8-K: Runway Growth Finance Corp. Enters New Advisory Agreement Following Acquisition of Adviser by BC Partners Credit

Runway Growth Finance Corp. has entered into a new investment advisory agreement with Runway Growth Capital LLC following the acquisition of the adviser by RGC Group Acquisition, owned by BCP Special Opportunities Fund III Originations LP, an affiliate of BC Partners Advisors L.P.

Summary

• Runway Growth Finance Corp. entered into a new investment advisory agreement with Runway Growth Capital LLC on January 30, 2025.
• This agreement follows the acquisition of Runway Growth Capital LLC by RGC Group Acquisition, owned by BCP Special Opportunities Fund III Originations LP, an affiliate of BC Partners Advisors L.P.
• The new advisory agreement was approved by the company's stockholders on January 23, 2025.
• The terms, fee structure, and services provided in the new agreement remain unchanged from the original advisory agreement, except for the date and term.
• Runway Growth Capital LLC will continue to operate independently and serve as the external investment adviser to Runway Growth Finance Corp., with the current leadership and investment teams remaining in place.
• BC Partners Credit and Mount Logan Capital have acquired Runway Growth Capital LLC to accelerate capital formation and diversify financing options.
• Runway's target investment range is $30-150 million.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook due to the acquisition by BC Partners Credit, which is expected to provide Runway Growth Capital with greater resources and opportunities for growth. The continuity of management and investment teams also contributes to the positive sentiment.

Positives

• The acquisition by BC Partners Credit provides Runway Growth Capital with access to greater resources and scale.
• The existing management and investment teams will remain in place, ensuring continuity.
• Runway Growth Capital expects to increase originations and enhance financing capabilities.
• The new advisory agreement maintains the same terms as the original, providing stability.

Risks

• The forward-looking statements involve risks and uncertainties, including those related to future operating results, net investment income projections, and the ability to attract and retain talented professionals.
• There are risks associated with the business prospects of Runway Growth Finance and its portfolio companies.
• The ability of portfolio companies to achieve their objectives and the adequacy of Runway Growth Finance's cash resources are also risks.
• Future changes in laws or regulations could impact the company.

Future Outlook

Runway Growth Capital expects to increase originations, expand its offerings, and enhance its financing capabilities to support high-growth companies.

Management Comments

• Ted Goldthorpe, Head of BC Partners Credit, stated that combining Runway's expertise with BC Partners Credit's scale will establish a diversified presence in the venture debt ecosystem.
• Runway Founder and Chief Executive Officer David Spreng commented that joining the BC Partners Credit platform marks an exciting new chapter and contributes to the long-term vision of providing financing solutions to high-quality companies.

Industry Context

This announcement reflects a trend of private equity firms acquiring or partnering with specialty finance companies to expand their reach in specific lending markets, such as venture debt.

Comparison to Industry Standards

• Other BDCs such as Ares Capital Corporation and Main Street Capital Corporation also utilize external management structures, but their fee structures and investment strategies may differ.
• Runway's focus on growth-stage companies aligns with other venture debt providers like Hercules Capital, but the specific terms of their advisory agreements and investment approaches may vary.

Stakeholder Impact

• Shareholders: The acquisition and new advisory agreement are expected to benefit shareholders by providing greater resources and opportunities for growth.
• Employees: The existing management and investment teams will remain in place, ensuring job security and continuity.
• Borrowers: Runway Growth Capital expects to expand its offerings and enhance its financing capabilities, providing more options for borrowers.
• Investors: The acquisition is expected to drive returns for investors through attractive risk-adjusted investments.

Next Steps

• Runway Growth Capital will continue to operate independently and serve as the external investment adviser to Runway Growth Finance Corp.
• Runway Growth Capital will leverage BC Partners Credit's platform to accelerate capital formation and diversify financing options.
• Runway Growth Capital will focus on increasing originations within its target investment range of $30-150 million.

Key Dates