Related to the Mergers

CCAP and FCRD have agreed to cooperate with each other and use their respective reasonable best efforts to obtain all necessary actions or non-actions, consents and approvals from third parties to consummate the transactions contemplated by the Merger Agreement, including the First Merger, and to make all necessary and to take all reasonable steps as may be necessary to obtain third party approvals to consummate the transactions contemplated by the Merger Agreement, including the First Merger. There can be no assurance that any permits, consents, approvals, confirmations or authorizations will be obtained or that such permits, consents, approvals, confirmations or authorizations will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following the Mergers.

 

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DESCRIPTION OF THE MERGER AGREEMENT

The following summary, which includes certain of the material terms of the Merger Agreement, is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. CCAP and FCRD encourage you to read the Merger Agreement carefully and in its entirety.

Structure of the Mergers

Pursuant to the terms of the Merger Agreement, at the Effective Time, Acquisition Sub will be merged with and into FCRD, whereupon the separate existence of Acquisition Sub will cease, and FCRD will continue as the Surviving Corporation in the First Merger and a wholly-owned subsidiary of CCAP. Immediately after the Effective Time and as part of a single integrated transaction with the First Merger, the Surviving Corporation will be merged with and into Acquisition Sub 2, whereupon the separate existence of the Surviving Corporation will cease, and Acquisition Sub 2 will continue as the Surviving Corporation.

Closing; Completion of the Proposed Mergers

Subject to the satisfaction of various conditions to closing (including obtaining the FCRD Stockholder Approval), the Closing will take place at 10:00 a.m. (local time) on a date to be specified by CCAP and FCRD, but no later than the second business day after the satisfaction or waiver of the conditions set forth in the Merger Agreement, unless another time, date or place is agreed to in writing by CCAP and FCRD. Concurrently with the Closing, FCRD will cause a certificate of merger with respect to the First Merger (the “Certificate of First Merger”) to be executed and filed with the Secretary of State of the State of Delaware (the “Delaware Secretary”) and the First Merger will become effective on the date and time at which the Certificate of First Merger has been duly filed with, and accepted for record by, the Delaware Secretary or at such other date and time as is agreed in writing between CCAP and FCRD and specified in the Certificate of First Merger (such date and time being the “Effective Time”). Subsequently, Acquisition Sub 2 and the Surviving Corporation will cause a certificate of merger with respect to the Second Merger (the “Certificate of Second Merger”) to be executed and filed with the Delaware Secretary as provided under DGCL. The Second Merger will become effective on the date and time at which the Certificate of Second Merger has been duly filed with, and accepted for record by, the Delaware Secretary or at such other date and time as is agreed in writing between Acquisition Sub 2 and FCRD and specified in the Certificate of Second Merger.

CCAP and FCRD expect to complete the Mergers as early as the fourth quarter of 2022 or the first quarter of 2023.

Merger Consideration

Under the Merger Agreement, on the Determination Date, each of CCAP and FCRD will deliver to the other a calculation of its estimated NAV as of 5:00 p.m. New York City time as of the Determination Date, in each case, as approved by the FCRD Board or CCAP Board, as applicable, calculated in good faith and based on certain agreed upon assumptions and methodologies, and applying the certain agreed upon adjustments. FCRD and CCAP will update and redeliver the Closing FCRD Net Asset Value or the Closing CCAP Net Asset Value, respectively, and as reapproved by the FCRD Board or CCAP Board, as applicable, in the event of a material change to such calculation between the Determination Date and the Closing Date or if needed to ensure that the calculation is determined within two days (excluding Sundays and holidays) prior to the Effective Time.

Subject to the terms and conditions of the Merger Agreement, at the Closing, CCAP will issue the Aggregate Share Consideration. In addition, subject to the terms and conditions of the Merger Agreement, at the Closing, CCAP will pay, in respect of all the issued and outstanding shares of FCRD Common Stock (excluding Cancelled Shares) in the aggregate, an amount of cash equal to the amount by which (i) the Closing FCRD Net Asset Value exceeds (ii) the product of (A) the Aggregate Share Consideration multiplied by (B) the CCAP Per Share NAV.

 

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Each person who as of the Effective Time is a record holder of shares of FCRD Common Stock will be entitled, with respect to all or any portion of such shares, to make an Election to receive the CCAP Merger Consideration for their shares of FCRD Common Stock in cash, subject to the conditions and limitations set forth in the Merger Agreement. Any record holder of shares of FCRD Common Stock at the record date who does not properly make an Election, or whose such Election is not properly revoked, will be deemed to have elected to receive payment for their shares of FCRD Common Stock in the form of CCAP Common Stock. For the purpose of making Elections, a record holder of FCRD Common Stock that is a registered clearing agency and which holds legal title on behalf of multiple ultimate beneficial owners will be entitled to submit elections as if each ultimate beneficial owner were a record holder of FCRD Common Stock.

Each Electing Share will be converted into the right to receive an amount in cash equal to the Per Share NAV, subject to certain adjustments as described below, as well as the right to receive an amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration. The “Per Share NAV” shall mean an amount in cash equal to the Closing FCRD Net Asset Value per share.

Each Non-Electing Share will be converted into the right to receive a number of validly issued, fully paid and non-assessable shares of CCAP Common Stock, equal to the Per Share Stock Consideration, subject to certain adjustments as described below, as well as the right to receive an amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration. The amount of CCAP Common Stock to be issued for each Non-Electing Share as ultimately determined is referred to as the “Per Share Stock Consideration.”

If the product of the Proposed Aggregate Stock Issuance Amount is greater than the Aggregate Share Consideration, then shares of CCAP Common Stock constituting the Aggregate Share Consideration will be delivered on a pro rata basis (determined on a whole-share basis) in respect of such Non-Electing Shares, and the remainder of the CCAP Aggregate Merger Consideration will be paid to such stockholders in cash. Any such reduction in the number of Non-Electing Shares will be applied among all stockholders who hold Non-Electing Shares, pro rata based on the aggregate number of Non-Electing Shares held by each such stockholder.

If the Proposed Cash Consideration is an amount greater than the Parent Cash Consideration, then the cash constituting the Parent Cash Consideration will be delivered on a pro rata basis in respect of such Electing Shares, and the remainder of the CCAP Aggregate Merger Consideration will be paid to such stockholders in shares of CCAP Common Stock. Any such reduction in the number of Electing Shares shall be applied among all stockholders who hold Electing Shares, pro rata based on the aggregate number of Electing Shares held by each such stockholder.

Although the Merger Consideration (excluding the CCAP Advisor Cash Consideration) paid to FCRD Stockholders will equal, in the aggregate, the Closing FCRD Net Asset Value, the Per Share Merger Consideration to be received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, depending on the Elections made by such FCRD Stockholder and Elections made by other FCRD Stockholders. However, as a result of certain limitations and adjustments pursuant to the terms of the Merger Agreement, including the adjustment mechanisms with respect to Electing Shares and Non-Electing Shares as further described in “Description of the Merger AgreementAllocation of Merger Consideration and Illustrative Elections and Calculations,” each holder of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time will receive Per Share Merger Consideration approximately equal to the implied market value of the Per Share Merger Consideration received by other FCRD Stockholders at the Effective Time calculated on the basis of the market value of shares of CCAP Common Stock as of the Determination Date. See “Risk Factors—Risks Relating to the Mergers— The CCAP Merger Consideration received by an individual FCRD Stockholder may represent an implied market value per share less than the Closing FCRD Net Asset Value per share, and, depending on the Elections made by an FCRD Stockholder and Elections made by other FCRD Stockholders, the CCAP Merger Consideration received may represent a value per share higher or less than the consideration received by other FCRD Stockholders calculated on the basis of the Closing CCAP Net Asset Value.

 

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Election Procedures

A Form of Election has been or will be provided to record holders of FCRD Common Stock as of the record date for the Special Meeting. FCRD Stockholders who wish to elect to receive the Per Share Cash Price for any or all shares of FCRD Common Stock held by such holder may indicate so on the Form of Election. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee and wish to elect to receive the Per Share Cash Price for any or all shares of FCRD Common Stock that you own beneficially, you must direct your intermediary accordingly by following the election instructions you receive from your broker, bank, trustee or other nominee.

FCRD will use its best efforts to make the Form of Election and this proxy statement/prospectus available to all persons who become record holders of FCRD Common Stock during the period between such record date and the Special Meeting. Any such holder’s election to receive the Per Share Cash Price will be properly made only if the Exchange Agent has received at its designated office, by the Election Deadline, a Form of Election properly completed and signed. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee, the deadline to properly elect to receive the Per Share Cash Price for any or all shares of FCRD Common Stock that you own beneficially will be set by such broker, bank, trustee or other nominee and may be prior to the Election Deadline. Please contact your broker, bank, trustee or other nominee for more information.

Any Form of Election may be revoked by the FCRD Stockholder submitting such Form of Election to the Exchange Agent only by written notice received by the Exchange Agent (i) prior to 5:00 p.m., New York City time, on the Election Deadline or (ii) after the date of the Special Meeting, if the Exchange Agent is legally required to permit such revocations and the Effective Time has not occurred prior to such revocation. If you hold your shares of FCRD Common Stock through a broker, bank, trustee or other nominee, the process and deadline to revoke any election instruction provided to your intermediary will be established by such broker, bank, trustee or other nominee and may differ from the process and deadline set forth in the immediately preceding sentence. Please contact your broker, bank, trustee or other nominee for more information.

In addition, all Forms of Election will automatically be revoked if the Exchange Agent is notified in writing by CCAP and FCRD that the First Merger has been abandoned.. Any FCRD Stockholder who has revoked their Form of Election and has not submitted a separate Form of Election by the proper time on the Election Deadline will be deemed not to have made an Election, the shares held by such holder will be treated by the Exchange Agent as Non-Electing Shares.

The Exchange Agent will have discretion to determine whether or not an election to receive the Per Share Cash Price has been properly made or revoked with respect to shares of FCRD Common Stock and when elections and revocations were received by it. If the Exchange Agent determines that any election to receive the Per Share Cash Price was not properly made with respect to shares of FCRD Common Stock, such shares will be treated by the Exchange Agent as shares that were Non-Electing Shares. The Exchange Agent will also make all computations as to the allocation and the proration contemplated by the provisions of the Merger Agreement and any such computation will be conclusive and binding on the FCRD Stockholders. The Exchange Agent may, with the mutual agreement of CCAP and FCRD, make such rules as are consistent with the provisions of the Merger Agreement for the implementation of the Elections provided for therein as will be necessary or desirable fully to effect such Elections.

Under the Merger Agreement, on the Determination Date, each of CCAP and FCRD will deliver to the other a calculation of its estimated NAV as of 5:00 p.m. New York City time as of the Determination Date, in each case, as approved by the FCRD Board or CCAP Board, as applicable, calculated in good faith and based on certain agreed upon assumptions and methodologies, and applying certain agreed upon adjustments. FCRD and CCAP will update and redeliver the Closing FCRD Net Asset Value or the Closing CCAP Net Asset Value, respectively, and as reapproved by the FCRD Board or CCAP Board, as applicable, in the event of a material change to such calculation between the Determination Date and the Closing Date or if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time. Based on such calculations, the parties will calculate (i) the FCRD Per Share NAV and (ii) the CCAP Per Share NAV.

 

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The Per Share Stock Consideration will be appropriately adjusted if, between the Determination Date and the Effective Time, any change in the number of outstanding shares of CCAP Common Stock or FCRD Common Stock occurs as a result of a reclassification, recapitalization, stock split (including a reverse stock split) or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period.

No fractional shares of CCAP Common Stock will be issued upon the conversion of FCRD Common Stock into CCAP Common Stock, and such fractional share interests will not entitle the owner thereof to any CCAP Common Stock or to vote or to any other rights of a holder of CCAP Common Stock. In lieu of any such fractional shares, each holder of FCRD Common Stock who would otherwise be entitled to such fractional shares will instead be entitled to an amount of cash based on a formula set forth in the Merger Agreement.

Allocation of Merger Consideration and Illustrative Elections and Calculations

General Assumptions for All Illustrations

 

Shares of CCAP Common Stock outstanding immediately prior to the Closing
Shares of FCRD Common Stock outstanding immediately prior to the Closing
Closing CCAP Net Asset Value
Closing FCRD Net Asset Value
CCAP Per Share NAV
CCAP Per Share Price
Total Stock Consideration
Aggregate Cash Consideration
Per Share Cash Price
Proposed Stock Issuance Amount

Illustration #1: 100% of shares of FCRD Common Stock Elect to Receive Cash

 

Number of Electing Shares (election to receive cash)
Number of Non-Electing Shares (deemed election to receive CCAP Common Stock)
Proposed Cash Consideration
Proposed Aggregate Stock Issuance Amount (shares of CCAP Common Stock)
Cash received for each Electing Share
Shares of CCAP Common Stock received for each Electing Share
Cash received for each Non-Electing Shares
Shares of CCAP Common Stock received for each Non-Electing Share

In Illustration 1, the Proposed Aggregate Stock Issuance Amount is less than the Total Stock Consideration so no conversion of Non-Electing Shares into Electing Shares would be required pursuant to the Merger Agreement.

However, since the Proposed Cash Consideration is an amount greater than the Aggregate Cash Consideration, the number of Electing Shares would be reduced by converting Electing Shares into Non-Electing Shares until the Aggregate Cash Consideration is equal to the Proposed Cash Consideration (determined on a whole-share basis). Applying such reduction among all stockholders who hold Electing Shares, pro rata based on the aggregate number of Electing Shares held by each such stockholder, it follows that each Electing Share would be converted into the right to receive $[ ] in cash and [ ] shares of CCAP Common Stock (with cash payable in lieu of fractional shares), which shares have a value of $[ ] based on the CCAP Per Share Price.

 

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Illustration #2: 100% of shares of FCRD Common Stock Elect to Receive Stock

 

Number of Electing Shares (election to receive cash)
Number of Non-Electing Shares (deemed election to receive CCAP Common Stock)
Proposed Cash Consideration
Proposed Aggregate Stock Issuance Amount (shares of CCAP Common Stock)
Cash received for each Electing Share
Shares of CCAP Common Stock received for each Electing Share
Cash received for each Non-Electing Shares
Shares of CCAP Common Stock received for each Non-Electing Share

In Illustration 2, the Proposed Cash Consideration is less than the Aggregate Cash Consideration, so no conversion of Electing Shares into Non-Electing Shares would be required pursuant to the Merger Agreement.

However, because the Proposed Aggregate Stock Issuance Amount is greater than the Total Stock Consideration, the number of Non-Electing Shares would be reduced by converting Non-Electing Shares into Electing Shares until the Total Stock Consideration is equal to the Proposed Aggregate Stock Issuance Amount (determined on a whole-share basis). Applying such reduction among all stockholders who hold Non-Electing Shares pro rata based on the aggregate number of Non-Electing Shares held by each Stockholder, it follows that each Non-Electing Share would be converted into the right to receive $[ ] in cash and [ ] shares of CCAP Common Stock (with cash payable in lieu of fractional shares), which shares have a value of $[ ] based on the CCAP Per Share Price.

Illustration #3: 50% of shares of FCRD Common Stock Elect to Receive Cash

 

Number of Electing Shares (election to receive cash)
Number of Non-Electing Shares (deemed election to receive CCAP Common Stock)
Proposed Cash Consideration
Proposed Aggregate Stock Issuance Amount (shares of CCAP Common Stock)
Cash received for each Electing Share
Shares of CCAP Common Stock received for each Electing Share
Cash received for each Non-Electing Shares
Shares of CCAP Common Stock received for each Non-Electing Share

In Illustration 3, the Proposed Aggregate Stock Issuance Amount is less than the Total Stock Consideration, so no conversion of Non-Electing Shares into Electing Shares would be required pursuant to the Merger Agreement.

However, because the Proposed Cash Consideration exceeds the Aggregate Cash Consideration, the number of Electing Shares would be reduced by converting Electing Shares into Non-Electing Shares until the Aggregate Cash Consideration is equal to the Proposed Cash Consideration (determined on a whole-share basis). Applying such reduction among all stockholders who hold Electing Shares, pro rata based on the aggregate number of Electing Shares held by each such stockholder, it follows that that each Electing Share would be converted into the right to receive $[ ] in cash and [ ] shares of CCAP Common Stock (which will be paid in cash payable in lieu of fractional shares), which shares have a value of $[ ] based on the CCAP Per Share Price.

 

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CCAP Advisor Cash Consideration

In connection with the transactions contemplated by the Merger Agreement, as additional consideration to the holders of shares of FCRD Common Stock that are issued and outstanding immediately prior to the Effective Time (excluding any Cancelled Shares), CCAP Advisor will pay or cause to be paid to such holders an aggregate amount in cash equal to $35 million.

Conversion of Shares; Exchange of Certificates; Book-Entry Shares

At the Effective Time, each Electing Share will be converted into the right to receive an amount in cash equal to the Per Share NAV, subject to certain adjustments as described under “Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations, ” as well as the right to receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration.

At the Effective Time, each Non-Electing Share will be converted into the right to receive a number of validly issued, fully paid and non-assessable shares of CCAP Common Stock, equal to the Per Share Stock Consideration, subject to certain adjustments as described under “Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations,” as well as the right to receive an additional amount in cash equal to the applicable ratable portion of the CCAP Advisor Cash Consideration.

Each share of FCRD Common Stock converted per the above will no longer be outstanding and will be automatically canceled and will cease to exist, and the holders of book-entry shares (the “Book-Entry Shares”) which immediately prior to the Effective Time represented such FCRD Common Stock, will cease to have any rights with respect to such FCRD Common Stock other than the right to receive, upon surrender of such Book-Entry Shares, the Per Share Merger Consideration.

After the Effective Time, there will be no registration of transfers on the stock transfer books of FCRD of shares of FCRD Common Stock that were outstanding immediately prior to the Effective Time. If Book-Entry Shares are presented to the Surviving Corporation for transfer to the Exchange Agent for the Effective Time, they will be cancelled against delivery of the applicable Merger Consideration, for each share of FCRD Common Stock formerly represented by such Book-Entry Shares.

