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Balance Point Capital adds hire, Nathan Elliott, for middle-market deal execution

balanceBalance Point Capital Partners hired Nathan Elliott for underwriting and execution of debt financing to middle-market companies.

He joins the Westport, Conn.-based company as a vice president. He will report to managing partner Seth Alvord and partner Justin Kaplan.

Previously, he was a vice president at Jefferies Finance, where he was responsible for due diligence and underwriting of loans and bridge financings for sponsor-led buyouts. Prior to that, he worked at GE Capital.

Balance Point Capital Partners invests mezzanine and equity capital into U.S. lower-middle-market companies generating revenue of $10-150 million, and EBITDA of at least $2 million.

Among the firm’s investments are game and toymaker Patch Products; New Jersey-based regional dental-management company Brighter Dental Care; Sacramento, Calif.-based security-alarm-monitoring company GHS Interactive Security; and radio broadcasters Digity Media and Connoisseur Media. – Abby Latour

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Sikich hires growth-company specialist Hampton for capital markets team

sikich_logoMiddle-market investment bank Sikich has hired Ryan Hampton to join its capital market team.

Hampton joins as a director.

He has specialist experience in raising capital for emerging growth companies across industries.

Previously, Hampton was a vice president of investment banking at Clark Dodge & Company/Advanced Equities. He was also a vice president at Bank of America Merrill Lynch, where he completed numerous mergers and acquisitions and raised capital for a range of companies. – Abby Latour

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Gladstone Capital expands middle-market debt origination team with LA hire, Zoltan Berty

gladstoneGladstone Capital Corp., a BDC that trades on Nasdaq under the ticker symbol GLAD, has announced Zoltan Berty is joining the company to lead West Coast debt origination efforts of privately held middle-market companies.

Berty was hired as a managing director and will be based in Los Angeles.

He joins Gladstone from Caltius Mezzanine, a mezzanine fund investing in junior capital and minority equity investments in middle-market companies, where he was a principal.

Previously, he was a vice president at D. E. Shaw Direct Capital, where he originated investments across the capital structure, including senior debt, mezzanine, and equity. He was also a director at CapitalSource focused on senior and subordinated debt investments for buyouts and recapitalization deals.

Berty has also held credit management and debt underwriting positions at Transamerica Technology Finance and Fleet Capital.

GLAD invests in senior, second-lien, and subordinated term loans and equity of small- to mid-sized U.S. companies. – Abby Latour

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Angelo, Gordon & Co. to launch middle-market direct-lending business

Angelo_Gordon_CoAngelo, Gordon & Co. will launch a middle-market direct-lending business after hiring Chris Williams and Trevor Clark, formerly of Madison Capital.

The business is expected to launch in the first quarter of next year. The team will focus on loans to companies generating EBITDA of $3-50 million. The new direct-lending business will collaborate with Angelo Gordon’s corporate credit team of 27.

Williams and Clark co-founded the direct-lending business at Madison Capital, a subsidiary of New York Life. The pair will be based in Chicago. Each of them will join the firm as managing director.

“[We] believe the current opportunity to help close the funding gap for middle market companies is substantial,” said Michael Gordon, co-founder and chief investment officer of Angelo Gordon.

Previously, Clark was CEO at Madison Capital Funding, and oversaw all operational and strategic activities of the middle-market lending operation. He also held various positions in loan underwriting and origination at Antares Capital, GE Capital, and Bank of America.

Williams had been co-founder and senior managing director at Madison Capital Funding, and was part of the executive committee and group head of specialty lending. Prior to Madison Capital, Williams held positions in loan underwriting and origination at Cochran, Caronia & Co., GE Capital, and Bank of America.

“We see a great deal of opportunity in lending directly to the middle market as the shift to non-bank lenders continues to grow,” said Williams. “Banks continue to have a low appetite for risk and the high yield market isn’t open to these companies.”

Privately held Angelo, Gordon & Co. manages $27 billion of assets. – Abby Latour

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American Capital closes $1.1B lower middle-market buyout fund

American-Capital-AgencyAmerican Capital closed a $1.1 billion private equity fund focused on buyouts of lower middle-market U.S. companies. A team of ten led by Sean Eagle, Eugene Krichevsky, David Steinglass, and Justin DuFour, based in Bethesda, Md., will manage the fund, known as American Capital Equity III.

