Varagon Capital Partners, L.P. (“Varagon”), a leading direct lender to middle market companies, today announced that it has entered into a definitive agreement to form a new strategic partnership with Aflac Global Investments (“Aflac”) and is extending its existing strategic partnership with American International Group (“AIG”).
Upon closing of the new partnership, Aflac will make a new multi-year investment commitment of up to $3.0 billion to Varagon to invest in middle market loans. Aflac will also acquire a significant noncontrolling minority interest in Varagon, creating a mutually-beneficial partnership and demonstrating a commitment to a long-term relationship.
Aflac will acquire the interests in Varagon currently held by certain former and current partners and affiliates of Oak Hill Capital Management. The transaction will not reduce ownership of Varagon by management or AIG, and upon closing, Aflac and AIG will hold equal ownership stakes. Varagon will continue to operate as an independent company with no changes to its strategy, investment philosophy, management team, or day-to-day operations.
AIG, which has been an anchor investor and client of Varagon since 2014, will continue to support the growth of the platform.
Walter Owens, Chief Executive Officer of Varagon, said: “We are excited to welcome Aflac as a new partner and to continue our strategic relationship with AIG. These long-term commitments from two world-class insurers provide access to substantial capital, enhance Varagon’s capabilities to serve investors and borrowers, and accelerate the execution of our strategic growth objectives. We appreciate Aflac’s recognition of Varagon’s capabilities as a leading middle market asset manager and we look forward to a successful partnership.”
Eric M. Kirsch, Aflac Incorporated Executive Vice President, Global Chief Investment Officer and President of Aflac Global Investments, commented: “Middle market credit is a strategically important asset class for Aflac and we are excited to partner with Varagon. Varagon’s rigorous investment underwriting process and proven origination capabilities directly align with Aflac’s strategy of partnering with high-quality asset managers.”
Geoffrey Cornell, Deputy Chief Investment Officer of AIG Investments, added: “As a long-term investor with a focus on credit discipline, we see an attractive opportunity in middle market credit and are pleased to continue our partnership with the Varagon team. We are proud to have been an early backer of Varagon. We are looking forward to Aflac joining our strategic partnership to jointly support Varagon’s continued growth.”
The transaction, which is subject to customary closing conditions and certain regulatory approvals, is expected to close in the first quarter of 2020.
Wells Fargo Securities served as financial advisor and Davis Polk & Wardwell LLP provided legal representation to Varagon; Rothschild & Co served as financial advisor and Debevoise & Plimpton LLP provided legal representation to Aflac; and Cadwalader, Wickersham & Taft LLP provided legal representation to AIG.