Appraisal Rights

Notwithstanding anything in above discussions to the contrary, shares of FCRD Common Stock outstanding immediately prior to the Effective Time and held by a record holder who is entitled to demand and has (or the “beneficial owner” (as defined in Section 262 of the DGCL) of such shares has) properly demanded appraisal for such FCRD Common Stock in accordance with, and which record holder (and/or any such beneficial owner) complies in all respects with, Section 262 of the DGCL (such shares, the “Dissenting Shares”) will not be converted into the right to receive the Per Share Merger Consideration or any portion of the CCAP Advisor Cash Consideration, and will instead represent the right to receive payment of the consideration due to such Dissenting Shares in accordance with and to the extent provided by Section 262 of the DGCL. If any such holder or beneficial owner fails to perfect or otherwise waives, withdraws or loses his right to appraisal under Section 262 of the DGCL or other applicable law, then the right of such holder or beneficial owner to be paid the fair value of such Dissenting Shares will cease and such Dissenting Shares will be deemed to have been converted, as of the Effective Time, into the right to receive the Per Share Merger Consideration and the applicable ratable portion of the CCAP Advisor Cash Consideration, without interest and subject to any withholding of taxes required by applicable law. FCRD will give CCAP prompt notice of any demands received by FCRD for appraisal of FCRD Common Stock or any threats thereof, any actual or attempted withdrawals of such demands and any other demands, notices or instruments received by FCRD relating to rights to be paid the fair value of Dissenting Shares, and CCAP will have the right to participate in and to control all negotiations and proceedings with respect to such demands. Prior to the Effective Time, FCRD will not, except with the prior written consent of CCAP, make any payment with respect to, or settle or compromise or offer to settle or compromise, any such demands, or approve any withdrawal of any such demands, or agree to do any of the foregoing. See “Appraisal Rights of FCRD Stockholders and Beneficial Owners” for more information.

 

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Withholding Taxes

CCAP, CCAP Advisor, the Surviving Corporation and the Exchange Agent will be entitled to deduct and withhold from the Aggregate Merger Consideration any amounts payable pursuant to the Merger Agreement to any former holder of FCRD Common Stock such amounts as CCAP, CCAP Advisor, the Surviving Corporation or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code or any provisions of applicable state, local or foreign tax law. If any amounts are withheld and paid over to the appropriate governmental entity, such withheld amounts will be treated as having been paid to the FCRD Stockholders from whom they were withheld.

Representations and Warranties

The Merger Agreement contains representations and warranties made by FCRD to CCAP and CCAP to FCRD, subject to specified exceptions and qualifications, relating to, among other things:

 

   

corporate organization, including incorporation, qualification and subsidiaries;

 

   

capitalization and subsidiaries;

 

   

power and authority to execute, deliver and perform obligations under the Merger Agreement;

 

   

absence of conflicts, and required government filings and consents;

 

   

compliance with applicable laws and permits;

 

   

SEC documents, financial statements and enforcement actions;

 

   

the accuracy and completeness of information supplied for inclusion in this proxy statement/prospectus;

   

disclosure controls and procedures;

 

   

absence of certain changes and actions since January 1, 2020;

 

   

absence of undisclosed liabilities;

 

   

absence of certain litigation, orders or investigations;

 

   

employee matters, including with respect to any employee benefit plans;

 

   

intellectual property matters;

 

   

tax matters;

 

   

material contracts;

 

   

real property matters;

 

   

environmental matters;

 

   

state takeover laws;

 

   

vote required for the First Merger;

 

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brokers’ fees;

 

   

opinion of financial advisor;

 

   

insurance coverage;

 

   

investment assets; and

 

   

ERISA matters.

In addition, the Merger Agreement includes certain representations made by CCAP regarding the sufficiency of the debt financing to pay the Aggregate Cash Consideration, investment advisory agreement between CCAP and CCAP Advisor, and the solvency of CCAP, Acquisition Sub and Acquisition Sub 2.

The Merger Agreement contains representations and warranties made by CCAP Advisor to FCRD, subject to specified exceptions and qualifications, relating to, among other things:

 

   

organization and qualification;

 

   

power and authority to execute, deliver and perform obligations under the Merger Agreement;

 

   

absence of conflicts, and required government filings and consents;

 

   

compliance with applicable laws and permits;

 

   

absence of certain litigation, orders or investigations;

 

   

the accuracy of information supplied or to be supplied by CCAP Advisor for inclusion in this proxy statement/prospectus; and

 

   

sufficiency of funds to pay the CCAP Advisor Cash Consideration.

These representations and warranties were made as of a specific period of time, may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Merger Agreement and may have been included in the Merger Agreement for the purpose of allocating contractual risk between the parties rather than to establish matters as facts. The Merger Agreement is described herein, and attached as Annex A to this document, to provide you with information regarding its terms and conditions. Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this document.

For purposes of the Merger Agreement, “material adverse effect” with respect to CCAP, FCRD or CCAP Advisor, as applicable, means, any fact, circumstance, event, change, occurrence or effect that would have, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on (1) the business, condition (financial or otherwise), properties, liabilities, assets or results of operations of such party or its subsidiaries, taken as a whole, or (2) the ability of the party to timely perform its obligations under this Agreement or consummate the transactions contemplated hereby; provided, however, that, for purposes of the foregoing clause (1) only, none of the following shall constitute or be taken into account in determining whether a material adverse effect shall have occurred or exists or would reasonably be expected to occur or exist:

 

  (i)

changes in general economic, financial market, business or geopolitical conditions;

 

  (ii)

general changes or developments in any of the industries or markets in which such party, any of its subsidiaries, or any of the portfolio companies operate (or applicable portions or segments of such industries or markets);

 

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  (iii)

changes in any applicable laws or applicable accounting regulations or principles or interpretations thereof;

 

  (iv)

any change in the price or trading volume of such party’s or any of the portfolio companies’ securities, in and of itself (provided that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of “material adverse effect” will be taken into account in determining whether there has been a material adverse effect);

 

  (v)

any failure by such party or any of the portfolio companies to meet published analyst estimates or expectations of such party’s or any of the portfolio companies’ revenue, earnings or other financial performance or results of operations for any period, in and of itself (provided that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of “material adverse effect” will be taken into account in determining whether there has been a material adverse effect);

 

  (vi)

any failure by such party, any of its subsidiaries, or any portfolio company to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings or other financial performance or results of operations, in and of itself (provided that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of “material adverse effect” will be taken into account in determining whether there has been a material adverse effect);

 

  (vii)

any outbreak or escalation of hostilities or war or any act of terrorism, or any acts of God or natural disasters, epidemic, pandemic, disease outbreak (including COVID-19), or the related responses of governmental authorities with respect thereto;

 

  (viii)

the negotiation, existence, announcement, or performance of the Merger Agreement and the consummation of the transactions contemplated;

 

  (ix)

any action taken by such party, any of its subsidiaries, any portfolio company, in each case which is required by the Merger Agreement; and

 

  (x)

any actions taken (or omitted to be taken) at the written request of CCAP or FCRD, as applicable;

provided that the facts, circumstances, events, changes, occurrences or effects set forth in clauses (i) through (iii) and (vii) above will be taken into account in determining whether a material adverse effect has occurred to the extent (but only to such extent) such facts, circumstances, events, changes, occurrences or effects have a disproportionate adverse impact on such party and its subsidiaries, taken as a whole, relative to the other participants in the industries in which such party and its subsidiaries operate.

Interim Operations of FCRD

FCRD has agreed that, between the date of the Merger Agreement and the earlier of the Effective Time and the date, if any, on which the Merger Agreement is terminated (the “Interim Period”), except (a) as may be required by law, (b) as may be agreed in writing by CCAP (which consent will not be unreasonably withheld, delayed or conditioned), (c) as may be expressly contemplated or permitted pursuant to the Merger Agreement, (d) as set forth in FCRD’s disclosure letter or (e) as reasonably required to comply with, establish or implement COVID-19 measures: (x) FCRD will, and will cause its subsidiaries to, use reasonable best efforts to conduct the business of FCRD and its subsidiaries, as applicable, in the ordinary course of business and in a manner consistent with past practice in all material respects and use reasonable best efforts to preserve intact its business organization, maintain in effect all material licenses and permits required to carry on its business, maintain in effect any exemptive orders or exemptive relief which it has received from the SEC and which are currently in effect and preserve its material business relationships, provided that (1) no action by FCRD or its subsidiaries with respect to any of the matters specifically addressed by any other provisions of Section 6.1 of the Merger Agreement will be deemed a breach of this clause (x), unless such action would constitute a breach of one or more of such other provisions and (2) the

 

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failure by FCRD or any of its subsidiaries to take any action prohibited by clauses (a) through (q) below will not be deemed to be a breach of this clause (x); and (y) FCRD will not, and will not permit any of its subsidiaries to, provided that, notwithstanding anything in the Merger Agreement to the contrary, none of FCRD or its subsidiaries will be restricted or encumbered from taking any action, or be required or permitted to take any action, if such restriction, encumbrance, requirement or permission would contravene any provision of that certain Third Amended and Restated Senior Secured Revolving Credit Agreement dated as of October 16, 2020, as amended, by and among FCRD, as the borrower, each of the financial institutions from time to time party hereto, and ING Capital LLC, as administrative agent, issuing bank and lender (the “FCRD Credit Facility”) or any provision of that certain Indenture dated as of November 18, 2014, by and between the Company and U.S. Bank National Association, as amended pursuant to the Fourth Supplemental Indenture dated as of May 25, 2021, by and between the Company and U.S. Bank National Association (the “Existing Notes Indenture”) or the 5.000% Notes due May 25, 2026 issued pursuant to the Existing Notes Indenture (the “Existing Notes”):

(a) amend or otherwise change, in any material respect, FCRD’s Certificate of Incorporation or Bylaws (or such equivalent organizational or governing documents of any of its subsidiaries);

(b) except for transactions solely among FCRD and its wholly-owned subsidiaries, split, combine, reclassify, redeem, repurchase or otherwise acquire or amend the terms of any capital stock or other equity interests or rights;

(c) except for transactions solely among FCRD and its wholly-owned subsidiaries, issue, sell, pledge, dispose, encumber or grant, or authorize the same with respect to, any (i) shares of FCRD’s or its subsidiaries’ capital stock, (ii) options, warrants, convertible securities or other rights of any kind to acquire any shares of FCRD’s or its subsidiaries’ capital stock or (iii) appreciation rights, phantom equity or similar rights with respect to, or valued in whole or in part in reference to, FCRD or any of its subsidiaries;

(d) (i) declare, set aside, authorize, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to FCRD’s or any of its subsidiaries’ capital stock or other equity interests, other than (A) dividends and distributions paid by any wholly-owned subsidiary of FCRD to FCRD or any of its wholly-owned subsidiaries, (B) regular quarterly cash distributions payable by FCRD on a quarterly basis consistent with past practices and FCRD’s investment objectives and policies as publicly disclosed (provided that such dividend shall (i) be determined by the FCRD Board in good faith such that it does not exceed an amount equal to the sum of (a) FCRD’s net investment income generated in the applicable quarter (“Quarterly Dividends”) plus (b) any other of FCRD’s net investment income generated prior to the applicable quarter that had not previously been distributed by FCRD and (ii) not exceed a maximum amount of $0.12 per share of FCRD Common Stock), or (C) the authorization and payment of any tax dividend or distribution necessary for FCRD to maintain its qualification as a RIC or avoid any entity-level tax, in each case as reasonably determined by FCRD; or (ii) purchase, redeem or otherwise acquire shares of capital stock or other equity interests of FCRD or its subsidiaries (other than any wholly-owned subsidiaries) or any options, warrants, or rights to acquire any such shares or other equity interests;

(e) directly or indirectly acquire or dispose (including by merger, consolidation or acquisition of stock or assets), except in respect of any merger, consolidation, business combination among FCRD and its wholly-owned subsidiaries, any corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof, or any FCRD portfolio company investment, or agree to do any of the foregoing, except for:

(i) acquisitions in the form of investments in (X) new investments in FCRD portfolio company investments listed in FCRD’s disclosure letter, provided that (i) in the case of clause (X), for so long as the ratio of (x) FCRD’s (on a consolidated basis with its subsidiaries) outstanding indebtedness for borrowed money to (y) FCRD’s (on a consolidated basis with its subsidiaries) net asset value (calculated in a manner consistent with the calculation of Closing FCRD Net Asset Value as set forth in FCRD’s disclosure letter and based on FCRD’s most recent publicly reported net asset value) does not exceed 1.75x on a pro forma basis, in each case calculated to assume the incurrence of Indebtedness and the related investments associated with the Company’s unfunded commitments listed in FCRD’s disclosure letter;

 

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(ii) dispositions made in accordance with FCRD’s investment objectives, policies and restrictions in connection with an existing FCRD portfolio company (provided that such disposition is not made in exchange for consideration less than the fair market value (as set forth in FCRD’s schedule of investments included in its most recent quarterly or annual reports filed with the SEC) of the asset being disposed), other than a “Pending Sale Agreement” (as defined in the Merger Agreement) on the terms set forth therein;

(iii) compliance with unfunded commitment obligations existing as of September 30, 2022 with respect to any FCRD portfolio company investments listed FCRD’s disclosure letter;

(iv) dispositions or exchanges of assets related to repayments, reorganizations, restructurings or receipt of reorganized securities related to FCRD portfolio company investments (whether or not such FCRD portfolio company investments are held as of the date hereof); and

(v) in any case where FCRD or FCRD portfolio company investment is subject to a compulsory drag-along, call option, prepayment option or redemption, or similar compulsory contractual obligation, to sell, have redeemed or paid off, or otherwise dispose of, any FCRD portfolio company investment pursuant to the contractual terms pertaining to such FCRD portfolio company investment;

provided, that: (A) in each case only if such transactions individually or collectively do not result in any material tax liability (other than any liability for alternative minimum taxes) being imposed on FCRD or its subsidiaries (for the avoidance of doubt, taking into account the dividends paid deduction under Section 562 of the Code); (B) FCRD will provide CCAP notification of any such disposition promptly following the consummation thereof; and (C) FCRD will provide CCAP notification of any such acquisition promptly following the consummation thereof;

(f) (i) make or change any material tax election other than in the ordinary course of business, (ii) change any material method of tax accounting other than in the ordinary course of business, (iii) amend any material tax return, or (iv) agree to any extension or waiver of the statute of limitations with respect to a material amount of tax other than in the ordinary course of business consistent with past practice and FCRD’s investment objectives and policies;

(g) except as permitted by Section 6.1(e)(i)-(v) of the Merger Agreement, make any loans, advances or capital contributions to, or investments in, any other person (other than (i) to or in FCRD or any direct or indirect wholly-owned subsidiary of FCRD and (ii) pursuant to previously disclosed commitments existing as of the date of the Merger Agreement that are identified in FCRD’s disclosure letter or are otherwise set forth therein);

(h) amend, enter into, terminate or waive any material rights under, any FCRD material contract or any material agreement underlying any FCRD portfolio company investment, other than (i) in the ordinary course of business consistent with past practice, (ii) such actions which would not be materially adverse to FCRD or its subsidiaries or (iii) as otherwise set forth in FCRD’s disclosure letter;

(i) (i) pay, discharge or satisfy any indebtedness that has a prepayment cost, “make whole” amount, prepayment penalty or similar obligation (other than (A) the payment, discharge or satisfaction, required pursuant to the terms of FCRD Credit Facility as in effect as of the date of the Merger Agreement and (B) indebtedness incurred by FCRD or its wholly-owned subsidiaries and owed to FCRD or its wholly-owned subsidiaries), (ii) cancel any material indebtedness owing to FCRD or any of its subsidiaries (individually or in the aggregate) or waive or amend any claims or rights of substantial value (other than indebtedness incurred by FCRD or its wholly-owned subsidiaries and owed to FCRD or its wholly-owned subsidiaries), in each case other than indebtedness, claims or rights related to investments in any FCRD portfolio companies, or (iii) waive material benefits of, or agree to modify in any material manner, any confidentiality, standstill or similar agreement to which FCRD or any of its subsidiaries is a party (other than in the ordinary course of business consistent with past practice);

 

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(j) make any pledge of any of its material assets or permit any of its material assets to become subject to any liens except permitted liens;

(k) commence any material proceedings except with respect to routine matters in the ordinary course of business and consistent with past practice, or settle any proceedings other than settlements that result solely in monetary obligations involving payment by FCRD or any of its subsidiaries of (i) the amounts specifically reserved in accordance with GAAP with respect to such proceeding or claim on FCRD’s consolidated financial statements for the quarter ending June 30, 2022, (ii) amounts to be paid from escrow accounts for purposes of working capital adjustments and indemnification matters related to former portfolio companies, in each case pursuant to contracts that have been made available to CCAP prior to the date of the Merger Agreement, (iii) amounts to be paid from insurance proceeds for the purpose of paying such settlements, (iv) an amount not greater than $50,000 in the aggregate or (v) amounts held as collateral as agent for any FCRD portfolio companies or on behalf of third party lenders;

(l) make any material change to its methods of accounting, except as required by GAAP (or any interpretation thereof), Regulation S-X of the Exchange Act or a governmental authority or quasi-governmental authority (including the Financial Accounting Standards Board or any similar organization), or as otherwise required by applicable law;

(m) enter into a new line of business outside of FCRD’s investment objective as described in any forms, documents and reports required to be filed or furnished by FCRD to the SEC prior to the date of the Merger Agreement (provided, that the foregoing shall not apply in any way to any FCRD portfolio company);

(n) (i) increase the compensation or benefits payable or to become payable to any of its directors, officers or individual independent contractors; (ii) establish, adopt, enter into, amend or terminate any collective bargaining agreement or employee benefit plan, program or agreement for the benefit of any of its officers, directors or individual independent contractors; (iii) enter into any severance, change of control or retention agreement with any of its officers, directors or individual independent contractors; or (iv) hire any employee or individual independent contractor;

(o) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of FCRD or any of its subsidiaries;

(p) incur any indebtedness for borrowed money or guarantee any such indebtedness of any person (except for (i) indebtedness for borrowed money incurred with making any follow-on investment in FCRD portfolio company investments listed in FCRD’s disclosure letter, (ii) indebtedness for borrowed money incurred in complying with unfunded commitment obligations existing as of September 30, 2022 with respect to any FCRD portfolio company investments listed in FCRD’s disclosure letter, (iii) drawdowns with respect to the FCRD Credit Facility, but solely to the extent that such drawdowns do not cause FCRD (on a consolidated basis with its subsidiaries) to exceed the leverage ratio set forth in FCRD’s disclosure letter on a pro forma basis, (iv) indebtedness owed to FCRD or its wholly owned subsidiaries or (v) as otherwise set forth in FCRD’s disclosure letter, so long as, in each case, such indebtedness does not provide for any penalty upon prepayment);

(q) permit Logan JV to take any action described in subsections (a), (c), (i), (k) or (o) hereof as applied to the Logan JV; or

(r) enter into any agreement to do any of the foregoing.