ACE III acquired a portfolio of equity investments from American Capital and an option to purchase the equity interest of another portfolio company. ACE III has an additional $445 million of capital commitments to deploy for purchases of new control equity and equity-related investments in companies generating $5-25 million of annual EBITDA. – Abby Latour

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Solar Capital BDC – PIMCO joint venture to focus on unitranche middle-market loans

Solar Capital Partners is seeking to grow in what it sees as one of the few remaining spaces where opportunity abounds since regional banks retrenched after the credit crisis: unitranche lending to middle-market companies. The investment firm, which manages two BDCs, has teamed up with PIMCO in the venture.

This month, the Solar Capital BDC, which trades on Nasdaq under the ticker symbol SLRC, announced the formation of a joint venture with PIMCO to focus on unitranche loans to private equity-owned and entrepreneur-owned middle-market companies, targeting companies across sectors with a steady track record of generating annual EBITDA of $20-50 million.

The unitranche initiative marks the first time Solar Capital will have the scale needed to underwrite and hold entire unitranche loans, adding to the range of products already offered to its private equity clients.

The joint venture will initially comprise equity commitments of $300 million from Solar Capital and $43.25 million from the PIMCO affiliate. The PIMCO affiliate committed an additional $256.75 million of capital to co-invest in unitranche loans alongside the joint venture. With expected eventual leverage of 2x debt-to-equity, the unitranche loan program will have $1.5-1.8 billion of investable capital.

“To be relevant in this space, you need to write a check for $100 million to $200 million. That’s why we sought a joint venture partner,” said Michael Gross, CEO and co-founder of the investment firm.

“This is not the type of leverage that CLOs are using—ours is a conservative up to 2x. So we don’t need to rely on buoyant credit markets,” said Gross. “But the leverage will allow us to scale up and buy bigger pieces of the same loan, and thus become more relevant to the borrower.”

Despite the frothiness in credit markets, middle-market unitranche lending remains attractive, according to Gross. There, leverage levels have remained at 4.5-5.5x, covenants are intact, and capital structures still have a significant equity cushion, Gross said.

“From a borrower’s perspective the market is very attractive. As an investor, it’s time to be incredibly selective,” said Bruce Spohler, Solar Capital’s chief operating officer and co-founder of the investment firm.

Recovery rates for unitranche loans are still untested for the most part, but will likely fall between the recovery levels of mezzanine debt and middle-market bank loans, said Gross.

As of June 30, Solar Capital’s portfolio was valued at $984 million, consisting of 43 portfolio companies and was invested roughly 74% in senior secured loans and Crystal Financial, whose loans are 100% senior secured. Among Solar Capital’s portfolio were loans backingAdams OutdoorWireCoGlobal Tel*Link, and Blue Coat Systems.

In addition to the Solar Capital SLRC BDC, Solar Capital Partners also manages Solar Senior Capital, which trades on Nasdaq under the ticker symbol SUNS. Solar Senior Capital BDC last week unveiled a first-lien loan joint venture with Voya Investment Management.

Solar Senior Capital committed $50 million to the first-lien loan program with Voya Investment Management, while Voya is committing $7.25 million. Management also expects to leverage this vehicle 2x debt-to-equity. Voya Investment Management, an investment advisor for several insurance subsidiaries of NYSE-listed Voya Financial, was formerly known as ING U.S.

As of June 30, Solar Senior Capital’s portfolio was valued at $266 million, consisting of 37 portfolio companies and was invested roughly 97% in senior secured loans and Gemino Senior Secured Healthcare, whose loans are 100% senior secured. Among Solar Senior’s portfolio were loans backing Aegis Toxicology SciencesAsurionConvergeOne, and Genex.

Solar Capital and Solar Senior Capital expect to begin funding investments in their respective joint ventures before year-end.

Unitranche loans, usually from a single lender, offer an interest rate between that of senior loans and subordinated debt. For borrowers, these loans are simpler to manage because they are not from a group of lenders. From the lender’s perspective, unitranche loans could see a larger recovery in the event of a default due to the absence of more senior or junior creditors. – Abby Latour

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Solar Senior Capital sets up middle-market ventures with Voya, PIMCO

solarSolar Senior Capital and Voya Investment Management have unveiled plans for a joint venture to lend to private equity-owned and entrepreneur-owned middle-market companies.

In a press release yesterday, Solar Senior Capital said it has committed $50 million to the first-lien loan program, while Voya is committing $7.25 million. The joint venture will primarily invest in senior secured term loans.

