Churchill Financial Group is jumping on the business development company bandwagon.

On Tuesday, the middle-market lender filed a prospectus with the Securities and Exchange Commission (SEC) for an initial public offering of up to $150 million for a closed-end fund called Churchill Financial BDC that will invest in first-lien senior unsecured and unitranche loans to middle market companies that are, in most cases, controlled by private equity firm.

Like many BDCs launched over the past year, Churchill Financial BDC will acquire its initial portfolio of loans from existing private funds, in this case Churchill Financial Cayman LTD and Churchill Financial Leverage Loan Trust 2011-I LLC, for an as-yet undisclosed price. It will fund the purchases through borrowings from a revolving credit facility it intends to enter into with various lenders, according to the filing.

The closed-end fund may also apply for a small business investment company license from the U.S. Small Business Administration (SBA), which the prospectus said it believes would allow it “greater flexibility in pursuing debt investments in smaller and lower middle market companies and would provide an attractive source of capital through the debt financing provided by the SBA.”

Also like many new BDCs, Churchill’s prospectus cited opportunity the significant amount of U.S. debt issued by middle market, sponsor-backed companies that will need to be refunded between 2012 and 2015.

“Many of these loans were held in debt securitizations completed between 2006 and 2008. These securitization vehicles often had reinvestment periods ranging from three to six years, and therefore most such vehicles are unlikely to be able to offer refinancing options to existing portfolio borrowers when their credit facilities approach maturity,” the fund said in its prospectus.
“We believe the loss of the lending capacity in the middle market combined with the need for borrowers to refinancing existing indebtedness over the next several years will create significant lending opportunities for us.”

Kenneth Kencel, president and CEO of Churchill Financial Group, will serve as the company's president, CEO and chairman; Alastair Merrick as its CFO, chief administrative officer, treasurer and secretary; and Kevin Dooley as general counsel and chief compliance officer.

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