Interim Operations of CCAP

Similarly, CCAP has agreed that, during the Interim Period, except (a) as may be required by law, (b) as may be agreed in writing by FCRD (which consent will not be unreasonably withheld, delayed or conditioned), (c) as may be expressly contemplated or permitted by the Merger Agreement, (d) as set forth in its disclosure letter to the Merger Agreement or (e) as reasonably required to comply with, establish or implement COVID-19 Measures: (x) CCAP will, and will cause its subsidiaries to, use reasonable best efforts to conduct the business of CCAP and its

 

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subsidiaries, as applicable, in the ordinary course of business and in a manner consistent with past practice in all material respects and use reasonable best efforts to preserve intact its business organization, maintain in effect all material licenses and permits required to carry on its business, maintain in effect any exemptive orders or exemptive relief which it has received from the SEC and which are currently in effect and preserve its material business relationships (provided that (1) no action by CCAP or its subsidiaries (including Acquisition Sub and Acquisition Sub 2) with respect to any of the matters specifically addressed by any other provisions of Section 6.2 of the Merger Agreement will be deemed a breach of this clause (x), unless such action would constitute a breach of one or more of such other provisions, (2) the failure by CCAP or any of its subsidiaries to take any action prohibited by clauses (a) through (j) below will not be deemed to be a breach of this clause (x), and (3) acquisitions and dispositions of investments in CCAP’s portfolio companies in accordance with CCAP’s investment objectives, policies, and restrictions in effect as of the date of the Merger Agreement will not be deemed to be a breach of this clause (x)); and (y) CCAP will not, and will not permit any of its subsidiaries to:

 

  (a)

amend or otherwise change, in any material respect, the organizational documents of CCAP (or such equivalent organizational or governing documents of any of its subsidiaries);

 

  (b)

except for transactions solely among CCAP and its wholly-owned subsidiaries, split, combine, reclassify, redeem, repurchase or otherwise acquire or amend the terms of any capital stock or other equity interests or rights;

 

  (c)

except for transactions solely among CCAP and its wholly-owned subsidiaries or in connection with CCAP’s DRIP, issue, sell, pledge, dispose, encumber or grant any (i) shares of its or its subsidiaries’ capital stock, (ii) options, warrants, convertible securities or other rights of any kind to acquire any shares of its or its subsidiaries’ capital stock or (iii) appreciation rights, phantom equity or similar rights with respect to, or valued in whole or in part in reference to, CCAP or any of its subsidiaries;

 

  (d)

(i) declare, set aside, authorize, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to CCAP’s or any of its subsidiaries’ capital stock or other equity interests, other than (A) dividends and distributions paid by any wholly-owned subsidiary of CCAP to CCAP or any of its wholly-owned subsidiaries, (B) regular quarterly cash distributions payable by CCAP on a quarterly basis consistent with past practices and CCAP’s investment objectives and policies as publicly disclosed or (C) the authorization and payment of any dividend or distribution necessary for CCAP to maintain its qualification as a RIC or avoid any entity-level tax, in each case as reasonably determined by CCAP; or (ii) purchase, redeem or otherwise acquire share of capital stock or other equity interests of CCAP or its subsidiaries (other than wholly-owned subsidiaries) or any option, warrants, or rights to acquire any such shares or other equity interests;

 

  (e)

directly or indirectly acquire (including by merger, consolidation or acquisition of stock or assets), except in respect of any merger, consolidation, business combination among CCAP and its wholly-owned subsidiaries, any corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof, in each case that are material to CCAP and its subsidiaries, taken as a whole, and except for acquisitions of CCAP’s portfolio company investments in accordance with CCAP’s investment objectives, policies and restrictions;

 

  (f)

amend, enter into or terminate any contract to which CCAP or any of its subsidiaries is a party, except for the Merger Agreement or as expressly set forth in the Merger Agreement other than (i) in the ordinary course of business consistent with past practice and (ii) which would not have a material adverse effect;

 

  (g)

make any material change to its methods of accounting, except as required by GAAP (or any interpretation thereof), Regulation S-X of the Exchange Act or a governmental authority or quasi-governmental authority (including the Financial Accounting Standards Board or any similar organization) or as otherwise required by applicable law;

 

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  (h)

(i) make or change any material tax election other than in the ordinary course of business, (ii) change any material method of tax accounting other than in the ordinary course of business, (iii) amend any material tax return, or (iv) agree to any extension or waiver of the statute of limitations with respect to a material amount of tax other than in the ordinary course of business consistent with past practices and CCAP’s investment objectives and policies;

 

  (i)

enter into a new line of business outside of CCAP’s investment objective as described in any forms, documents and reports required to be filed or furnished by CCAP to the SEC prior to the date of the Merger Agreement (provided, that the foregoing shall not apply in any way to any of CCAP’s portfolio company); or

 

  (j)

enter into any agreement to do any of the foregoing.

Additional Covenants

FCRD and CCAP have agreed to additional covenants, including the following matters:

Preparation of Proxy Statement/Prospectus

As promptly as practicable after the execution of the Merger Agreement (i) FCRD will prepare (with CCAP’s reasonable cooperation) the proxy statement and, in consultation with CCAP, will set a preliminary record date for the Special Meeting and commence a broker search pursuant to Section 14a-13 of the Exchange Act in connection therewith and (ii) CCAP will prepare (with FCRD’s reasonable cooperation) and file with the SEC the registration statement on Form N-14, of which this proxy statement/prospectus is a part, in connection with the registration under the Securities Act of CCAP Common Stock to be issued in the First Merger. Each of CCAP and FCRD will use its reasonable best efforts to have the registration statement on Form N-14 declared effective under the Securities Act, and this proxy statement cleared of all comments from the SEC, as promptly as practicable after such filing (including by responding to comments from the SEC), and, prior to the effective date of the registration statement on Form N-14, CCAP will take all action reasonably required to be taken under any applicable state securities laws in connection with the issuance of CCAP Common Stock in connection with the First Merger. Each of CCAP and FCRD will furnish all information as may be reasonably requested by the other in connection with any such action and the preparation, filing and distribution of the registration statement on Form N-14 and this proxy statement/prospectus. As promptly as practicable after the registration statement on Form N-14 will have become effective, FCRD will use its reasonable best efforts to cause this proxy statement to be mailed to its stockholders.

The Special Meeting and FCRD Board Recommendation

Subject to the earlier termination of the Merger Agreement in accordance with the terms of the Merger Agreement, FCRD will, as soon as practicable following the effectiveness of the registration statement on Form N-14, duly call, give notice of, convene and hold the Special Meeting solely for the purpose of seeking the stockholder approval of the Merger Proposal (“FCRD Stockholder Approval”); provided, that FCRD may postpone or adjourn the Special Meeting to a later date in accordance with the terms of the Merger Agreement. Notwithstanding the foregoing, FCRD will, at the request of CCAP, adjourn the Special Meeting to a date specified by CCAP for the absence of a quorum or if FCRD has not received proxies representing a sufficient number of shares of FCRD Common Stock to approve the Merger Proposal.

The FCRD Board, based on the unanimous recommendation of the Special Committee, has approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the First Merger, and made the recommendation contained herein that the FCRD Stockholders should vote “FOR” the Merger Proposal (the “FCRD Board Recommendation”). Neither the FCRD Board nor any committee thereof will (i) withhold or withdraw, or modify or qualify in a manner adverse to CCAP, Acquisition Sub or Acquisition Sub 2, or propose publicly to withhold or withdraw, or modify or qualify in a manner adverse to CCAP, Acquisition Sub or Acquisition Sub 2, the FCRD Board Recommendation, (ii) fail to include FCRD Board Recommendation in this proxy statement/prospectus, (iii) approve, determine to be advisable, or recommend, or propose publicly to approve, determine to be advisable, or recommend, any Competing Proposal (as defined below) or (iv) resolve, agree or publicly propose to take any such actions (each such action in (i), (ii), (iii) and (iv) being referred to as a “FCRD Adverse Recommendation Change”). Notwithstanding any FCRD Adverse Recommendation Change, unless the Merger Agreement is terminated in accordance with its terms, the obligations of the parties hereunder will continue in full force and effect and such obligations will not be affected by the commencement, public proposal, public disclosure or communication to FCRD of any Competing Proposal (whether or not a Superior Proposal (as defined below)).

 

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“Competing Proposal” means any inquiry, proposal, discussions, negotiations or offer from any third party (a) with respect to a merger, reorganization, consolidation, tender offer, self-tender, exchange offer, stock acquisition, asset acquisition, share exchange, business combination, recapitalization, liquidation, dissolution, joint venture or other transaction involving FCRD or any of its subsidiaries or joint ventures, or (b) relating to any direct or indirect acquisition, in one transaction or a series of transactions, of (1) assets or businesses (including any mortgage, pledge or similar disposition thereof but excluding any mortgage or pledge in connection with a bona fide debt financing transaction entered into in the ordinary course of business consistent with past practice) that constitute or represent, or would constitute or represent if such transaction is consummated, twenty percent (20%) or more of the total assets (based on fair market value) of FCRD and its subsidiaries, taken as a whole, as of the date of such inquiry or proposal, or that generated twenty percent (20%) or more of net revenue or net income of FCRD and its subsidiaries, taken as a whole, for the twelve-month period ending on the last day of FCRD’s then most recently completed fiscal quarter, or (2) twenty percent (20%) or more of the outstanding shares of any class of capital stock of, or other equity or voting interests in, FCRD or any of its subsidiaries or any resulting parent company of FCRD, in each case other than the Mergers.

“Superior Proposal” means a bona fide, unsolicited, written and binding Competing Proposal that is fully financed or has fully committed financing (with all percentages in the definition of Competing Proposal increased to fifty percent (50%)) made by a third party on terms that the FCRD Board determines in good faith, after consultation with its financial and outside legal advisors, and considering all legal, financial, regulatory and other material aspects of, and the identity of the third party making, the Competing Proposal and such factors as the FCRD Board considers in good faith to be appropriate, (a) is more favorable to FCRD Stockholders from a financial point of view than the transactions contemplated by the Merger Agreement (including any revisions to the terms and conditions of the Merger Agreement proposed by CCAP to FCRD in writing in response to such Competing Proposal under the provisions of the Merger Agreement) and (b) is reasonably likely of being completed on the terms proposed on a timely basis.

Appropriate Actions; Consents; Filings

Each of FCRD, CCAP and CCAP Advisor will use their respective reasonable best efforts to consummate and make effective the transactions contemplated by the Merger Agreement and to cause the conditions to the First Merger set forth in the Merger Agreement to be satisfied, including using reasonable best efforts to accomplish the following: (i) the obtaining of all necessary actions or non-actions, consents and approvals from governmental authorities or other persons necessary in connection with the consummation of the transactions contemplated by the Merger Agreement, including the First Merger, and the making of all necessary registrations and filings (including filings with governmental authorities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval from, or to avoid a proceeding by, any governmental authority or other persons necessary in connection with the consummation of the transactions contemplated by the Merger Agreement, including the First Merger, (ii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the transactions contemplated by the Merger Agreement, including the First Merger, performed or consummated by such party in accordance with the terms of the Merger Agreement, including seeking to have any stay or temporary restraining order entered by any court or other governmental authority vacated or reversed and (iii) the execution and delivery of any additional instruments reasonably necessary to consummate the First Merger and any other transactions to be performed or consummated by such party in accordance with the terms of the Merger Agreement and to carry out fully the purposes of the Merger Agreement. Without limiting the generality of the foregoing, each of the parties will make any applications and filings as reasonably determined by FCRD and CCAP are required under applicable United States or foreign competition, antitrust, merger control or investment laws (“Antitrust Laws”) with respect to the transactions contemplated hereby as promptly as practicable, but in no event later than as required by law. CCAP will pay all filing fees and other charges for the filings required under any Antitrust Law by FCRD and CCAP.

 

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Each of FCRD, CCAP and CCAP Advisor agree to take (and to cause their affiliates to take) promptly any and all steps necessary to avoid or eliminate each and every impediment and obtain all consents under any Antitrust Laws that may be required by any foreign or United States federal, state or local government authority.

Each of FCRD, CCAP and CCAP Advisor will furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any investigation or other inquiry from a governmental authority or in connection with any proceeding initiated by a private party.

Access to Information; Confidentiality

Upon reasonable notice and subject to applicable laws relating to the confidentiality of information, each of FCRD and CCAP will (and will cause each of its subsidiaries to) afford reasonable access to the other party’s representatives, in a manner not disruptive to the operations of the operations of the business of such party and its subsidiaries, during normal business hours and upon reasonable notice throughout the period prior to the Effective Time (or until the earlier termination of the Merger Agreement), to the personnel, agents, properties, books and records of such party and its subsidiaries and, during such period, will (and will cause each of its subsidiaries to) furnish promptly to such representatives all information concerning the business, properties and personnel of such party and its subsidiaries as may reasonably be requested.

No Solicitation

FCRD will, and will cause its subsidiaries and its and their representatives to, (i) immediately cease and cause to be terminated any existing solicitation of, or discussions or negotiations with, any third party relating to any Competing Proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to a Competing Proposal (an “Inquiry”) and immediately terminate all physical and electronic data room access previously granted to any such third party and (ii) not terminate, waive, amend, release or modify any provision of any confidentiality or “standstill” agreement to which it or any of its affiliates or representatives is a party with respect to any Competing Proposal or Inquiry.

In addition, except as otherwise expressly provided in the Merger Agreement, until the Effective Time or, if earlier, the termination of the Merger Agreement, FCRD will not, and will cause its subsidiaries and its and their representatives not to, directly or indirectly:

 

   

(i) initiate, solicit, endorse, facilitate or knowingly encourage the making of any Competing Proposal or Inquiry;

 

   

(ii) continue or engage in negotiations or discussions with, or knowingly furnish any non-public information to, any third party relating to a Competing Proposal or any Inquiry; or

 

   

(iii) resolve, agree or publicly propose to do any of the foregoing.

Notwithstanding the foregoing, at any time prior to the date that the FCRD Stockholder Approval is obtained, in the event that FCRD (or its representatives on FCRD’s behalf) receives directly or indirectly a written Inquiry or a written Competing Proposal from any third party that (i) FCRD Board determines in good faith to be bona fide, (ii) was unsolicited and (iii) did not otherwise result from a breach of the no solicitation provision of the Merger Agreement, FCRD and the FCRD Board and its representatives may engage or participate in negotiations or discussions with, or furnish any information and other access to, any third party making such Inquiry or Competing Proposal and its representatives and affiliates and prospective debt and equity financing sources that have been specifically engaged for the purpose of financing such Competing Proposal if the FCRD Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that:

 

   

(A) such Inquiry or Competing Proposal either constitutes a Superior Proposal or could reasonably be expected to lead to a Superior Proposal; and

 

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(B) the failure to take such action could reasonably be expected to be inconsistent with the fiduciary duties of the FCRD Board under the DGCL;

provided that (x) prior to furnishing any non-public information concerning FCRD and its subsidiaries FCRD receives from such person, to the extent such person is not already subject to a confidentiality agreement with FCRD containing confidentiality terms that are not materially less favorable in the aggregate to FCRD than those contained in the confidentiality agreement (unless FCRD offers to amend the confidentiality agreement to reflect such more favorable terms) (an “Acceptable Confidentiality Agreement”), and (y) FCRD will promptly provide or make available to CCAP (I) an unredacted copy of each such Acceptable Confidentiality Agreement and (II) all non-public information concerning it or its subsidiaries that it provides to any third party given such access that was not previously made available to CCAP or its representatives.

Neither FCRD nor the FCRD Board nor any committee thereof will effect an FCRD Adverse Recommendation Change and, except as expressly provided in the Merger Agreement, neither the FCRD Board nor any committee thereof will approve or recommend, and FCRD will not (and will cause each of its subsidiaries not to) execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other Contract or agreement, in each case constituting or with respect to, any Competing Proposal or Inquiry, in each case other than an Acceptable Confidentiality Agreement, and neither the FCRD Board nor any committee thereof will resolve, agree or publicly propose to take any such actions.

Notwithstanding the immediately preceding sentence, at any time prior to the receipt of the FCRD Stockholder Approval, subject to certain conditions and procedural requirements, the FCRD Board may, if FCRD has received a Competing Proposal after the date of the Merger Agreement that (i) FCRD Board has determined in good faith to be bona fide, (ii) was unsolicited, (iii) did not otherwise result from a breach of the no solicitation provision of the Merger Agreement and (iv) the FCRD Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a Superior Proposal, authorize, adopt or approve such Superior Proposal and cause FCRD to enter into a binding definitive agreement providing for the consummation of such Superior Proposal concurrently with the termination of the Merger Agreement.

Directors’ and Officers’ Indemnification and Insurance

CCAP, Acquisition Sub and Acquisition Sub 2 have agreed that all rights to exculpation and indemnification for acts or omissions occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with the transactions contemplated by the Merger Agreement), existing as of the date of the Merger Agreement in favor of the current or former directors, officers, managers, or employees, as the case may be, of FCRD, its subsidiaries or FCRD’s affiliates, including but not limited to officers and employees of FEAC (collectively, the “D&O Indemnified Parties”), as provided in their respective organizational documents as in effect on the date of the Merger Agreement or in any contract disclosed or made available to CCAP prior to the date of the Merger Agreement will survive the Merger and will continue in full force and effect.

