Nuveen Churchill Private Credit Fund Approves Asset Sale and Wind-Down Strategy

The move marks a pivotal transition as the fund aligns with strategic goals, including asset reallocation and shareholder liquidity.

November 11, 2024

Overview of the Transaction

Nuveen Churchill Private Credit Fund (NCPCF) recently announced a significant restructuring initiative involving the sale of nearly all its assets to the affiliated Nuveen Churchill Private Capital Income Fund (PCAP). This strategic move paves the way for NCPCF’s dissolution, liquidation, and termination as a business development company (BDC). PCAP is set to assume NCPCF's portfolio assets and outstanding obligations under its existing credit facility.

Details of the Transaction

The transaction involves transferring substantially all assets and liabilities, excluding certain records required for the liquidation process, to PCAP. The total consideration for the transaction will equal NCPCF's net asset value (NAV), calculated as of the Determination Date. As of July 31, 2024, NCPCF reported a NAV of approximately $210.6 million, a portfolio asset value of $527.2 million, and outstanding indebtedness of $339.6 million under its credit facility.

The asset transfer and subsequent liquidation are structured to offer NCPCF shareholders an immediate cash distribution, potentially taxable, as a lump sum payment based on the NAV calculation. This approach provides direct liquidity, a key reason cited by NCPCF’s board for the transaction's approval.

Management and Governance Alignment

Both NCPCF and PCAP are managed by entities affiliated with Nuveen, LLC, and share overlapping trustee board members. This alignment enables seamless operational integration as PCAP assumes management of NCPCF’s assets. Churchill Asset Management LLC and Churchill PCIF Advisor LLC, external advisers to NCPCF and PCAP respectively, will continue overseeing portfolio activities.

Shareholder Implications and Approval

Shareholders of NCPCF are slated to vote on the transaction during a special virtual meeting. A majority vote in favor is required for the transaction to proceed. Abstentions and non-votes will count against the proposal. The board has unanimously recommended shareholder approval, emphasizing the liquidity and streamlined operations the transaction offers.

Rationale and Strategic Goals

NCPCF’s decision is grounded in a strategic evaluation of exit alternatives. Liquidating its assets via a sale to PCAP offers a direct and efficient mechanism for shareholder returns while circumventing the complexities of alternative liquidation strategies. The merger enables PCAP to consolidate assets, achieve scale, and enhance portfolio diversification, which aligns with its long-term growth objectives.

Risks and Considerations

Despite its merits, the transaction involves risks. The NAV may fluctuate before the Determination Date, impacting final shareholder payouts. Additionally, any delays or failure to secure shareholder approval could complicate the wind-down process and incur significant expenses. Litigation risks and operational disruptions during the transaction period are also concerns highlighted by NCPCF.

Financial and Tax Considerations

The transaction will be funded through a mix of PCAP’s existing credit facility and cash reserves. Shareholders should be prepared for potential tax liabilities arising from the distribution. Detailed guidance will follow from NCPCF's management to ensure compliance with U.S. federal income tax regulations.

Looking Ahead

If approved, the transition is expected to be finalized by the fourth quarter of 2024. Post-transaction, PCAP will emerge as one of the 15 largest perpetually private BDCs, marking a significant milestone in Nuveen’s portfolio evolution.