Cox Capital tenders for Variant interval fund at 40% discount

Cox Capital Partners is offering $2.5 million for shares of Variant Alternative Income Fund at $15.47 each, 40% below the interval fund's $25.79 net asset value as of Oct. 26. AltsWire reported the tender on Oct. 30, two days after Cox sent Variant its formal consent request.

Cox Capital Retail Secondaries Fund I, a Cox affiliate's private fund, is seeking up to 161,290 shares, or about $2.5 million at that price. It will take tenders pro rata if holders offer more, and the offer expires at 5 p.m. ET on Nov. 30 unless Cox extends or terminates it. Cox described the bid as the first third-party tender offer for shares of an active interval fund.

For advisors holding NICHX, the bid prices a potential exit at about 60 cents on the dollar, but Variant can withhold consent to a share transfer at its discretion, according to AltsWire. That consent clause determines whether a client's sale completes.

"It's our first interval fund tender offer, but far from our first interval fund trade," said John Cox, the firm's founder and chief investment officer. "Several sponsors have let us provide liquidity to their shareholders over the last six years, and we hope Variant and others will do the same."

Cox said the firm has completed interval fund trades with at least three major sponsors, including Bluerock, at discounts of roughly 5% to 31% to NAV. The 40% bid is wider than the 12.5% to 30% discounts in Cox's nontraded BDC offers this year. Cox attributed the gap to proration of NICHX's repurchase offers and a portfolio of specialty finance assets such as litigation finance and royalties that the firm called hard to value.

The Variant Alternative Income Fund (NICHX) runs quarterly repurchase offers for 5% of its outstanding shares at NAV and may buy up to an additional 2% before prorating requests. Its NAV has slipped from $26.42 on Feb. 19 to $25.79 on Oct. 26, about 2.4%. Cox said Variant does not publish proration results, and shareholders have told the firm NICHX's backlog is among the deepest in the interval fund space.

"If holders are getting 10% to 20% of their request filled each quarter, getting most of the way out at NAV takes roughly 2½ to 5+ years," Cox said. "That assumes NAV holds and the fund doesn't change course along the way."

As Private Wealth Daily previously reported, Cox and Saba's unsolicited offer for Blue Owl Capital Corporation II shares proposed a 34.9% discount.

If Variant has not consented by expiration, Cox said it can extend the offer or terminate it and release tendered shares.