To the fullest extent that FCRD or its subsidiaries would be permitted by applicable law as required by the organizational documents of FCRD or its subsidiaries as in effect on the date of the Merger Agreement, CCAP has agreed to:

 

   

(i) indemnify and hold harmless each D&O Indemnified Party against and from any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, proceeding or investigation arises out of or pertains to: (A) any alleged action or omission in such D&O Indemnified Party’s capacity as a director, officer or employee of FCRD, its investment adviser or any of its subsidiaries prior to the Effective Time; or (B) the Merger Agreement or the transactions contemplated thereby; and;

 

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(ii) pay in advance of the final disposition of any such claim, proceeding or investigation the expenses (including attorneys’ fees) of any D&O Indemnified Party upon receipt of an undertaking by or on behalf of such D&O Indemnified Party to repay such amount if it will ultimately be determined by a final and non-appealable judgment of a court of competent jurisdiction that such D&O Indemnified Party is not entitled to be indemnified under applicable law.

Notwithstanding anything to the contrary contained in the Merger Agreement, CCAP will not settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, proceeding or investigation, unless such settlement, compromise, consent or termination includes an unconditional release of all of the D&O Indemnified Parties covered by the claim, proceeding or investigation from all liability arising out of such claim, proceeding or investigation.

FCRD has agreed to purchase, effective as of the Closing, a six (6) year “tail” policy, on terms and conditions no less advantageous to the D&O Indemnified Parties than the existing directors’ and officers’ liability insurance and fiduciary insurance maintained by FCRD as of the date of the Merger Agreement, covering claims arising from facts, events, acts or omissions that occurred at or prior to the Effective Time, including the transactions contemplated thereby; provided, that CCAP will not be required to pay a total premium for such “tail” policy in excess of three hundred percent (300%) of the annual premium currently paid by FCRD for such insurance, but in such case shall purchase as much of such coverage as possible for such amount.

Notification of Certain Matters

Subject to applicable law, FCRD will give prompt written notice to CCAP, and CCAP will give prompt written notice to FCRD, of (a) any notice or other communication received by such party from any governmental authority in connection with the Merger Agreement, the Merger or the transactions contemplated thereby, or from any person alleging that the consent of such person is or may be required in connection with the Mergers or the transactions contemplated thereby, if the subject matter of such communication or the failure of such party to obtain such consent could be material to FCRD, the Surviving Corporation or CCAP, (b) any claims, investigations or proceedings commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its subsidiaries which relate to the Merger Agreement, the Mergers or the transactions contemplated thereby and (c) any fact, circumstance or development of which FCRD or CCAP (as applicable) becomes aware that will or is reasonably likely to result in any of the closing conditions becoming incapable of being satisfied by 5:00 p.m. (New York time) on June 23, 2022 (the “Termination Date”).

Public Announcements

Except as otherwise provided in the Merger Agreement or required by applicable laws, prior to any FCRD Adverse Recommendation Change, each of FCRD, CCAP, Acquisition Sub and Acquisition Sub 2 will consult with each other before issuing any press release or public announcement with respect to the Merger Agreement or the transactions contemplated thereby, and none of the parties or their affiliates will issue any such press release or public announcement prior to obtaining the other parties’ written consent (which consent may be delivered via electronic mail, but will not be unreasonably withheld or delayed).

Acquisition Sub

CCAP will take all actions necessary to (a) cause Acquisition Sub and Acquisition Sub 2 to perform its obligations under the Merger Agreement and to consummate the First Merger on the terms and conditions set forth in the Merger Agreement and (b) ensure that, prior to the Effective Time, Acquisition Sub and Acquisition Sub 2 will not conduct any business, or incur or guarantee any indebtedness or make any investments, other than as specifically contemplated by the Merger Agreement.

No Control of the Other Party’s Business

Nothing contained in the Merger Agreement is intended to give FCRD or CCAP, directly or indirectly, the right to control or direct the operations of the other party or its subsidiaries prior to the Effective Time. Prior to the Effective Time, each of FCRD and CCAP will exercise, consistent with the terms and conditions of the Merger Agreement, complete control and supervision over its and its subsidiaries’ operations.

 

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Rule 16b-3 Matters

Prior to the Effective Time, each of FCRD and CCAP will take all such steps as may be required to cause any dispositions of FCRD Common Stock (including derivative securities with respect to FCRD Common Stock) or acquisitions of CCAP Common Stock (including derivative securities with respect to CCAP Common Stock) resulting from the transactions contemplated by the Merger Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to FCRD or will become subject to such reporting requirements with respect to CCAP, to be exempt under Rule 16b-3 under the Exchange Act, to the extent permitted by applicable law.

Repayment of FCRD Credit Facility

At least five business days prior to the Closing Date (or such shorter period as may be agreed by CCAP), FCRD will deliver to CCAP a draft copy of a customary payoff letter (subject to delivery of funds as arranged by CCAP) from the “Administrative Agent” (as defined in the FCRD Credit Facility) under the FCRD Credit Facility (the “Payoff Letter”), and, on or prior to the Closing Date, FCRD will deliver to CCAP an executed copy of the Payoff Letter to be effective upon the Closing. FCRD will, and will cause its subsidiaries to, deliver all the documents required for the termination of commitments under the FCRD Credit Facility, subject to the occurrence of the Closing and the repayment in full of all obligations then outstanding thereunder (using funds arranged by CCAP).

Repayment or Assumption of Existing Notes

Effective as of the Closing, CCAP will, and will cause the Surviving Corporation to, take all such steps as may be necessary to either (a) pay or cause to be paid, or to provide adequate security (in the form of funds deposited with the trustee, as required under the Existing Notes Indenture for discharge or defeasance of the indebtedness under the Existing Notes) for the repayment of the full amount of principal and accrued interest, and any and all of the fees, costs, expenses, penalties and other amounts payable under the Existing Notes upon consummation of the Closing, and FCRD will instruct CCAP to deliver such amount to such account or accounts as required by the Existing Notes in connection with the repayment of the Existing Notes and will deliver evidence satisfactory to FCRD of repayment and cancellation, or adequate security (in the form of funds deposited into an escrow account with the trustee, as required under the Existing Notes Indenture) with respect to repayment, of such notes, or (b) expressly assume, by an indenture supplemental to the Existing Notes Indenture, executed and delivered to the trustee, the due and punctual payment of the principal of (and premium, if any) and interest, if any, on all Existing Notes and the performance of every covenant of the Existing Notes Indenture on the part of FCRD to be performed or observed.

Certain Tax Matters

During the period from the date of the Merger Agreement to the Effective Time, each of CCAP and FCRD will not, and will not permit any of its subsidiaries to, directly or indirectly, without the prior written consent of the other party, take any action, or knowingly fail to take any action, which action or failure to act is reasonably likely to cause CCAP or FCRD (as applicable) to fail to qualify as a RIC.

Stock Exchange Listing

CCAP has agreed to use its reasonable best efforts to cause the shares of CCAP Common Stock to be issued in connection with the First Merger to be listed on Nasdaq, subject to official notice of issuance, prior to the Effective Time.

 

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Takeover Statutes and Provisions

None of the FCRD, CCAP, Acquisition Sub or Acquisition Sub 2 will take any action that would cause the First Merger and related transactions to be subject to requirements imposed by any takeover statutes. Each of FCRD and CCAP will take all necessary steps within its control to exempt (or ensure the continued exemption of) the First Merger from, or if necessary to challenge the validity or applicability of, any applicable takeover statute, as now or hereafter in effect.

Stockholder Litigation

Each of FCRD and CCAP will reasonably cooperate and consult with one another in connection with the defense and settlement of any proceeding by FCRD Stockholders or CCAP Stockholders against any of them or any of their respective directors, officers or affiliates with respect to the Merger Agreement or the transactions contemplated thereby. Each of FCRD and CCAP (a) will keep the other party reasonably informed of any material developments in connection with any such proceeding brought by its stockholders and (b) will not settle any such proceeding without the prior written consent of the other party (such consent not to be unreasonably delayed, conditioned or withheld).

Coordination of Dividends

CCAP and FCRD will coordinate with each other in designating the record and payment dates for any quarterly dividends or distributions to its stockholders, including a tax dividend, declared in accordance with the Merger Agreement in any calendar quarter in which the Closing Date might reasonably be expected to occur. In the event that a dividend or distribution with respect to the shares of FCRD Common Stock permitted under the terms of the Merger Agreement has (i) a record date prior to the Effective Time and (ii) has not been paid as of the Effective Time, the holders of shares of FCRD Common Stock shall be entitled to receive such dividend or distribution after the Effective Time on the appropriate payment date and, in connection therewith, FCRD shall deposit such dividend or distribution with the Exchange Agent to be paid to such FCRD Stockholders.

Stockholder Notice

On the Closing Date, each of FCRD and CCAP will use reasonable best efforts to make a determination as to whether or not the Mergers constitute a “reorganization” within the meaning of Section 368(a) of the Code, which determination will be made reasonably and in good faith after consultation with tax counsel, but will not constitute a representation, warranty, covenant, obligation or guarantee of any kind whatsoever to FCRD, FCRD Stockholders or any other person with respect thereto (and no such person will be entitled to rely on such determination in any respect). In making such determination, FCRD and CCAP will be entitled to rely on certain customary assumptions and representations reasonably acceptable to FCRD and CCAP after consultation with tax counsel, including representations set forth in certificates of officers of FCRD and CCAP, which FCRD and CCAP will use reasonable best efforts to cause to be promptly provided to each other if requested by the other party. As soon as practicable after the Closing Date, CCAP will inform the stockholders in writing of any such determination. Each of FCRD, CCAP, Acquisition Sub and Acquisition Sub 2 will report the Mergers and the other transactions contemplated by the Merger Agreement in a manner consistent with such determination, except as otherwise required by applicable law. For the avoidance of doubt, if the Mergers constitute a “reorganization” within the meaning of Section 368(a) of the Code, the Merger Agreement is intended to be, and was thereby adopted as, a “plan of reorganization” for purposes of Section 354 and 361 of the Code and Treasury Regulations Section 1.368-2(g) and 1.368-3(a), to which FCRD, CCAP and Acquisition Sub are parties under Section 368(b) of the Code.

Conditions to Closing the Mergers

Conditions to the Obligations of Each Party

The respective obligations of FCRD and CCAP to consummate the First Merger are subject to the satisfaction or (to the extent permitted by law) waiver by FCRD and CCAP at or prior to the Effective Time of the following conditions:

 

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FCRD will have obtained the FCRD Stockholder Approval;

 

   

the issuance of CCAP Common Stock in connection with the First Merger will have been approved for listing on Nasdaq, subject to official notice of issuance;

 

   

the registration statement on Form N-14 will have become effective under the Securities Act and will not be the subject of any stop order or proceedings seeking a stop order;

 

   

any applicable waiting period (and any extension or related voluntary commitments thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, relating to the consummation of the First Merger shall have expired or early termination thereof shall have been granted; and

 

   

no governmental authority of competent jurisdiction will have issued or entered any law or order which is then in effect and has the effect of restraining, enjoining or otherwise prohibiting or making unlawful the consummation of the First Merger.

Conditions to Obligations of CCAP and Acquisition Sub to Effect the First Merger

The obligations of CCAP and Acquisition Sub to effect the First Merger are also subject to the satisfaction or (to the extent permitted by law) waiver by CCAP at or prior to the Effective Time, of the following conditions:

 

   

the representations and warranties of FCRD contained in the Merger Agreement will be true and correct to the applicable bringdown standard (subject to the materiality thresholds set forth in the Merger Agreement) as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be so true and correct as of such specific date only);

 

   

FCRD will have performed or complied in all material respects with its obligations required under the Merger Agreement to be performed or complied with on or prior to the Closing Date;

 

   

CCAP will have received a certificate signed by an executive officer of FCRD, dated as of the Closing Date, certifying as to certain matters set forth in the Merger Agreement; and

 

   

since the date of the Merger Agreement, there will not have occurred and be continuing any material adverse effect with respect to FCRD.

Conditions to Obligations of FCRD to Effect the First Merger

The obligation of FCRD to effect the First Merger is also subject to the satisfaction or (to the extent permitted by law) waiver by FCRD, at or prior to the Effective Time, of the following conditions:

 

   

each of the representations and warranties of CCAP, Acquisition Sub, Acquisition Sub 2 and CCAP Advisor contained in the Merger Agreement will be true and correct to the applicable bringdown standard (subject to the materiality thresholds set forth in the Merger Agreement) as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be so true and correct as of such specific date only);

 

   

each of CCAP, Acquisition Sub, Acquisition Sub 2 and CCAP Advisor will have performed or complied in all material respects with its obligations required under the Merger Agreement to be performed or complied with on or prior to the Closing Date;

 

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FCRD will have received a certificate signed by an executive officer of CCAP, dated as of the Closing Date, certifying as to certain matters set forth in the Merger Agreement;

 

   

since the date of the Merger Agreement, there will not have occurred and be continuing any material adverse effect with respect to CCAP;

 

   

FCRD will have received the written opinion of external legal counsel, as of the Closing Date to the effect that the Mergers will qualify for the tax treatment contemplated in IRS Revenue Ruling 2001-46 and will qualify as a “reorganization” within the meaning of Section 368(a) of the Code; and

 

   

since the date of the Merger Agreement, there will not have occurred and be continuing any material adverse effect with respect to CCAP Advisor.

Frustration of Closing Conditions

None of CCAP, Acquisition Sub, Acquisition Sub 2 or FCRD may rely either as a basis for not consummating the First Merger or any of the other transactions contemplated by the Merger Agreement or terminating the Merger Agreement and abandoning the Mergers on the failure of any condition set forth in the Merger Agreement to be satisfied if such failure was caused by such party’s failure to act in good faith or to use the efforts to cause the Closing to occur as required by the Merger Agreement.

Termination of the Merger Agreement

Right to Terminate

Notwithstanding anything contained in the Merger Agreement to the contrary, the Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the FCRD Stockholder Approval is obtained (except as otherwise expressly noted), as follows:

 

   

(a) by mutual written consent of FCRD and CCAP;

 

   

(b) by either FCRD or CCAP, if:

 

   

(i) the First Merger will not have been consummated on or before the Termination Date; provided that no party may terminate the Merger Agreement for this reason if the failure of such party to perform or comply with any of its obligations under the Merger Agreement has been the principal cause or resulted in the failure of the Closing to have occurred on or before the Termination Date;

 

   

(ii) prior to the Effective Time, any governmental authority of competent jurisdiction will have issued or entered any law or order or taken any other action permanently restraining, enjoining or otherwise prohibiting or making unlawful the consummation of the transactions contemplated by the Merger Agreement, and such law or order or other action will have become final and non-appealable; provided that no party may terminate the Merger Agreement if the issuance of such law or order or taking of such action was proximately caused by the failure of such party to perform or comply with its obligations under the Merger Agreement and no party may terminate the Merger Agreement on this basis if it is then in material breach of any of its representations, warranties, covenants or obligations under the Merger Agreement; or

 

   

(iii) the Special Meeting (including any adjournments or postponements thereof) will have been duly held and completed and the FCRD Stockholder Approval will not have been obtained at such Special Meeting (or at any adjournment or postponement thereof) at which a vote on the adoption of the Merger Agreement is taken;

 

   

(c) by FCRD, if:

 

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(i) CCAP, Acquisition Sub, Acquisition Sub 2 or CCAP Advisor breaches or fails to perform any of their respective representations, warranties and covenants under the Merger Agreement, which breach or failure to perform would result in the failure of certain FCRD closing conditions, and such breach is not curable prior to the Termination Date or if curable prior to the Termination Date, has not been cured within 30 days after the giving of written notice thereof by FCRD to CCAP (provided that FCRD is not then in material breach so as to result in the failure of a CCAP closing condition and, provided further, that FCRD may not terminate the Merger Agreement if the breach by CCAP has been primarily caused by a breach of any provision of the Merger Agreement by FCRD); or

 

   

(ii) prior to obtaining the FCRD Stockholder Approval, in order to substantially concurrently enter into a binding final agreement providing for the consummation of a Superior Proposal to the extent permitted by, and subject to the applicable terms and conditions of the Merger Agreement (provided that (i) FCRD has not breached any of the no solicitation provisions of the Merger Agreement in any material respect and (ii) prior to or simultaneously with such termination FCRD pays the FCRD Termination Fee to CCAP); or

 

   

(iii) at any time prior to the Effective Time, if (A) all of the closing conditions have been, and continue to be, satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, each of which will be capable of being satisfied if the Closing Date were the date of such termination), (B) CCAP and Acquisition Sub do not consummate the First Merger on or prior to the date the Closing is required to occur pursuant to the Merger Agreement, (C) FCRD will have irrevocably confirmed in writing to CCAP that it is ready, willing and able to complete the Closing on the date of such confirmation and throughout the three business day period following delivery of such confirmation, and (D) CCAP and Acquisition Sub fail to effect the Closing within three business days following delivery of such confirmation;

 

   

(d) by CCAP, if:

 

   

(i) FCRD breaches or fails to perform any of its representations, warranties and covenants under the Merger Agreement, which breach of failure to perform would result in the failure of CCAP closing conditions, and such breach is not curable prior to the Termination Date or if curable prior to the Termination Date, has not been cured within thirty days after the giving of written notice thereof by CCAP to FCRD (provided that CCAP, Acquisition Sub or Acquisition Sub 2 is not then in material breach so as to result in the failure of a FCRD closing condition and, provided further, that CCAP may not terminate the Merger Agreement if the breach by FCRD has been primarily caused by a breach of any provision of the Merger Agreement by CCAP); or

 

   

(ii) at any time prior to the receipt of the FCRD Stockholder Approval, (A) FCRD or the FCRD Board (or any committee thereof) will have made an FCRD Adverse Recommendation Change, (B) FCRD fails to publicly reaffirm the FCRD Board Recommendation within five business days after receipt of a written request therefor by CCAP, (C) FCRD, any of its subsidiaries or any of its or their representatives intentionally breaches the no-solicitation provision of the Merger Agreement in a material respect, and such breach remains uncured for five business days following written notice thereof by CCAP to FCRD, (D) FCRD fails to recommend against any Competing Proposal that is a tender offer or exchange offer subject to Regulation 14D promulgated under the Exchange Act within ten business days after the commencement thereof or (E) FCRD or any of its subsidiaries enters into an Alternative Acquisition Agreement (other than an Acceptable Confidentiality Agreement) or FCRD fails to include the Merger Proposal in this Proxy Statement.

