IPO Report: CM Finance (CMFN)

Francis Gaskins |

CM Finance (CMFN) is a specialty finance company that invests primarily in the debt of middle-market companies.

13 other companies are scheduled to IPO this week.  The full IPO calendar is available at IPOpremium.com

CMFN scheduled a $100 million IPO with a market capitalization of $190 million at a price range midpoint of $15 for Thursday, February 6, 2014, on the Nasdaq

Manager, Joint managers: Raymond James, Keefe, Bruyette & Woods, Oppenheimer

Co-Managers: Stephens, Wunderlich Securities
SEC Documents



Valuation Ratios


Price /

Price /

Price /

Price /

% offered


Cap (mm)





in IPO

CM Finance (CMFN)











Price /



Cap (mm)





CM Finance (CMFN)






Apollo Investment (AINV)






THL Credit (TCRD)






Gladstone Capital (GLAD)






Compared to AINV, TCRD and GLAD, CMFN’s valuations are in range.  CMFN has a higher dividend than TCRD and GLAD, but a lower dividend than AINV.

The IPO rating on CMFN is neutral.

CMFN is a specialty finance company that invests primarily in the debt of middle-market companies.

CMFN seek to invest primarily in middle-market companies that have annual revenues of at least $50 million and EBITDA of at least $20 million. CMFN’s investment objective is to maximize the total return to stockholders in the form of current income and capital appreciation through debt and related equity investments by targeting investment opportunities with favorable risk-adjusted returns.

CMFN is an externally managed, closed-end, non-diversified management investment company that intends to file an election to be regulated as a BDC under the 1940 Act. CMFN intends to elect to be treated as a RIC under Subchapter M of the Code for U.S. federal income tax purposes.

As of September 30, 2013, CMFN’s portfolio consisted of debt and equity investments in 12 portfolio companies consisting of 54.8% first lien investments, 44.6% second lien investments and 0.6% warrant positions, at fair value.

As of September 30, 2013, the weighted average annualized yield of the debt investments in CMFN’s portfolio was 11.06% as if unfunded obligations were fully funded and is weighted based on each respective investment’s par amount.

Recent developments

In December 2013, CMFN entered into the Stifel Arrangement pursuant to which Stifel agreed to make a capital contribution in an aggregate amount equal to the lesser of $40.0 million and 17.2% of CMFN’s issued and outstanding shares of common stock after giving effect to this offering at the assumed initial public offering price per share.

CMFN intends to use the investment by Stifel to repurchase up to $32.7 million of the Cyrus Funds’ interest in CMFN, which will reduce the Cyrus Funds’ investment in CMFN to $57.3 million assuming an offering of $100 million.

CMFN does not intend to call the remaining portion of Stifel’s capital commitment. CMFN refers to Stifel’s investment in CMFN and the CM Finance Merger as the “formation transactions.”

CMFN was formed on February 15, 2012 as a limited liability company and commenced operations in March 2012.

In March 2012, CMFN was originally capitalized with commitments of $50 million from the Cyrus Funds, which it refers to as its initial private placement.

Subsequent to CMFN’s initial private placement, the Cyrus Funds increased their aggregate capital commitments to $110 million. As of September 30, 2013 CMFN had aggregate capital commitments of $110 million.

Subsequent to September 30, 2013, the Cyrus Funds increased their aggregate capital commitments to $163.6 million. As of the date of the prospectus, CMFN has called all outstanding capital commitments from the Cyrus Funds, which have been used to make investments in accordance with CMFN’s investment strategy and pay for expenses of the Company.


CMFN expects to pay dividends to yield 9.0% annually, at the price range mid-point of $15, starting with a pro rata distribution for Q1 ’14.


CMFN’s primary competitors in providing financing to middle-market companies include public and private funds, other BDCs, commercial and investment banks, commercial finance companies and, to the extent they provide an alternative form of financing, private equity funds and hedge funds.

Many of CMFN’s competitors are substantially larger and have considerably greater financial, technical and marketing resources than CMFN does.

Pre-IPO 5% stockholders

Cyrus Select Opportunities Master Fund, Ltd. 63.6%

Stifel Venture Corp. 36.4% 

Use of proceeds

CMFN expects to net $95.8 million from its IPO. Proceeds are allocated as follows:

to repay the Cyrus Funds Debt of $38.5 million, which CMFN incurred as part of the merger consideration paid to the Cyrus Funds in connection with the CM Finance Merger.

to invest in unitranche loans and standalone second and first lien loans and selectively in mezzanine loans/structured equity and in the equity of portfolio companies through warrants and other instruments in accordance with CMFN’s investment objective and for general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
CMFN CM Finance Inc 9.26 -0.08 -0.88 66,447
NNCHY Nissan Chemical Industries Ltd ADR 30.38 0.00 0.00 0


Emerging Growth

International Western Petroleum Inc

International Western Petroleum Inc is an exploration-stage oil and natural gas company. The Company is engaged in the acquisition, development, and exploration of crude oil and natural gas properties in…

Private Markets


Spotify is a online music service offering providing digital content from a range of record labels and artists. Users can browse through the interface by artist, album, genre, playlist, record…


D-Wave Systems is the first quantum computing company. Its mission is to integrate new discoveries in physics, engineering, manufacturing, and computer science into breakthrough approaches to computation to help solve…