Chicago Atlantic BDC (LIEN) Is Absorbing REFI at an Implied 1.0833 Exchange Ratio, N-14 of Sept 23, 2026

What the deal is, and three corrections to the usual summary

Three details are easy to get wrong. First, 1.0833 is “implied,” the filing's own word. The merger agreement defines the Exchange Ratio as “the ratio (rounded to the fourth decimal place) of the Closing REFI NAV to the Closing LIEN NAV,” each calculated no earlier than 48 hours (excluding Sundays and holidays) before the merger takes effect. Second, the registration statement being effective is not a vote date. The September 23, 2026 draft still shows the LIEN meeting as “[ ], 2026,” and I found no definitive prospectus or proxy on EDGAR as of November 1, 2026. Third, REFI is not yet a BDC. The merger needs REFI to file Form N-54A to elect BDC status first, and the plan is a two-session REFI meeting on one day: the BDC election and new advisory agreement vote, a short adjournment while the election is filed and the REFI board adopts the Rule 17a-8 approvals, then the merger vote.

Structurally, REFI merges with and into LIEN and LIEN survives, keeping its articles and bylaws. The companies share a manager family (Chicago Atlantic), so both boards used special committees of independent directors, with KBW advising LIEN's committee and Oppenheimer advising REFI's. Both fairness opinions date from signing, on June 16 and June 17, 2026, and the filing's own risk factors say they do not reflect later changes.

The exchange ratio: four numbers for the same idea

The N-14 prints four ratios. They are different dates and different adjustments, not four deals.

I could reproduce 1.0833 from the filing's own inputs (our arithmetic). REFI's pro forma net assets after the BDC election and the Koach shares are $371,181 thousand, less $1,690 thousand of REFI deal costs, over 26,020,636 shares. LIEN's net assets are $302,490 thousand less $3,350 thousand of deal costs, over 22,820,590 shares. The first is about $14.20 a share and the second about $13.11, which gives 1.0833. Without the Koach shares the same method gives about 1.0783, so that one transaction moves the ratio by roughly 0.005.

Why the pro forma NAV ($13.14) is below LIEN's reported NAV ($13.26): the filing says the $0.12 decrease “is the result of the net impact of the estimated pro forma adjustments.” That is a pro forma figure, not a reported NAV.

The Koach shares

On July 9, 2026, after signing, REFI issued 4,306,754 shares at $14.53 to Koach Capital funds in exchange for 14 second lien promissory notes with about $62.5 million of principal, secured by mortgages on 32 retail and related properties leased to cannabis operators. The notes bear 12.0% (10.0% cash, 2.0% payment in kind), sit behind about $39 million of first lien debt, and carry an exit fee of 2.5 times the commitment amount of each note. The shares are 16.8% of REFI's shares after the issue and are locked up for three months (20%) and six months (80%). The filing says the issue is expected to be neutral or slightly accretive to REFI's adjusted book value per share, but its own risk factor adds that the effect “will not be determinable until the Determination Date.” The Koach notes count as REFI assets in the ratio, and the lock-up expiry is flagged as a possible overhang on LIEN's price after the merger.

What each holder gets

On tax, the merger is intended to be a reorganization under Section 368(a) of the Internal Revenue Code. The N-14 says REFI shareholders are not expected to recognize gain or loss except on cash received in lieu of fractional shares. A tax opinion to that effect is a condition for both sides, and it is not binding on the IRS. REFI must also pay “Tax Dividends” before its BDC election to clear accumulated earnings and profits and bring its REIT taxable income to zero; the filing gives no amount, so a REFI holder cannot compute that dividend from it.

Dividends: the number the filing does not print

The filing says the initial dividend rate of the combined company “is expected to be lower than REFI’s current dividend rate.” It prints no figure. The dividend histories are in the filing, so the arithmetic is possible.

Both rows are our arithmetic and assume LIEN keeps $0.34 and the ratio is 1.0833; nothing guarantees either. For coverage, LIEN's net investment income was $7,653,193, or $0.34 a share, in the second quarter of 2026, matching its dividend. REFI's distributable earnings were $0.43 per diluted share against its $0.47 dividend (10-Q), and $0.51 a year earlier. The LIEN board approved another $0.34 on August 10, 2026, payable October 9, 2026 to holders of record on September 25, 2026.