Termination Fees

Set forth below are summaries of the termination fees that may be payable if the Merger Agreement is terminated prior to consummation of the Mergers. CCAP or FCRD, as applicable, will be the entities entitled to receive any termination fees under the Merger Agreement. The CCAP Board and FCRD Board have approved the amount of the termination fee which may be paid.

 

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FCRD Termination Fee

The Merger Agreement provides for the payment by FCRD to CCAP of a termination fee of $5.556 million (the “FCRD Termination Fee”) if the Merger Agreement is terminated by:

 

   

(i) either CCAP or FCRD, pursuant to paragraph (b)(iii) under “—Right to Terminate” above, and in any such case, prior to the Special Meeting, a Competing Proposal will have been publicly disclosed and not withdrawn prior to such date;

 

   

(ii) FCRD, pursuant to paragraph (c)(ii) under “Right to Terminate” above; or

 

   

(iii) CCAP, pursuant to paragraph (d)(i) or (d)(ii) under “Right to Terminate” above.

In any such case, FCRD will pay to CCAP the FCRD Termination Fee (less the amount of any CCAP Expenses previously paid to CCAP) (A) on the same day as the consummation of any Tail Period Transaction, should one occur (regardless of whether such consummation happens prior to or following the expiration of the Tail Period), (B) in the case of clause (ii) above, substantially concurrently with such termination or (C) in the case of clause (iii) above, no later than three business days following the date of such termination

“Tail Period” means the nine-month period immediately following any termination of the Merger Agreement.

“Tail Period Transaction” means FCRD’s entry into an Alternative Acquisition Agreement (as defined below) with respect to any Competing Proposal with a third party during the nine-month period immediately following any termination of the Merger Agreement; provided, that for purposes of this definition, the references to “twenty percent (20%)” in the definition of Competing Proposal will be deemed to be references to “fifty percent (50%).”

“Alternative Acquisition Agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract or agreement, in each case constituting or with respect to, any Competing Proposal or Inquiry.

Reimbursement of CCAP Expenses

If the Merger Agreement is terminated by FCRD or CCAP in accordance with paragraph (b)(iii) under “Description of the Merger Agreement —Right to Terminate” above, in circumstances in which the FCRD Termination Fee is not then payable to CCAP, then FCRD will reimburse CCAP and its affiliates for all of their documented out-of-pocket fees and expenses (including all documented fees and expenses of counsel, accountants, experts and consultants to CCAP and Acquisition Sub, Acquisition Sub 2 and their affiliates) incurred and payable by CCAP, Acquisition Sub or Acquisition Sub 2 or on their behalf in connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of the Merger Agreement and the transactions contemplated thereby (the “CCAP Expenses”), up to a maximum reimbursement payment of $1,500,000.

CCAP Termination Fee

The Merger Agreement provides for a payment by CCAP to FCRD of a termination fee of $7,142,850 (the “CCAP Termination Fee”) if the Merger Agreement is terminated by:

 

   

FCRD, pursuant to paragraph (c)(i) or (c)(iii) under “Right to Terminate” above; or

 

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CCAP, pursuant to paragraph (b)(i) under “Right to Terminate” above (at any time during which FCRD would have been entitled to terminate the Merger Agreement pursuant to paragraph (c)(i) or (c)(iii) under “Right to Terminate” above).

In any such case, CCAP will pay to FCRD the CCAP Termination Fee no later than three business days following the date of such termination.

Effect of Termination

In the event that the Merger Agreement is terminated and the Mergers are abandoned, written notice thereof will be given by the terminating party to the other party, specifying the provisions of the Merger Agreement pursuant to which such termination is made, and the Merger Agreement will forthwith become null and void and of no effect without liability on the part of any party thereto, and all rights and obligations of any party thereto will cease, except that (1) CCAP and FCRD will remain liable to each other for any damages incurred arising out of any Intentional Breach (as defined below) of the Merger Agreement or Fraud (as defined below) and (2) certain designated provisions of the Merger Agreement will survive the termination, including, but not limited to, the termination and termination fee provisions and confidentiality provisions.

“Intentional Breach” means any breach of the Merger Agreement where the action or non-action constituting or giving rise to such breach was intentionally undertaken by the party taking such action, with actual knowledge that such action or non-action would or would reasonably be expected to constitute or give rise to a breach of the Merger Agreement.

“Fraud” means, of a person, an intentional and willful misrepresentation of or with respect to a representation or warranty set forth in the Merger Agreement, or in any certificate delivered thereunder, by such person, which misrepresentation constitutes actual common law fraud (and not constructive fraud or negligent misrepresentation) with the specific intent to induce another party to rely upon such representation or warranty.

Amendment of the Merger Agreement

Subject to applicable law, each party of the Merger Agreement may only modify or amend the Merger Agreement by written agreement executed and delivered by the duly authorized officers of each of the respective parties; provided, that no amendment will be made to the Merger Agreement after the Effective Time. However, after receipt of the FCRD Stockholder Approval, if any such amendment will by applicable law require further approval of the FCRD Stockholders, the effectiveness of such amendment will be subject to the approval of the FCRD Stockholders.

Extension; Waiver

The conditions to each of the parties’ obligations to consummate the Mergers are for the sole benefit of such party and may be waived by such party (without the approval of the FCRD Stockholders) in whole or in part to the extent permitted by applicable law.

At any time prior to the Effective Time, FCRD or CCAP may (a) waive or extend the time for the performance of any of the obligations or other acts of CCAP, Acquisition Sub, Acquisition Sub 2 or CCAP Advisor, in the case of FCRD, or FCRD, in the case of CCAP, or (b) waive any inaccuracies in the representations and warranties contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement on the part of CCAP, Acquisition Sub, Acquisition Sub 2 or CCAP Advisor, in the case of FCRD, or FCRD, in the case of CCAP.

 

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Expenses; Transfer Taxes

In general, all expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses. However, FCRD will be required to pay a portion of CCAP’s expenses incurred in connection with the Mergers, subject to a maximum reimbursement payment of $1,500,000, if the Merger Proposal is not approved by FCRD Stockholders at the Special Meeting, the Merger Agreement is subsequently terminated and CCAP is not otherwise entitled to the termination fee described elsewhere herein. It is expected that CCAP will incur approximately $[•] and FCRD will incur approximately $[•] of fees and expenses in connection with completing the Mergers. Other than taxes imposed upon holders of FCRD Common Stock, CCAP will pay all (a) transfer, stamp and documentary taxes or fees and (b) sales, use, gains, real property transfer and other similar taxes or fees arising out of or in connection with the Merger Agreement.

Governing Law; Jurisdiction

The Merger Agreement is governed and construed in accordance with the laws of the State of Delaware applicable to contracts made and performed entirely within such state, without regard to any applicable conflicts of law principles that would cause the application of the laws of another jurisdiction, except to the extent governed by the Investment Company Act, in which case the latter will control.

Each of FCRD, CCAP, Acquisition Sub, Acquisition Sub 2 and CCAP Advisor agrees that any proceeding brought by any party to enforce any provision of, or based on any matter arising out of or in connection with, the Merger Agreement or the transactions contemplated thereby will be brought in the Delaware Court of Chancery, or if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the District of Delaware, and the appellate courts to which orders and judgments therefore may be appealed (collectively, the “Acceptable Courts”). Each of the parties submits to the jurisdiction of any Acceptable Court in any proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, the Merger Agreement or the transactions contemplated thereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such proceeding. Each party irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any proceeding in any such Acceptable Court or that any such proceeding brought in any such Acceptable Court has been brought in an inconvenient forum.

 

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ACCOUNTING TREATMENT

The merger of FCRD with and into Acquisition Sub is expected be accounted for as an asset acquisition pursuant to ASC 805-50, Business Combinations-Related Issues, with the fair value of total consideration paid in conjunction with the Mergers allocated to the assets acquired and liabilities assumed based on their relative fair values as of the date of the Mergers. Based on the preliminary pro forma purchase price allocation calculated as of June 30, 2022, the estimated fair value of the net assets acquired approximates the estimated fair value of the Merger Consideration paid by CCAP.

The final allocation of the purchase price will be determined after the Mergers are completed and after completion of a final analysis to determine (i) the fair value of total consideration to be paid in conjunction with the mergers; and (ii) the fair values of FCRD’s acquired assets and assumed liabilities as of the acquisition date. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma adjustments presented in this document.

 

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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS

Scope of Discussion

The following is a general discussion of material U.S. federal income tax consequences of the Mergers to holders of FCRD Common Stock that exchange their shares of FCRD Common Stock for the Merger Consideration and of the payment of the Tax Dividend (as defined below) to holders of FCRD Common Stock. This discussion does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed.

This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in each case in effect as of the date of this joint proxy statement/prospectus. These authorities may change or be subject to differing interpretations, and any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of FCRD Common Stock after the Mergers. Neither CCAP nor FCRD have sought any rulings from the IRS or an opinion from counsel regarding the matters discussed below except the reorganization opinion discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Mergers or any related transactions.

This discussion is limited to FCRD Stockholders that hold FCRD Common Stock, and will hold any CCAP Common Stock received pursuant to the Mergers, as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a stockholder’s particular circumstances. In addition, it does not address consequences relevant to stockholders subject to special rules, including, without limitation:

 

   

U.S. expatriates and former citizens or long-term residents of the United States;

 

   

persons subject to the alternative minimum tax;

 

   

persons holding FCRD Common Stock or CCAP Common Stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

 

   

persons that hold or have held (directly, indirectly or constructively) more than 5% of the outstanding FCRD Common Stock or CCAP Common Stock;

 

   

banks, insurance companies, and other financial institutions;

 

   

brokers, dealers or traders in securities;

 

   

U.S. stockholders (as defined below) whose “functional currency” is not the U.S. dollar;

 

   

“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

   

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

 

   

tax-exempt organizations or governmental organizations;

 

   

persons subject to the three-year holding period rule in Section 1061 of the Code;

 

   

persons deemed to sell FCRD Common Stock or CCAP Common Stock under the constructive sale provisions of the Code;

 

   

persons who hold or receive FCRD Common Stock or CCAP Common Stock pursuant to the exercise of any employee stock option or otherwise as compensation; and

 

   

tax-qualified retirement plans.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds FCRD Common Stock or CCAP Common Stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding FCRD Common Stock or CCAP Common Stock and the partners in such partnerships are urged to consult their tax advisors regarding the U.S. federal income tax consequences to them.

For purposes of this discussion, a “U.S. stockholder” is any beneficial owner of FCRD Common Stock or CCAP Common Stock that is, for U.S. federal income tax purposes:

 

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an individual who is a citizen or resident of the United States;

 

   

a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

   

a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

A “non-U.S. stockholder” is any beneficial owner of FCRD Common Stock or CCAP Common Stock that is neither a U.S. stockholder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE MERGERS, INCLUDING AN INVESTMENT IN CCAP COMMON STOCK, ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Qualification of the Mergers as a Reorganization under Section 368(a) of the Code

Subject to the discussion below, the Mergers, taken together, may qualify as a reorganization within the meaning of Section 368(a) of the Code. However, the Mergers will not qualify as a reorganization if the fair market value of the CCAP Common Stock received by FCRD Stockholders in the Mergers does not equal or exceed 40% of the aggregate consideration. As noted above under “Description of the Merger Agreement – Merger Consideration,” upon completion of the Mergers, subject to the terms and conditions of the Merger Agreement, each FCRD Stockholder will receive, in exchange for each share of FCRD Common Stock (excluding Cancelled Shares), its portion of the Aggregate Merger Consideration consisting of (a) the Aggregate Share Consideration, up to the Share Issuance Cap, (b) the Parent Cash Consideration and (c) the CCAP Advisor Cash Consideration. The amount of CCAP Common Stock and cash to be transferred in the Mergers is subject to adjustments.

The obligation of FCRD to complete the Mergers is conditioned on the receipt of an opinion from Simpson Thacher & Bartlett LLP, counsel to FCRD (or, if Simpson Thacher & Bartlett LLP is unable or unwilling to render such an opinion, the written opinion of Kirkland & Ellis LLP or another nationally recognized counsel as may be reasonably acceptable to FCRD), generally to the effect that, for U.S. federal income tax purposes, the Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, with respect to FCRD and CCAP. Consequently, no assurance can be given that the IRS will not assert, or that a court would not sustain, a position contrary to any of those set forth below. Accordingly, each FCRD shareholder is urged to consult with its tax advisor with respect to the particular tax consequence of the Mergers to such holder.

The tax opinion described above will be based on then-existing law, will be subject to certain assumptions, qualifications and exclusions and will be based in part on the truth and accuracy of certain representations as to factual matters from FCRD and CCAP, as well as certain covenants by those parties.

Certain Tax Consequences of the Mergers

Tax Consequences if the Mergers Qualify as a Reorganization—U.S. Stockholders

If the Mergers qualify as a reorganization, then generally, and subject to the discussion herein, for U.S. federal income tax purposes:

 

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Each U.S. stockholder will recognize gain, but not loss, in the Mergers, equal to the lesser of (i) the amount of cash received (other than cash received in lieu of a fractional share of CCAP Common Stock) and (ii) the excess, if any, of (x) the sum of the amount of cash received (other than cash received in lieu of a fractional share of CCAP Common Stock) and the fair market value of the CCAP Common Stock received in the Mergers (determined at the effective time of the Mergers) over (y) the U.S. stockholder’s tax basis in the shares of CCAP Common Stock surrendered in the Mergers. Such U.S. stockholder will also recognize gain or loss attributable to any cash received in lieu of a fractional share of CCAP Common Stock in an amount equal to the difference between the amount of cash received and the portion of the basis of the CCAP Common Stock received that is deemed allocable to the fractional share. The Tax Dividend should not be treated for U.S. federal income tax purposes as part of the consideration paid for shares of FCRD Common Stock in the Mergers but instead should be treated for U.S. federal income tax purposes as a distribution with respect to the FCRD Common Stock. See the discussion below under the heading “—FCRD’s Pre-Merger Income and Gains and the Tax Dividend”;

 

   

A U.S. stockholder’s aggregate tax basis in the shares of CCAP Common Stock received in the Mergers (including any fractional share of CCAP Common Stock for which cash is received) will be the same as his, her or its aggregate tax basis in the FCRD Common Stock surrendered in the Mergers, increased by the amount of gain recognized (excluding any gain attributable to the receipt of cash in lieu of a fractional share of CCAP Common Stock) and decreased by the amount of cash received (other than cash received in lieu of a fractional share of CCAP Common Stock); and

 

   

The holding period of the shares of CCAP Common Stock received in the Mergers (including any fractional share of CCAP Common Stock for which cash is received) by a U.S. stockholder will include the holding period of the shares of FCRD Common Stock that he, she or it surrendered.

The tax treatment of the receipt of the CCAP Advisor Cash Consideration is unclear because there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror. If a U.S. stockholder’s share of the CCAP Advisor Cash Consideration is treated as additional merger consideration received in exchange for FCRD Common Stock, such payment would be treated as part of the total consideration received in exchange for the FCRD Common Stock and treated in the manner described above with respect to other cash consideration provided in the Mergers or simply as cash received in a taxable sale or exchange of shares. It is possible, however, that a U.S. stockholder’s share of the CCAP Advisor Cash Consideration may be treated as ordinary income, and not as received in exchange for such holder’s FCRD Common Stock. Although the matter is not free from doubt, CCAP, CCAP Advisor and the Exchange Agent intend to take the position that a U.S. stockholder’s share of the CCAP Advisor Cash Consideration received by such holder is treated as additional merger consideration, and, assuming such position is respected, any gain recognized by a U.S. stockholder on the receipt of its share of the CCAP Advisor Cash Consideration should, subject to the discussion below regarding dividend treatment, be capital gain. No assurances can be given, however, that the IRS will not assert, or that a court would not sustain, a contrary position.

Subject to the discussion below under “—Potential Treatment of Cash as a Dividend,” any gain recognized in the Mergers generally will be capital gain and will be long-term capital gain if the U.S. stockholder’s holding period for the shares of FCRD Common Stock surrendered is more than one year at the effective time of the Mergers. Long-term capital gain of non-corporate U.S. stockholders is generally taxed at preferential rates. Each U.S. stockholder is urged to consult his, her or its tax advisor about the application of these rules. The amount of gain (or non-recognized loss) must be computed separately for each block of FCRD Common Stock if those blocks were purchased at different prices or at different times, and a loss realized on one block of stock may not be used to offset a gain realized on another block of stock. If a U.S. stockholder acquired different blocks of shares of FCRD Common Stock at different prices or at different times, the U.S. stockholder is urged to consult his, her or its tax advisor about the calculation of gain (or non-recognized loss) for different blocks of FCRD Common Stock surrendered in the Mergers and the identification of the tax basis and holding periods of the particular shares of CCAP Common Stock received in the Mergers.

Potential Treatment of Cash as a Dividend

It is possible that all or part of the gain that a U.S. stockholder recognizes in the Mergers (other than any gain attributable to the receipt of cash in lieu of a fractional share of CCAP Common Stock) could be treated as dividend income rather than capital gain if (1) the U.S. stockholder is a significant stockholder of CCAP or (2) the U.S. stockholder’s percentage ownership, taking into account constructive ownership rules, in CCAP after the Mergers is

 

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not meaningfully reduced from what its percentage ownership would have been if it had received solely shares of CCAP Common Stock rather than a combination of cash and shares in the Mergers. This could happen, for example, because of ownership of additional shares of CCAP Common Stock by such holder, ownership of CCAP Common Stock by a person related to such holder or a share repurchase by CCAP from other CCAP stockholders. The IRS has indicated in rulings that any reduction in the interest of a stockholder that owns a small number of shares in a publicly and widely held corporation and that exercises no control over corporate affairs would result in capital gain as opposed to dividend treatment. In addition, since FCRD and CCAP have each been operating their investment activities in a manner that is intended to qualify them each as RICs under the Code, including satisfying the applicable requirements related to distributions, it is unlikely that, even in the event that a U.S. stockholder’s ownership, actual and/or constructive, in CCAP was not sufficiently reduced under the foregoing rules, any gain would be treated as dividend income because RICs generally distribute all or substantially all of their income. U.S. stockholders are urged to consult their tax advisors as to the potential tax consequences of the Mergers to them.

Cash Received In Lieu of a Fractional Share of CCAP Common Stock

A holder of FCRD Common Stock who receives cash in lieu of a fractional share of CCAP Common Stock will generally be treated as having received the fractional share pursuant to the Mergers and then as having sold that fractional share of CCAP Common Stock for cash. As a result, a holder of FCRD Common Stock will generally recognize gain or loss equal to the difference between the amount of cash received and the basis in his or her fractional share interest as set forth above. Except as described above, this gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the Mergers, the holding period for such shares is greater than one year. The deductibility of capital losses is subject to limitations.

Tax Consequences if the Mergers Do Not Qualify as a Reorganization

If the Mergers do not qualify as a reorganization, U.S. stockholders will be treated as having sold their FCRD Common Stock in a taxable sale and will generally recognize gain or loss equal to the difference between the fair market value of the CCAP Common Stock and cash received (including such holder’s share of the Parent Cash Consideration and possibly, as discussed above, the CCAP Advisor Cash Consideration) and the basis in his or her FCRD Common Stock. This gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the Mergers, the holding period for such shares of FCRD Common Stock is greater than one year. The deductibility of capital losses is subject to limitations. The aggregate tax basis of an FCRD Stockholder in the CCAP Common Stock received in the Mergers will equal its fair market value at the Effective Time, and the holding period for the CCAP Common Stock will begin the day after the Effective Time.

Medicare Tax on Certain Investment Income

Certain non-corporate U.S. stockholders whose income exceeds certain thresholds may also be subject to a 3.8% tax on their “net investment income” (or, in the case of an estate or trust, their undistributed “net investment income”) up to the amount of such excess. Gain recognized in the Mergers will generally be includable in a U.S. stockholder’s net investment income for purposes of this tax. Non-corporate U.S. stockholders are urged to consult their tax advisors regarding the possible effect of this tax.

Information Reporting and Backup Withholding

U.S. stockholders may be subject to information reporting and backup withholding on any cash payments they receive in the Mergers, including cash in lieu of fractional shares of CCAP Common Stock. Payments will not be subject to backup withholding if the U.S. stockholder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides CCAP, the Exchange Agent or other applicable withholding agent, as appropriate, with a properly completed IRS Form W-9 (or its successor form) certifying that such U.S. stockholder is a U.S. person, the taxpayer identification number provided is correct and such U.S. stockholder is not subject to backup withholding. The taxpayer identification number of an individual is his or her social security number. Any amounts withheld under the backup withholding rules are not an additional tax and will generally be allowed as a refund or a credit against a U.S. stockholder’s U.S. federal income tax liability, provided that the U.S. stockholder timely furnishes the required information to the IRS.

 

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Reporting Requirements

A U.S. stockholder who receives CCAP Common Stock pursuant to the Mergers will generally be required to retain records pertaining to the Mergers. A U.S. stockholder who is a “significant holder” that receives CCAP Common Stock pursuant to the Mergers will generally be required to file a statement with the holder’s U.S. federal income tax return setting forth certain information, including such holder’s basis in and the fair market value of such holder’s FCRD Common Stock surrendered in the Mergers. U.S. stockholders are urged to consult their tax advisors regarding the application of these reporting requirements.

Non-U.S. Stockholders

Subject to the discussion herein, for U.S. federal income tax purposes, any gain recognized by a non-U.S. stockholder upon the exchange of FCRD Common Stock for the Merger Consideration, including cash instead of a fractional share of CCAP Common Stock, pursuant to the Mergers (which gain will generally be determined in the manner described above with respect to U.S. stockholders) generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a U.S. trade or business of such non-U.S. stockholder (and, if required by an applicable income tax treaty, the non-U.S. stockholder maintains a permanent establishment in the United States to which such gain is attributable), in which case the non-U.S. stockholder generally will be subject to tax on such gain in the same manner as a U.S. stockholder and, if the non-U.S. stockholder is a foreign corporation, such corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty); or

 

   

the non-U.S. stockholder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the Mergers and certain other requirements are met, in which case the non-U.S. stockholder generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on the gain, which may be offset by U.S. source capital losses of the non-U.S. stockholder, if any, provided the non-U.S. stockholder has timely filed U.S. federal income tax returns with respect to such losses.

It is possible that all or part of the gain that a non-U.S. stockholder recognizes in the Mergers (other than any gain attributable to the receipt of cash in lieu of a fractional share of CCAP Common Stock) could be treated as dividend income rather than capital gain. See “—Potential Treatment of Cash as a Dividend” above. If any gain that a non-U.S. stockholder recognizes in the Mergers is treated as a dividend, then such gain may be subject to 30% withholding unless (i) the non-U.S. stockholder is eligible for a reduced tax treaty rate with respect to dividend income or (ii) the gain is effectively connected with a U.S. trade or business of such non-U.S. stockholder (and, if required by an applicable income tax treaty, the non-U.S. stockholder maintains a permanent establishment in the United States to which such gain is attributable), in which case no such withholding will be required and the non-U.S. stockholder generally will be subject to tax on such gain in the same manner as a U.S. stockholder (and, if the non-U.S. stockholder is a foreign corporation, the branch profits tax described above may also apply). In general, a non-U.S. stockholder must furnish an IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI (as applicable) in order to prove its eligibility for any of the foregoing exemptions or reduced rates.

As discussed above under the heading “—U.S. Stockholders,” the tax treatment of the receipt of the CCAP Advisor Cash Consideration is not entirely clear. Given this uncertainty, except as provided below with respect to effectively connected income, CCAP Advisor or the Exchange Agent, or any other applicable withholding agent, may withhold U.S. income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty, provided the non-U.S. stockholder furnishes the applicable forms or documents certifying qualification for the lower treaty rate) from the portion of the CCAP Advisor Cash Consideration payable to a non-U.S. stockholder. A non-U.S. stockholder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. stockholders are urged to consult their tax advisors regarding the U.S. federal income tax consequences of receiving their shares of the CCAP Advisor Cash Consideration.

 

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If a non-U.S. stockholder’s share of the CCAP Advisor Cash Consideration that is received is effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. stockholder maintains a permanent establishment in the United States to which such amount is attributable), the non-U.S. stockholder will be exempt from the U.S. federal withholding tax described immediately above. To claim the exemption, the non-U.S. stockholder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that its share of the CCAP Advisor Cash Consideration is effectively connected with the non-U.S. stockholder’s conduct of a trade or business within the United States. Any such effectively connected income will be subject to U.S. federal income tax on a net income basis at the regular U.S. rates. A non-U.S. stockholder that is a corporation may also be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected income, as adjusted for certain items. Non-U.S. stockholders are urged to consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

A non-U.S. stockholder may be subject to information reporting and, in certain circumstances, backup withholding with respect to any cash payments received by such holder pursuant to the Mergers, including cash in lieu of fractional shares of CCAP Common Stock. Payments will not be subject to backup withholding if (i) the non-U.S. stockholder certifies under penalties of perjury that it is not a United States person as defined under the Code (and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or (ii) such holder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. stockholder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Limitations on Utilization of Loss Carryforwards and Unrealized Losses

In general, if FCRD Stockholders before the Mergers hold less than 50% of the outstanding shares of CCAP immediately following the Mergers, it is expected that limitations under the Code will apply to any capital loss carryforwards of FCRD and, if FCRD has a “net unrealized built-in loss” (as defined under Section 382 of the Code) at the time of the Mergers, any unrealized losses of FCRD.

In this regard, the Mergers are expected to result in potential limitations (i) on the ability of CCAP to use FCRD’s capital loss carryforwards, if any, and, if FCRD has a “net unrealized built-in loss” at the time of the Mergers, to recognize any capital losses on the disposition of assets acquired from FCRD to the extent the losses are realized within five years following the Mergers and are attributable to unrealized capital losses inherent in the tax basis of such assets at the time of the Mergers, and (ii) on the ability of FCRD’s taxable subsidiaries to use their net operating loss carryforwards. These potential limitations generally would be imposed on an annual basis. Losses in excess of the limitation may be carried forward indefinitely for capital loss carryforwards, disallowed capital losses and post-2017 net operating loss carryforwards while pre-2018 net operating loss carryforwards are subject to a 20-year expiration from the year incurred. The limitations generally would equal the product of the fair market value of FCRD’s (or FCRD’s taxable subsidiaries, as the case may be) equity immediately prior to the Mergers and the “long-term tax-exempt rate,” as published monthly by the IRS, in effect at such time. No assurance can be given as to what long-term tax-exempt rate will be in effect at the time of the Mergers.

If FCRD has a “net unrealized built-in gain” (as defined under Section 382 of the Code) at the time of the Mergers, CCAP will be prohibited from using (i) its own capital loss carryforwards, if any, and (ii) if CCAP has a “net unrealized built-in loss” at the time of the Mergers (as defined under Section 382 of the Code), its own built-in losses (once realized), against the unrealized gains in FCRD’s portfolio at the time of the Mergers, if any, to the extent such gains are realized within five years following the Mergers. The ability of CCAP to absorb its losses in the future depends upon a variety of factors that cannot be known in advance. Even if CCAP is able to utilize its capital loss carryforwards or unrealized losses, the tax benefit resulting from those losses will be shared by both CCAP Stockholders and FCRD Stockholders following the Mergers. Therefore, a CCAP Stockholder may pay more taxes, or pay taxes sooner, than such stockholder otherwise would have paid if the Mergers did not occur.

 

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If CCAP has a “net unrealized built-in gain” at the time of the Mergers, CCAP will also be prohibited from using (i) FCRD’s capital loss carryforwards, if any, and (ii) if FCRD has a “net unrealized built-in loss” at the time of the Mergers, FCRD’s unrealized losses (once realized), against the unrealized gains in CCAP’s portfolio at the time of the Mergers, if any, to the extent such gains are realized within five years following the Mergers. The ability of CCAP to use FCRD’s losses (including unrealized losses) in the future depends upon a variety of factors that cannot be known in advance. Even if CCAP is able to utilize capital loss carryforwards or unrealized losses of FCRD, the tax benefit resulting from those losses will be shared by both CCAP Stockholders and FCRD Stockholders following the Mergers. Therefore, a FCRD Stockholder may pay more taxes, or pay taxes sooner, than such stockholder otherwise would have paid if the Mergers did not occur.

Further, in addition to the other limitations on the use of losses, under Section 381 of the Code, for the tax year of the Mergers, only that percentage of CCAP’s capital gain net income for such tax year (excluding capital loss carryforwards), if any, equal to the percentage of its tax year that remains following the Mergers can be reduced by FCRD’s capital loss carryforwards (as otherwise limited under the Code, as described above).

FCRD’s Pre-Merger Income and Gains and the Tax Dividend

FCRD’s taxable year will end on the day the Mergers become effective. Under applicable U.S. tax rules, FCRD will be required to declare to its stockholders of record one or more distributions of all of its previously undistributed net investment income and net realized capital gain, in order to maintain FCRD’s treatment as a RIC with respect to its taxable year ending on the date of the Mergers and to avoid being subject to any corporate-level U.S. federal income tax on its taxable income for such taxable year (the “Tax Dividend”). It is expected that the Tax Dividend will equal or exceed all of FCRD’s previously undistributed net investment income and net realized capital gains and that as a result FCRD will not be subject to corporate-level U.S. federal income tax with respect to its final taxable year ending on the date on which the Mergers are effective.

The Tax Dividend should be treated as a distribution with respect to the FCRD Common Stock. Accordingly, if you are a U.S. stockholder, the Tax Dividend generally will (subject to the last sentence in this paragraph) be taxable to you as ordinary income or capital gains depending on the type and amount of FCRD’s income to which the Tax Dividend is attributable. Distributions of FCRD’s investment company taxable income (which is, generally, FCRD’s net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to the extent of FCRD’s current or accumulated earnings and profits. To the extent any portion of the Tax Dividend is attributable to dividends from U.S. corporations and certain qualified foreign corporations, that portion may be eligible for taxation at a preferential rate if you are taxed at individual rates. In this regard, it is anticipated that the Tax Dividend will generally not be attributable to dividends and, therefore, generally will not qualify for the preferential rate. Distributions of FCRD’s net capital gains (which are generally FCRD’s realized net long-term capital gains in excess of realized net short-term capital losses) that are properly reported by FCRD as “capital gain dividends” will be taxable to you as long-term capital gains regardless of the length of time that you have owned your FCRD Common Stock. Distributions in excess of FCRD’s current and accumulated earnings and profits first will reduce your adjusted tax basis in your FCRD Common Stock and, after the adjusted basis is reduced to zero, will constitute capital gains to you.

If you are a non-U.S. stockholder, the Tax Dividend generally will be subject to withholding of U.S. federal tax at a 30% rate (or lower rate if you are eligible for a reduced rate under an applicable income tax treaty) to the extent attributable to a distribution of FCRD’s “investment company taxable income” out of current or accumulated earnings and profits, unless the distributions are properly designated as (1) paid by FCRD in respect of FCRD’s “qualified net interest income” (generally, FCRD’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which you or FCRD is at least a 10% stockholder, reduced by expenses that are allocable to such income) or (2) paid by FCRD in connection with FCRD’s “qualified short-term gain” (generally, the excess of FCRD’s net short-term capital gains for the taxable year over FCRD’s net long-term capital losses for such taxable year). If any portion of the Tax Dividend is attributable to FCRD’s net capital gains or is in excess of FCRD’s current and accumulated earnings and profits, that portion of the Tax Dividend generally will not be subject to U.S. federal income or withholding tax. However, if the Tax Dividend is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, you maintain a permanent establishment in the United States to which the Tax Dividend is attributable), you will not be subject to U.S. federal withholding tax provided you satisfy any applicable

 

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certification and disclosure requirements, but you generally will be subject to tax on the Tax Dividend in the same manner as a U.S. stockholder, as described in the preceding paragraph. In addition, a non-U.S. stockholder that is a corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on any such effectively connected income, as adjusted for certain items. If you are an individual that has been present in the United States for 183 days or more during the taxable year, and certain other conditions are satisfied, any portion of the Tax Dividend that is attributable to FCRD’s net capital gains generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which portion may be offset by U.S. source capital losses, if any, provided you have timely filed U.S. federal income tax returns with respect to such losses.

Moreover, if CCAP has net investment income or net realized capital gain, but has not distributed such income or gain prior to the Mergers and you acquire shares of CCAP Common Stock in the Mergers, a portion of your subsequent distributions from CCAP may, in effect, be a taxable return of part of your investment. Similarly, if you acquire CCAP Common Stock in the Mergers when CCAP holds appreciated securities, you may receive a taxable return of part of your investment if and when CCAP sells the appreciated securities and distributes the realized gain.

Additional Withholding Tax on Payments Made to Foreign Accounts

Pursuant to Sections 1471 to 1474 of the Code and the U.S. Treasury Regulations thereunder, the relevant withholding agent generally will be required to withhold 30% of any dividends on FCRD Common Stock, certain other income from U.S. sources and (subject to proposed U.S. Treasury Regulations as discussed below) the gross proceeds from a sale of FCRD Common Stock, which may include a share of the CCAP Advisor Cash Consideration and the Tax Dividend, paid to (i) a foreign financial institution (whether such financial institution is the beneficial owner or an intermediary) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity (whether such entity is the beneficial owner or acting as an intermediary) unless such entity certifies that it does not have any substantial U.S. owners or provides the name, address and taxpayer identification number of each substantial U.S. owner and such entity meets certain other specified requirements. If payment of this withholding tax is made, stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such dividends or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. Certain jurisdictions have entered into agreements with the United States that may supplement or modify these rules.

Currently effective, proposed U.S. Treasury Regulations have been issued that, when finalized, will provide for the repeal of the 30% withholding tax that would have potentially applied to all payments of gross proceeds from the sale, exchange or disposition occurring on or after January 1, 2019 of stock, bonds, or other property that could give rise to dividends or interest from sources within the United States (such as FCRD Common Stock). In the preamble to the proposed U.S. Treasury Regulations, the government provided that taxpayers may rely upon this repeal until the issuance of final U.S. Treasury Regulations.

FCRD Stockholders are urged to consult their tax advisors regarding the potential application of withholding under this legislation and guidance to the CCAP Advisor Cash Consideration and the Tax Dividend. Neither FCRD nor CCAP will pay any additional amounts in respect of any amounts withheld.

U.S. Federal Income Taxation of an Investment in CCAP Common Stock

Election to be Taxed as a RIC

As a BDC, CCAP has elected to be treated, and intends to operate in a manner so as to continuously qualify annually as, a RIC under the Code. As a RIC, CCAP generally will not pay corporate-level income taxes on its net investment income and net capital gains CCAP distributes to its stockholders as dividends on a timely basis. Instead, dividends that CCAP distributes (or is deemed to timely distribute) generally will be taxable to stockholders, and any net operating losses, foreign tax credits and most other tax attributes generally will not pass through to stockholders. CCAP will be subject to U.S. federal corporate-level income tax on any undistributed income and/or gains. To qualify as a RIC, CCAP must, among other things, meet certain source of income and asset diversification requirements (as described below). In addition, CCAP must distribute to its stockholders, for each taxable year, generally an amount equal to at least 90% of CCAP’s “investment company taxable income,” as defined by the Code but determined without regard to the deduction for dividends paid (the “Annual Distribution Requirement”).

 

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Taxation as a RIC

 

If CCAP:

 

   

qualifies as a RIC; and

 

   

satisfies the Annual Distribution Requirement;

then CCAP will not be subject to U.S. federal income tax on the portion of its investment company taxable income and net capital gain (generally, net long-term capital gain in excess of net short-term capital loss) CCAP distributes (or is deemed to distribute) to stockholders. CCAP will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to CCAP’s stockholders.

CCAP will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless CCAP distributes in a timely manner an amount at least equal to the sum of (1) 98% of CCAP’s ordinary income for each calendar year, (2) 98.2% of CCAP’s capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (to the extent that U.S. federal income tax was not imposed on such amounts) less certain over-distributions in the prior year (collectively, the “Excise Tax Requirement”). CCAP has paid in the past, and can be expected to pay in the future, such excise tax on a portion of its income.