Fees and governance

The filing is direct about fees: it says the LIEN structure “is expected to result in higher aggregate management and incentive fees, as a percentage of net assets,” than REFI’s, and that the adviser's dollar base fee “will likely increase” because assets under management grow.

Read both together. Base plus incentive fees are 2.16% for REFI and 4.84% pro forma (our sums of the table's rows), a large rise, but total annual expenses fall because interest and other costs shrink on the larger base and the pro forma leans on LIEN's low leverage. The pro forma column also includes the Koach assets. REFI's net assets there are the BDC-converted figure, not the REIT book value.

Board, management and leverage

After the merger the board has seven members: three from REFI's independent directors, two from LIEN's independent directors and two affiliated with the LIEN adviser. LIEN Adviser stays the manager under the existing agreement, and REFI's management agreement ends at the BDC election with no termination payment. Peter Sack is expected to be chief executive officer, and the president role is shared by Dino Colonna and David Kite.

As a BDC the combined company must keep asset coverage of at least 150%. The filing's pro forma is about 500%, with $168.1 million of borrowings: LIEN's $100.0 million revolver stays, REFI's $110.0 million revolver and $50.0 million of unsecured notes pass to the combined company, and the closing conditions include specified conditions on those lenders. BDC status also brings affiliate-transaction limits (Sections 17(a) and 57 of the Investment Company Act) that a REIT does not have.

Votes

REFI says it received two letters from purported shareholders asserting disclosure deficiencies in the proxy statement and believes the claims are without merit. I found no court filing.

Portfolio overlap and concentration

The N-14 lists every portfolio company of both funds at June 30, 2026. LIEN has 37 portfolio companies and about $335 million at fair value, 89.5% first lien, 73.6% cannabis, and no investment on non-accrual at June 30, 2026 or December 31, 2025. REFI had 29 debt investments with $453.1 million of principal and a 15.6% weighted average yield to maturity, before the Koach notes.

Overlap. The filing says approximately 50% of REFI's investments were also held by LIEN as of March 31, 2026. Using exact issuer names in the two June 30 tables, 13 of REFI's 27 names also appear in LIEN's list: Aeriz, BeLeaf Medical, Canopy Growth, Dreamfields Brands (Jeeter), Flowery (Bill's Nursery), FLUENT, Illicit - S1 Enterprises, Kapple Holdings, Oasis - AZ GOAT, Subsero Holdings - Illinois, TheraTrue, Verano Holdings and Wellgreens 2.0. That is 48% of REFI's names, 56% of LIEN's fair value ($188.4 million of $334.8 million) and 42% of REFI's ($188.1 million of $446.9 million). REFI also holds a separate loan to Two Bunch Palms Trail (Jeeter) that this name match does not count. All of this is our reading of two tables, and exposure to the same borrower in two funds is not a statement about quality.

Combined concentration. Adding the two fair-value tables before the Koach notes gives $781.7 million. Verano Holdings is $117.0 million of it, or 15.0% ($64.2 million at LIEN, $52.8 million at REFI). The Jeeter group is about 8.5%, FarmaceuticalRX 6.3%, Aeriz 5.6% and the Vireo New York loan 5.2% (our arithmetic). Cannabis is 88.7% of the two tables combined (our arithmetic), compared with 73.6% for LIEN alone. The Koach notes add a further $62.5 million of loans secured by cannabis retail properties.

For a REFI holder the mandate changes in two ways: as a BDC the company can lend outside real estate and outside cannabis, but the filing says no material repositioning of REFI's portfolio is anticipated at closing. REFI's loans are “substantially secured by real estate,” with average real estate collateral coverage of 1.2 times (10-Q); the BDC will carry them at fair value, and its adviser can only add non-cannabis lending over time.