Moreover, CCAP’s ability to dispose of assets to meet its distribution requirements may be limited by (1) the illiquid nature of CCAP’s portfolio and (2) other requirements relating to CCAP’s status as a RIC, including the Diversification Tests (as defined below). If CCAP disposes of assets to meet the Annual Distribution Requirement, the Diversification Tests, or the Excise Tax Requirement, CCAP may make such dispositions at times that, from an investment standpoint, are not advantageous.

To qualify as a RIC for U.S. federal income tax purposes, CCAP generally must, among other things:

 

   

qualify to be treated as a BDC at all times during each taxable year;

 

   

derive in each taxable year at least 90% of its gross income from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities or foreign currencies or other income derived with respect to its business of investing in such stock, securities or foreign currencies, or (b) net income derived from an interest in a “qualified publicly traded partnership,” or “QPTP” (collectively, the “90% Income Test”); and

 

   

diversify its holdings so that at the end of each quarter of the taxable year:

 

   

at least 50% of the value of its assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs and other securities that, with respect to any issuer, do not represent more than 5% of the value of its assets or more than 10% of the outstanding voting securities of that issuer; and

 

   

no more than 25% of the value of its assets is invested in the securities, other than U.S. Government securities or securities of other RICs, of (i) one issuer, (ii) two or more issuers that are controlled, as determined under applicable tax rules, by CCAP and that are engaged in the same or similar or related trades or businesses or (iii) securities of one or more QPTPs (collectively, the “Diversification Tests”).

CCAP may be required to recognize taxable income for U.S. federal income tax purposes in circumstances in which it does not receive a corresponding payment in cash, such as income from hedging or foreign currency transactions. For example, if CCAP holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with “payment-in-kind” or “PIK” interest or, in certain cases, that have increasing interest rates or that are issued with warrants), CCAP must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by it in the same taxable year. Because any original issue discount or other amounts accrued will be included in CCAP’s investment company taxable income for the year of accrual, CCAP may be required to make a distribution to its stockholders in order to satisfy the Annual Distribution Requirement and/or the Excise Tax Requirement, even though CCAP will not have received any corresponding cash amount. To enable CCAP to make distributions to stockholders that will be sufficient to satisfy the Annual Distribution Requirement and the Excise Tax Requirement CCAP may need to liquidate or sell some of its assets at times or at prices that are not advantageous, raise additional equity or debt capital, take out loans, forego new investment opportunities or otherwise take actions that are disadvantageous to its business (or be unable to take actions that are advantageous to its business). If CCAP borrows money, it may be prevented by loan covenants from declaring and paying dividends in certain circumstances. Even if CCAP is authorized to borrow funds and to sell assets in order to satisfy

 

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distribution requirements, under the Investment Company Act, CCAP generally is not permitted to make distributions to its stockholders while CCAP’s debt obligations and senior securities are outstanding unless certain “asset coverage” tests or other financial covenants are met. Limits on CCAP’s payment of dividends may prevent CCAP from meeting the Annual Distribution Requirement, and may, therefore, jeopardize CCAP’s qualification for taxation as a RIC, or subject CCAP to the 4% excise tax on undistributed income.

Furthermore, a portfolio company in which CCAP invests may face financial difficulty that requires CCAP to work-out, modify or otherwise restructure CCAP’s investment in the portfolio company. Any such restructuring could, depending on the specific terms of the restructuring, cause CCAP to recognize taxable income without a corresponding receipt of cash, which could affect its ability to satisfy the Annual Distribution Requirement or the Excise Tax Requirement, or result in unusable capital losses and future non-cash income. Any such restructuring could also result in CCAP receiving assets that give rise to non-qualifying income for purposes of the 90% Income Test.

In addition, certain of CCAP’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (a) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (b) convert long-term capital gain (currently taxed at lower rates for non-corporate taxpayers) into higher taxed short-term capital gain or ordinary income, (c) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (d) adversely affect the time when a purchase or sale of stock or securities is deemed to occur, (e) adversely alter the characterization of certain complex financial transactions, (f) treat dividends that would otherwise constitute qualified dividend income as non-qualified dividend income, (g) cause CCAP to recognize income or gain without receipt of a corresponding cash payment, and (h) produce income that will not be qualifying income for purposes of the 90% Income Test. CCAP will monitor its transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurance can be given that CCAP will be eligible for any such tax elections or that any elections CCAP makes will fully mitigate the effects of these provisions.

CCAP may acquire debt instruments with “market discount.” In general, CCAP will be treated as having acquired a debt instrument with market discount if it is acquired in the secondary market and its stated redemption price at maturity (or, in the case of a debt instrument issued with original issue discount, its revised issue price) exceeds CCAP’s initial tax basis in the debt instrument by more than a statutory de minimis amount. If CCAP acquires a debt instrument with market discount, CCAP will be required to treat any gain recognized on the disposition of such debt instrument as ordinary income (instead of capital gain) to the extent of the accrued market discount, unless CCAP elects or has elected to include market discount in income as it accrues.

Gain or loss recognized by CCAP from warrants acquired by CCAP as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long CCAP held a particular warrant.

CCAP’s investment in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, CCAP’s yield on those securities would be decreased. Stockholders will generally not be entitled to claim a U.S. foreign tax credit or deduction with respect to non-U.S. taxes paid by CCAP.

If CCAP purchases shares in a “passive foreign investment company” (a “PFIC”), CCAP may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares, even if such income is distributed as a taxable dividend by CCAP to its stockholders. Additional charges in the nature of interest may be imposed on CCAP in respect of deferred taxes arising from such distributions or gains. If CCAP invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, CCAP will be required to include in income each year a portion of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed to CCAP. Alternatively, CCAP may elect to mark-to-market at the end of each taxable year CCAP’s shares in such PFIC; in this case, CCAP will recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent it does not exceed prior increases included in income. CCAP’s ability to make a QEF election may depend on factors beyond its control, and under either election, CCAP may be required to recognize in any year income in excess of CCAP’s distributions from PFICs and CCAP’s proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether CCAP satisfies the Excise Tax Requirement.

CCAP’s functional currency is the U.S. dollar for U.S. federal income tax purposes. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time CCAP accrues income, expenses or other liabilities denominated in a foreign currency and the time CCAP actually collects such income or pays such expenses or liabilities may be treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt denominated in a foreign currency and other financial transactions denominated in foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, may also be treated as ordinary income or loss.

 

 

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If CCAP borrows money, it may be prevented by loan covenants from declaring and paying dividends in certain circumstances. Even if CCAP is authorized to borrow funds and to sell assets in order to satisfy distribution requirements, under the Investment Company Act, CCAP generally is not permitted to make distributions to its stockholders while CCAP’s debt obligations and senior securities are outstanding unless certain “asset coverage” tests or other financial covenants are met. Limits on CCAP’s payment of dividends may prevent CCAP from meeting the Annual Distribution Requirement, and may, therefore, jeopardize CCAP’s qualification for taxation as a RIC, or subject CCAP to the 4% excise tax on undistributed income.

Some of the income and fees that CCAP recognizes, such as management fees, may not be qualifying income for purposes of the 90% Income Test. In order to ensure that such income and fees do not disqualify CCAP as a RIC for a failure to satisfy the 90% Income Test, CCAP may be required to recognize such income or fees through one or more entities treated as U.S. corporations for U.S. federal income tax purposes. While CCAP expects that recognizing such income through such corporations will assist CCAP in satisfying the 90% Income Test, no assurance can be given that this structure will be respected for U.S. federal income tax purposes, which could result in such income not being counted towards satisfying the 90% Income Test. If the amount of such income were too great and CCAP were otherwise unable to mitigate this effect, it could result in CCAP’s disqualification as a RIC. If, as CCAP expects, the structure is respected, such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce the yield on such income and fees.

If CCAP fails to satisfy the 90% Income Test or the Diversification Tests in any taxable year, CCAP may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements. Additionally, relief is provided for certain de minimis failures of the diversification requirements where CCAP corrects the failure within a specified period. If the applicable relief provisions are not available or cannot be met, all of CCAP’s income would be subject to corporate-level income tax as described below. CCAP cannot provide assurance that it would qualify for any such relief should CCAP fail the 90% Income Test or the Diversification Tests.

CCAP is limited in its ability to deduct expenses in excess of its investment company taxable income. If CCAP’s expenses in a given year exceed its investment company taxable income, CCAP will have a net operating loss for that year. However, CCAP is not permitted to carry forward its net operating losses to subsequent years, so these net operating losses generally will not pass through to CCAP stockholders. In addition, expenses can be used only to offset investment company taxable income, and may not be used to offset net capital gain. As a RIC, CCAP may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset its investment company taxable income, but may carry forward those losses, and use them to offset future capital gains, indefinitely.

If CCAP fails to satisfy the Annual Distribution Requirement or otherwise fails to qualify as a RIC in any taxable year, and is not eligible for relief as described above, CCAP will be subject to tax in that year on all of its taxable income, regardless of whether CCAP makes any distributions to its stockholders. In that case, all of CCAP’s income will be subject to corporate-level income tax, reducing the amount available to be distributed to its stockholders. In contrast, assuming CCAP qualifies as a RIC, CCAP’s U.S. federal corporate-level income tax should be substantially reduced or eliminated. See “—Election to Be Taxed as a RIC” above.

Taxation of U.S. Stockholders

Whether an investment in the shares of CCAP Common Stock is appropriate for a U.S. stockholder will depend upon that person’s particular circumstances. An investment in the shares of CCAP Common Stock by a U.S. stockholder may have adverse tax consequences. The following summary generally describes certain U.S. federal income tax consequences of an investment in shares of CCAP Common Stock by taxable U.S. stockholders and not by U.S. stockholders that generally are exempt from U.S. federal income taxation. U.S. stockholders are urged to consult their tax advisors before investing in shares of CCAP Common Stock.

 

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Distributions on CCAP Common Stock

Distributions by CCAP generally are taxable to U.S. stockholders as ordinary income or capital gain. Distributions of CCAP’s investment company taxable income (which is, generally, CCAP’s net ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to U.S. stockholders to the extent of CCAP’s current or accumulated earnings and profits, whether paid in cash or reinvested in additional shares of CCAP Common Stock. However, to the extent such distributions CCAP pays to non-corporate U.S. stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, and certain holding period requirements are met, such distributions generally are taxable to such non-corporate U.S. stockholders at the preferential rates applicable to long-term capital gains (as discussed below). Distributions of CCAP’s net capital gain (which generally is the excess of CCAP’s net long-term capital gain over its net short-term capital loss) properly reported by CCAP as “capital gain dividends” will be taxable to U.S. stockholders as long-term capital gains (which, under current law, are taxed at preferential rates in the case of individuals, trusts or estates). This is true regardless of U.S. stockholders’ holding periods for their common stock and regardless of whether the dividend is paid in cash or reinvested in additional common stock. Distributions in excess of CCAP’s earnings and profits first will reduce a U.S. stockholder’s adjusted tax basis in such stockholder’s common stock and, after the adjusted tax basis is reduced to zero, will constitute capital gain to such U.S. stockholder.

A portion of CCAP’s ordinary income dividends, but not capital gain dividends, paid to corporate U.S. stockholders may, if certain conditions are met, qualify for the dividends-received deduction to the extent that CCAP has received dividends from certain U.S. corporations during the taxable year, but only to the extent such ordinary income dividends are treated as paid out of CCAP’s current or accumulated earnings and profits. CCAP expects only a small portion, if any, of its dividends to qualify for this deduction. Corporate U.S. stockholders are urged to consult their tax advisors in determining the application of these rules in their particular circumstances.

In general, “qualified dividend income” realized by non-corporate U.S. stockholders is taxable at the same rate as net long-term capital gain. Generally, qualified dividend income is dividend income attributable to certain U.S. and foreign corporations, as long as certain holding period requirements are met. As long as certain requirements are met, CCAP’s dividends paid to non-corporate U.S. stockholders attributable to qualified dividend income may be treated by such U.S. stockholders as qualified dividend income, but only to the extent such ordinary income dividends are treated as paid out of CCAP’s current or accumulated earnings and profits. CCAP expects only a small portion, if any, of its dividends to qualify as qualified dividend income.

Distributions will be treated in the manner described above regardless of whether such distributions are paid in cash or invested in additional CCAP Common Stock pursuant to CCAP’s dividend reinvestment plan. U.S. stockholders receiving distributions in the form of additional CCAP Common Stock will be treated as receiving a distribution in the amount of cash that they would have received if they had elected to receive the distribution in cash, unless CCAP issues additional shares of CCAP Common Stock with a fair market value equal to or greater than net asset value, in which case such holders will be treated as receiving a distribution in the amount of the fair market value of the distributed shares. The additional shares of CCAP Common Stock received by a U.S. stockholder pursuant to CCAP’s dividend reinvestment plan will have a new holding period for tax purposes commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account.

Although CCAP currently intends to distribute any of its net capital gain for each taxable year on a timely basis, CCAP may in the future decide to retain some or all of its net capital gain, and may designate the retained amount as a “deemed distribution.” In that case, among other consequences, CCAP will pay tax on the retained amount, each U.S. stockholder will be required to include such stockholder’s share of the deemed distribution in income as if it had been actually distributed to the U.S. stockholder, and the U.S. stockholder will be entitled to claim a credit equal to such stockholder’s allocable share of the tax paid thereon by CCAP. The amount of the deemed distribution net of such tax will be added to the U.S. stockholder’s adjusted tax basis for such stockholder’s CCAP Common Stock.

A U.S. stockholder that is not subject to U.S. federal income tax or otherwise is not required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes CCAP paid. In order to utilize the deemed distribution approach, CCAP must provide a written statement to its stockholders reporting the deemed distribution after the close of the relevant taxable year. CCAP cannot treat any of its investment company taxable income as a “deemed distribution.”

 

 

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For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of dividends paid for that year, CCAP may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If CCAP makes such an election, the U.S. stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by CCAP in October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by CCAP’s U.S. stockholders on December 31 of the year in which the dividend was declared.

CCAP has the ability to declare a large portion of a dividend in shares of CCAP Common Stock. Under current IRS guidance, CCAP may distribute dividends that are payable in cash or common stock at the election of each stockholder, and if the aggregate amount of cash available to be distributed to all stockholders is at least 20% of the aggregate declared distribution and certain other requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, U.S. stockholders will be taxed on the full amount of the dividend (including the fair market value of any portion of the dividend that is received in shares of CCAP Common Stock) on the date the dividend is received in the same manner as a dividend that is paid entirely in cash, which may result in U.S. stockholders having to pay tax on such dividends in excess of the cash that is received.

If investors purchase shares of CCAP Common Stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the investors will be subject to tax on the distribution even though it represents a return of their investment. CCAP has built-up or has the potential to build up large amounts of unrealized gain which, when realized and distributed, could have the effect of a taxable return of capital to stockholders.

Distributions out of CCAP’s current and accumulated earnings and profits will not be eligible for the 20% pass-through deduction under Section 199A of the Code.

Sales or Other Dispositions of CCAP Common Stock

A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder sells or otherwise disposes of such stockholder’s shares of CCAP Common Stock. The amount of gain or loss will be measured by the difference between such stockholder’s adjusted tax basis in the stock sold or otherwise disposed of and the amount of the proceeds received in exchange. Any gain or loss arising from such sale or disposition generally will be treated as long-term capital gain or loss if the stockholder has held such stockholder’s shares for more than one year. Otherwise, such gain or loss will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of CCAP Common Stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares. In addition, all or a portion of any loss recognized upon a disposition of shares of CCAP Common Stock may be disallowed if substantially identical stock or securities are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition.

In general, U.S. stockholders that are individuals, trusts or estates are taxed at preferential rates on their net capital gain (generally, the excess of net long-term capital gain over net short-term capital loss for a taxable year, including long-term capital gain derived from an investment in CCAP Common Stock). Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are subject to U.S. federal income tax on net capital gain at the rate that also applies to ordinary income. Non-corporate U.S. stockholders with net capital losses for a year (i.e., capital loss in excess of capital gain) generally may deduct up to $3,000 of such losses against their ordinary income each year; any net capital losses of a non-corporate U.S. stockholder in excess of $3,000 generally may be carried forward and used in subsequent years as provided in the Code. Corporate U.S. stockholders generally may not deduct any net capital losses for a year, but may carry back such losses for three years or carry forward such losses for five years.

 

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Information Reporting and Backup Withholding

CCAP will send to each of its U.S. stockholders, after the end of each calendar year, a notice providing, on a per share basis, the amounts includible in such U.S. stockholder’s taxable income for such year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each year’s distributions generally will be reported to the IRS. Distributions may also be subject to additional state, local and foreign taxes depending on a U.S. stockholder’s particular situation.

CCAP may be required to withhold U.S. federal income tax (as “backup withholding”) from distributions to any U.S. stockholder (1) who fails to furnish CCAP with a correct taxpayer identification number and a certification that such stockholder is not subject to backup withholding or (2) with respect to whom the IRS notifies CCAP that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect, unless in each case the U.S. stockholder is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact. An individual’s taxpayer identification number is his or her social security number. Backup withholding is not an additional tax. Any amount withheld under the backup withholding rules is allowed as a credit against the U.S. stockholder’s U.S. federal income tax liability and may entitle such stockholder to a refund, provided that proper information is timely provided to the IRS.

Medicare Tax on Net Investment Income

Non-corporate U.S. stockholders generally are subject to a 3.8% Medicare surtax on their “net investment income” (or, in the case of an estate or trust, their undistributed “net investment income”), the calculation of which includes interest income and original issue discount, any taxable gain from the disposition of CCAP Common Stock and any distributions on CCAP Common Stock (including the amount of any deemed distribution) to the extent such distribution is treated as a dividend or as capital gain (as described above under “—Distributions on CCAP Common Stock”). Non-corporate U.S. stockholders are urged to consult their tax advisors on the effect of acquiring, holding and disposing of CCAP Common Stock on the computation of “net investment income” in their individual circumstances.

Reportable Transactions

Under U.S. Treasury Regulations, if a stockholder recognizes a loss with respect to shares of $2 million or more for a non-corporate stockholder or $10 million or more for a corporate stockholder in any single taxable year (or a greater loss over a combination of years), the stockholder must file with the IRS a disclosure statement on Form 8886. Direct stockholders of certain portfolio securities in many cases are excepted from this reporting requirement,

 

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but under current guidance, stockholders of a RIC are not excepted. Future guidance may extend the current exception from this reporting requirement to stockholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have a similar reporting requirement. Stockholders are urged to consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.

Taxation of Non-U.S. Stockholders

Whether an investment in shares of CCAP Common Stock is appropriate for a non-U.S. stockholder will depend upon that person’s particular circumstances. An investment in shares of CCAP Common Stock by a non-U.S. stockholder may have adverse tax consequences and, accordingly, may not be appropriate for a non-U.S. stockholder. Non-U.S. stockholders are urged to consult their tax advisors before investing in CCAP Common Stock.

Distributions on CCAP Common Stock; Sales or Other Dispositions of CCAP Common Stock

Distributions of CCAP’s investment company taxable income to non-U.S. stockholders will generally be subject to U.S. withholding tax of 30% (unless lowered or eliminated by an applicable income tax treaty) to the extent payable from CCAP’s current or accumulated earnings and profits, unless an exception applies.

If a non-U.S. stockholder receives distributions of investment company taxable income and such distributions are effectively connected with a U.S. trade or business of the non-U.S. stockholder (and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained by the non-U.S. stockholder in the United States), such distributions generally will be subject to U.S. federal income tax at the rates applicable to U.S. persons. In that case, payors will not be required to withhold U.S. federal income tax if the non-U.S. stockholder complies with applicable certification and disclosure requirements. Special certification requirements apply to a non-U.S. stockholder that is a foreign trust and such entities are urged to consult their own tax advisors.

Actual or deemed distributions of CCAP’s net capital gain (which generally is the excess of CCAP’s net long-term capital gain over its net short-term capital loss) to a non-U.S. stockholder, and any gains recognized by a non-U.S. stockholder upon the sale or other disposition of CCAP Common Stock, will not be subject to withholding of U.S. federal income tax and generally will not be subject to U.S. federal income tax unless (a) the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the non-U.S. stockholder (and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained by the non-U.S. stockholder in the United States), in which case such distributions or gains generally will be subject to U.S. federal income tax at the rates applicable to U.S. persons or (b) the non-U.S. stockholder is an individual, has been present in the United States for 183 days or more during the taxable year, and certain other conditions are satisfied, in which case the distributions or gains, as the case may be, generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), although the distributions or gains may be offset by U.S. source capital losses, if any, of the non-U.S. stockholder provided such holder has timely filed U.S. federal income tax returns with respect to such losses.

For a corporate non-U.S. stockholder, distributions (both actual and deemed), and gains recognized upon the sale or other disposition of CCAP Common Stock, that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” at a rate of 30% (unless lowered or eliminated by an applicable income tax treaty).

In general, no U.S. source withholding taxes will be imposed on dividends paid by RICs to non-U.S. stockholders to the extent the dividends are properly designated as “interest-related dividends” or “short-term capital gain dividends.” Under this exemption, interest-related dividends and short-term capital gain dividends generally represent distributions of interest or short-term capital gain that would not have been subject to U.S. withholding tax at the source if they had been received directly by a non-U.S. stockholder, and that satisfy certain other requirements. For this purpose, dividends paid by CCAP generally will only qualify as interest-related dividends if they are paid by CCAP in respect of CCAP’s “qualified net interest income” (generally, CCAP’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which the non-U.S. stockholder or CCAP is at least a 10% stockholder, reduced by expenses that are allocable to such income). No assurance can be given that CCAP will distribute any interest-related or short-term capital gain dividends.

 

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If CCAP distributes its net capital gain in the form of deemed rather than actual distributions (which CCAP may do in the future), a non-U.S. stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the non-U.S. stockholder’s allocable share of the tax CCAP pays on the capital gain deemed to have been distributed. In order to obtain the refund, the non-U.S. stockholder must obtain a U.S. taxpayer identification number (if one has not been previously obtained) and file a U.S. federal income tax return even if the non-U.S. stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return.

CCAP has the ability to declare a large portion of a dividend in shares of CCAP Common Stock. Under current IRS guidance, CCAP may distribute dividends that are payable in cash or common stock at the election of each stockholder, and if the aggregate amount of cash available to be distributed to all stockholders is at least 20% of the aggregate declared distribution and certain other requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, non-U.S. stockholders will be taxed on the full amount of the dividend (including the fair market value of any portion of the dividend that is received in shares of CCAP Common Stock) on the date the dividend is received in the same manner as a dividend that is paid entirely in cash (including the application of withholding tax rules described above). In such a circumstance, CCAP may be required to withhold all or substantially all of the cash CCAP would otherwise distribute to a non-U.S. stockholder.

A non-U.S. stockholder may be subject to information reporting and backup withholding of U.S. federal income tax on dividends unless the non-U.S. stockholder provides the applicable withholding agent with an IRS Form W- 8BEN or IRS Form W-8BEN-E (or an acceptable substitute form) or otherwise meets documentary evidence requirements for establishing that it is a non-U.S. stockholder or otherwise establishes an exemption from backup withholding.

The tax consequences to a non-U.S. stockholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein. Non-U.S. stockholders are encouraged to consult their own advisors as to the applicability of an income tax treaty in their individual circumstances.

Withholding and Information Reporting on Foreign Financial Accounts

Pursuant to Sections 1471 to 1474 of the Code and the U.S. Treasury Regulations thereunder, the relevant withholding agent generally will be required to withhold 30% of any dividends on CCAP Common Stock and (subject to proposed U.S. Treasury Regulations as discussed below) 30% of the gross proceeds from a sale of CCAP Common Stock paid to (i) a foreign financial institution (whether such financial institution is the beneficial owner or an intermediary) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (ii) a non-financial foreign entity (whether such entity is the beneficial owner or an intermediary) unless such entity certifies that it does not have any substantial U.S. owners or provides the name, address and taxpayer identification number of each substantial U.S. owner and such entity meets certain other specified requirements. If payment of this withholding tax is made, stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. federal withholding taxes with respect to such dividends or proceeds will be required to seek a credit or refund from the IRS to obtain the benefit of such exemption or reduction. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. Certain jurisdictions have entered into agreements with the United States that may supplement or modify these rules.

Currently effective, proposed U.S. Treasury Regulations have been issued that, when finalized, will provide for the repeal of the 30% withholding tax that would have potentially applied to all payments of gross proceeds from the sale, exchange or disposition occurring on or after January 1, 2019 of stock, bonds, or other property that could give rise to dividends or interest from sources within the United States (such as CCAP Common Stock). In the preamble to the proposed U.S. Treasury Regulations, the government provided that taxpayers may rely upon this repeal until the issuance of final U.S. Treasury Regulations.

U.S. and non-U.S. stockholders are urged to consult with their tax advisors regarding the particular consequences to them of this legislation and guidance. CCAP will not pay any additional amounts in respect of any amounts withheld.

 

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Failure to Qualify as a RIC

If CCAP were unable to qualify for treatment as a RIC, and relief were not available as discussed above, CCAP would be subject to tax on all of its taxable income at regular corporate rates. CCAP would not be able to deduct distributions to stockholders and would not be required to make distributions for tax purposes. Distributions generally would be taxable to CCAP’s stockholders as ordinary dividend income to the extent of CCAP’s current or accumulated earnings and profits. Subject to certain limitations under the Code, corporate U.S. stockholders would be eligible for the dividends-received deduction and non-corporate U.S. stockholders would be able to treat such dividends as “qualified dividend income.” Distributions in excess of CCAP’s current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. If CCAP were to fail to meet the RIC requirements for more than two consecutive years and then sought to requalify as a RIC, CCAP would be subject to tax on any unrealized net built-in gains in the assets held by CCAP at the beginning of the taxable year in which it requalifies as a RIC that are recognized within the subsequent five years, unless CCAP makes a special election to pay corporate-level tax on such built-in gains at the time of its requalification as a RIC.

Possible Legislative or Other Actions Affecting Tax Considerations

Investors should recognize that the present U.S. federal income tax treatment of an investment in shares of CCAP Common Stock may be modified by legislative, judicial or administrative action at any time, and that any such action may affect investments and commitments previously made. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. Revisions in U.S. federal tax laws and interpretations thereof could adversely affect the tax consequences of an investment in CCAP.

 

119


CAPITALIZATION

The following table sets forth (1) CCAP’s and FCRD’s actual capitalization as of June 30, 2022 and (2) CCAP’s pro forma capitalization as of June 30, 2022 giving effect to the Mergers as if they had been completed on such date. You should read this table together with CCAP’s and FCRD’s financial statements and the related notes thereto, each incorporated by reference herein.

The financial data is not intended to provide any indication of what the combined company’s actual financial position or results of operations would have been had the Mergers been completed on the date indicated or to project results of operations for any future date.

 

     As of June 30, 2022  
     Actual
Crescent
Capital
BDC
     Actual
FCRD
     Pro Forma
CCAP
Combined
 
     (unaudited, dollar amounts
in thousands)
 

Cash and cash equivalents

   $ 9,415      $ 10,927      $ 8,589  

Restricted cash and cash equivalents

   $ 9,449      $ —        $ 9,449  

Debt

        

Total Debt (net of deferred financing costs)

   $ 651,262      $ 220,123      $ 888,163  

Net Assets

        

CCAP preferred stock, par value $0.001 per share, 10,000 shares authorized, zero shares issued and outstanding, actual and pro forma

     —          —          —    

CCAP Common Stock, par value $0.001 per share, 200,000,000 shares authorized, 30,887,360 shares issued and outstanding, actual, and 37,061,743 shares issued and outstanding, pro forma; FCRD Common Stock, par value $0.001 per share, 100,000,000 shares authorized, 29,922,028 shares issued and outstanding, actual

     31        30        37  

Paid-in capital in excess of par value

   $ 666,162      $ 417,547      $ 792,607  

Accumulated earnings (loss)

   $ (27,005    $ (258,847    $ (34,235

Total net assets

   $ 639,188      $ 158,730      $ 758,409  

Total capitalization

   $ 1,290,450      $ 378,853      $ 1,646,572  

 

120


PROPOSAL 1: THE MERGER PROPOSAL

FCRD is asking FCRD Stockholders to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Mergers. Subject to the terms and conditions of the Merger Agreement, FCRD Stockholders will have an opportunity, subject to certain limitations, to elect to receive either cash or shares of CCAP Common Stock upon completion of the Mergers in consideration for their shares of FCRD Common Stock, as described in the sections titled “Description of the Merger Agreement—Merger Consideration and Description of the Merger Agreement—Allocation of Merger Consideration and Illustrative Elections and Calculations.

Approval of the Merger Proposal is required for the completion of the Mergers. In the event the Merger Proposal is approved by FCRD Stockholders, but the Merger Agreement is terminated prior to the closing of the Mergers, the Mergers will not be completed.

BASED ON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE, THE FCRD BOARD RECOMMENDS THAT FCRD STOCKHOLDERS VOTE “FOR” THE MERGER PROPOSAL.

FCRD Stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the Merger Proposal. The affirmative vote of the holders of a majority of the outstanding shares of FCRD Common Stock entitled to vote at the Special Meeting is required to approve the Merger Proposal. Abstentions will have the effect of a vote “against” this proposal. In addition, the failure to vote will have the same effect as votes “against” the Merger Proposal. Properly executed and returned proxies will be voted “FOR” the approval of the Merger Proposal unless the relevant FCRD Stockholder designates otherwise.

Appraisal Rights

FCRD Stockholders and “beneficial owners” (as defined in Section 262 of the DGCL) will be entitled to exercise appraisal rights with respect to their shares in the First Merger in accordance with Section 262 of the DGCL if among other requirements, a written demand for appraisal is delivered by such FCRD Stockholder or beneficial owner in advance of the vote on the Merger Proposal at the Special Meeting and such shares are not voted in favor of the Merger Proposal. Voting your shares in favor of the Merger Proposal will cause you to lose any appraisal rights with respect to your shares in the First Merger. For more information, see “Appraisal Rights of FCRD Stockholders and Beneficial Owners” and “Description of the Merger Agreement—Appraisal Rights.”

PROPOSAL 2: THE ADJOURNMENT PROPOSAL

FCRD is asking FCRD Stockholders to approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, in the event that there are insufficient votes at the time of the Special Meeting to approve the Merger Proposal.

BASED ON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE, THE FCRD BOARD RECOMMENDS THAT, IF NECESSARY OR APPROPRIATE, FCRD STOCKHOLDERS VOTE “FOR” THE FCRD ADJOURNMENT PROPOSAL.

FCRD Stockholders may vote “FOR” or “AGAINST,” or they may “ABSTAIN” from voting on, the FCRD Adjournment Proposal. The affirmative vote of the holders of a majority of the shares of FCRD Common Stock present in person or represented by proxy and entitled to vote on the FCRD Adjournment Proposal at the Special Meeting, whether or not a quorum is present, is required to approve the FCRD Adjournment Proposal. Abstentions will have the same effect as a vote “against” approval of the FCRD Adjournment Proposal. The failure of beneficial owners owning shares through a broker, bank, trustee or other nominee to provide voting instructions with respect to such shares will have no effect on the outcome of the FCRD Adjournment Proposal.

 

121


MARKET PRICE INFORMATION

CCAP

CCAP Common Stock is traded on Nasdaq under the symbol “CCAP.” Prior to the listing of CCAP Common Stock on Nasdaq on February 3, 2020, CCAP Common Stock was offered and sold in transactions exempt from registration under the Securities Act pursuant to Section 4(a)(2) of Securities Act and Regulation D, as well as under Regulation S under the Securities Act.

The following table sets forth, for each fiscal quarter since the listing of the CCAP Common Stock on Nasdaq, the range of high and low sales prices of the CCAP Common Stock as reported on Nasdaq, the premium (discount) of sales price to CCAP’s net asset value, or NAV, and the distributions declared by CCAP for each fiscal quarter.

 

            Price Range                    
     Net Asset
Value(1)
     High     Low     High Sales
Price
Premium
(Discount)
to Net
Asset Value(2)
    Low Sales
Price

Premium
(Discount)
to Net
Asset Value(2)
    Cash
Dividend
Per Share(3)
 

Period

             

Year ended December 31, 2020

             

First Quarter

   $ 16.52      $ 17.10     $ 6.21       3.5     (62.4 )%    $ 0.41  

Second Quarter

   $ 18.12      $ 13.25     $ 8.68       (26.9 )%      (52.1 )%    $ 0.41  

Third Quarter

   $ 19.07      $ 13.81     $ 11.65       (27.6 )%      (38.9 )%    $ 0.41  

Fourth Quarter

   $ 19.88      $ 15.25     $ 12.40       (23.3 )%      (37.6 )%    $ 0.41  

Year ended December 31, 2021

             

First Quarter

   $ 20.24      $ 18.17     $ 14.72       (10.2 )%      (27.3 )%    $ 0.41  

Second Quarter

   $ 20.98      $ 19.95     $ 17.05       (4.9 )%      (18.7 )%    $ 0.41  

Third Quarter

   $ 21.16      $ 19.33     $ 18.40       (8.6 )%      (13.0 )%    $ 0.41  

Fourth Quarter

   $ 21.12      $ 20.90     $ 17.60       (1.0 )%      (16.7 )%    $ 0.61 (4) 

Year ended December 31, 2022

             

First Quarter

   $ 21.18      $ 18.47     $ 17.16       (12.7 )%      (18.9 )%    $ 0.41  

Second Quarter

   $ 20.69      $ 18.05     $ 15.50       (12.7 )%      (25.0 )%    $ 0.41  

Third Quarter

   $ *      $ 18.10     $ 15.02       *       *     $ 0.41  

Fourth Quarter (through November [ ], 2022)

   $ *      $ [   $ [     *       *     $ [

 

 

(1)

Net asset value per share is determined as of the last day in the relevant quarter and therefore does not reflect the net asset value per share disclosed to the market on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of the relevant quarter.

 

(2)

Calculated as the respective high or low closing sales price less net asset value, divided by net asset value (in each case, as of the applicable quarter).

 

(3)

Represents the dividend or distribution declared in the relevant quarter.

 

(4)

Consists of a regular quarterly dividend of $0.41 per share and four special dividends of $0.05 per share (totaling $0.20 per share) all of which were declared on November 5, 2021. The first special dividend was paid on December 5, 2021 to stockholders of record as of December 3, 2021. The remaining special dividends are payable on March 15, 2022, June 15, 2022 and September 15, 2022 to stockholders of record as of March 4, 2022, June 3, 2022 and September 2, 2022, respectively.

 

*

Net asset value has not yet been calculated for this period.

The closing price of CCAP Common Stock on November [•], 2022 was $[•], which represented a [premium/discount] of approximately [•]% to the NAV per share reported by CCAP as of June 30, 2022. As of [•], 2022, CCAP had [•] stockholders of record. This does not include the number of stockholders that hold shares through banks or broker-dealers.

FCRD

FCRD Common Stock began trading on May 1, 2010 and is currently traded on Nasdaq under the symbol “FCRD.” The following table sets forth: (i) the NAV per share of FCRD Common Stock as of the applicable period end, (ii) the high and low closing sales prices of FCRD Common Stock as reported on Nasdaq during the applicable period, and (iii) the closing high and low sales prices as a premium (discount) to NAV during the appropriate period.

 

122


            Closing Sales Price      Premium/
(Discount) of
High Sales
Price to
NAV(2)
    Premium/
(Discount) of
Low Sales
Price to
NAV(2)
 

Period

   NAV
per share(1)
     High      Low  

Fiscal Year Ended December 31, 2022

             

(Fourth quarter (through [ ])

   $ *      $ [ ]      $ [ ]        *       *  

Third quarter

   $ *      $ 3.50      $ 2.86        *       *  

Second quarter

   $ 5.30      $ 4.45      $ 3.23        (16 )%      (39 )% 

First quarter

   $ 6.12      $ 4.68      $ 4.28        (24 )%      (30 )% 

Fiscal Year Ended December 31, 2021

             

Fourth quarter

   $ 6.34      $ 4.82      $ 4.38        (24 )%      (31 )% 

Third quarter

   $ 6.50      $ 4.74      $ 4.36        (27 )%      (33 )% 

Second quarter

   $ 6.52      $ 4.77      $ 4.02        (27 )%      (38 )% 

First quarter

   $ 6.37      $ 4.04      $