Legal status risk factors, as the filings state them

These are quotations and paraphrases of the 10-Qs, not our view of the law. LIEN's 10-Q says the manufacture, distribution, sale or possession of cannabis that is not in compliance with the Controlled Substances Act “is illegal under U.S. federal law” and that strict enforcement “would likely result in our portfolio companies’ inability to execute a business plan.” It lists forfeiture of loan collateral to the federal government, federal courts possibly refusing to enforce contracts, and banks being “resistant to doing business with cannabis companies.”

Both 10-Qs also describe an April 23, 2026 order of the Department of Justice, acting through the Drug Enforcement Administration, to reclassify certain cannabis products from Schedule I to Schedule III: FDA-approved cannabis products and cannabis produced under state-licensed medical programs. Products for adult-use markets “remain classified as Schedule I.” The 10-Q says further hearings were held in June 2026 and no final framework has been set beyond the April order. It says partial relief from Section 280E of the Code may improve borrowers' cash flows, while easier access to capital could compress lending spreads.

NAV and dividend history

From the N-14's price tables (quarter-end NAV for LIEN, book value for REFI; dividends declared in the quarter):

LIEN's NAV has moved in a narrow band, from $13.19 to $13.33 over those six quarters, while REFI's book value fell from $14.87 to $14.15. In the filing's market table, the September 21, 2026 closes were $10.27 for LIEN and $10.80 for REFI, which the filing states as discounts of about 22.5% and 23.7% to June 30 NAV and book value. The ratio of those two closes is 1.0516 against the 1.0833 NAV ratio (our arithmetic). The exchange ratio is set on NAV, not on market prices, and the filing's risk factor says the market value of what REFI holders receive “will fluctuate.” This page does not take a view on either price.

Timeline and what is still open

Still open as of November 1, 2026: the meeting and record dates, the BDC election, the Rule 17a-8 board approvals, the lender consents, the amount of the Tax Dividends and the final ratio. The next documents to read are the definitive joint proxy statement/prospectus (if filed), Forms 8-K for the vote results (due within four business days) and the quarterly reports for the quarter ending September 30, 2026.

What a reader can do with this

This is analysis of public documents, not investment, legal or tax advice. What the filings let a holder check:

• Find the exact line that governs you. A REFI holder is in a REIT today; the LIEN share count, the fee table and the pro forma NAV in the N-14 are the numbers behind the swap.
• Rebuild the ratio from a live NAV. Divide REFI's adjusted book value per share by LIEN's NAV, as the agreement does, and compare it with 1.0833. The Koach issue alone is worth about 0.005 of ratio (our arithmetic).
• Put the dividend side by side. Use $0.47 against $0.3683 a quarter, then check the next declared LIEN dividend.
• Check voting mechanics before the meeting. An uninstructed street-name REFI share counts as a vote against; the control number on your voting instruction form is the way in.
• Look at concentration across your own holdings. If you own other cannabis lenders or BDCs, the overlap table is the starting point. For the wider field see our BDC list, what a BDC is and commercial mortgage REIT dividends and delinquencies.
• Know the tax paperwork. The share swap is intended to be tax-free; later sales go on Form 8949 and Schedule D. For another cannabis-linked listed REIT, see Innovative Industrial Properties.

FAQ

All figures are from SEC filings read on EDGAR on November 1, 2026. Chicago Atlantic BDC, Inc. (CIK 1843162): Form 8-K of June 18, 2026 with the merger terms (accession 0001213900-26-069853); Form 8-K of June 25, 2026 on its annual meeting (0001213900-26-072075); Form 8-K of August 13, 2026 (0001213900-26-088673); Form 10-Q for the quarter ended June 30, 2026 (0001193125-26-347342); Form N-14 8C/A of September 23, 2026 (0001140361-26-037360); the EDGAR filing index for the EFFECT notice of September 30, 2026 (9999999995-26-003107). Chicago Atlantic Real Estate Finance, Inc. (CIK 1867949): Form 8-K of June 11, 2026 (0001213900-26-067830); Form 8-K of July 13, 2026 on the Koach transaction (0001213900-26-077585); Form 10-Q for the quarter ended June 30, 2026 (0001193125-26-343398). Ownership shares, dividend comparisons, combined concentration, name-overlap counts, fee sums and the ratio recomputation are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.