Solar Senior Capital and Voya plan to seek third-party financing to leverage the entity to 2x debt-to-equity, according to yesterday’s statement. Solar Senior Capital and Voya expect to begin funding the portfolio with new investments before year-end.

The announcement comes on the heels of news last week that Solar Senior entered an agreement with an affiliate of a PIMCO fund. That joint venture will invest in middle-market senior secured unitranche loans sourced by the origination platform used by Solar Senior Capital. Initial funding commitments will total $600 million, a Sept. 2 SEC filing said.

The PIMCO joint venture entity, referred to as a senior secured unitranche loan program, will initially comprise equity commitments of $300 million from Solar Senior Capital and $43.25 million from the PIMCO affiliate. The PIMCO affiliate committed an additional $256.75 million of capital to co-invest in unitranche loans alongside the program.

Solar Senior Capital and the PIMCO affiliate are similarly in advanced talks with a third-party senior debt provider over financing, targeting leverage of 2x debt-to-equity for the portfolio.

Solar Senior Capital, listed on Nasdaq as SUNS, is a business development company focused on leveraged, middle-market companies. Voya Investment Management is an investment advisor for several insurance subsidiaries of NYSE-listed Voya Financial, was formerly known as ING U.S..

As of June 30, Solar Senior Capital’s portfolio was valued at $266 million, consisting of 37 portfolio companies and was invested roughly 84% in senior secured loans. Among them were loans backing Aegis Toxicology Sciences, Asurion, ConvergeOne, and Genex. – Abby Latour

 

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Metis, backed by Garrison Investment Group, joins swelling ranks of lenders to middle market

Garrison_Investment_Group_Lp_1089927A new player has joined the growing ranks of lenders to smaller companies, Metis Commercial Finance. The firm will target loans of $1-20 million to lower middle-market companies generating annual revenue of $10-100 million.

Metis is backed by middle-market credit and asset-based investor, Garrison Investment Group.

James Irwin, founder of Meridian Healthcare Finance and MC Healthcare Finance, is CEO of Metis, which will have offices in San Diego and Boston. Dan O’Rourke, a founder of Salus Capital Partners and NewAlliance Commercial Finance, is chief credit officer.

“Lending to the upper middle market has come back to where it was pre-credit crisis. Lending to the lower middle market hasn’t come back nearly as much,” said Irwin. “That’s where there’s opportunity. It’s underfunded and under-banked.”

Metis’ product offering is wider than that of many specialty lenders, offering a range of debt structures, from asset-based revolvers, term loans based on cash flow and other assets, to unitranche debt, as companies grow or weather tough times.

Metis will be national in scope, instead of regionally focused, like many lenders to middle-market companies, and lend across sectors.

“Banks today are prohibitive and not cost-effective in meeting the needs of these borrowers,” said O’Rourke. “As a non-bank you have much greater flexibility.”

The management team includes Bob Seidenberger, who will head sales and marketing at Metis and was previously vice president, specialty finance at BofI Federal Bank and a director at MC Healthcare Finance. Mike Pestrak, previously a portfolio manager at Celtic Capital, will be senior vice president of underwriting at Metis. – Abby Latour

 

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Golub Capital team adds two members for middle-market private equity lending

imgresGolub Capital has expanded its lending team with two hires who will focus on deals to upper middle-market private equity sponsors, a business area that the lender expects to increase in part due to changing bank regulations.

Hyun Chang joined Golub from J.P. Morgan Securities, where he was an executive director in the financial sponsors group. Michael Meagher joined from Deutsche Bank Securities, where he was a director in the financial sponsors group. They both started in August.

The two join a team of more than 60 and will report to Andy Steuerman, who is head of middle-market lending at Golub. Chang and Meagher will focus on the upper middle market, defined as companies that generate annual EBITDA of $40-80 million.

Golub defines its core middle market as companies generating annual revenue of $15-50 million and the lower middle market as those with EBITDA of $5-15 million.

Steuerman said tougher regulations for banks will result in more demand for lending to the upper middle market.

“It’s demand-driven,” Steuerman said of the hires. “We’ve seen some of the largest private equity firms decide to go back into the upper middle market.” – Abby Latour

 

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Fifth Street Management closes $305M Senior Loan Fund II

logo-fifth-street-regFifth Street Management has closed its Fifth Street Senior Loan Fund II (SLF II), a $305 million multi-tranche financing facility that will invest in senior secured loans to middle-market companies, according to a statement from the firm.

SLF II’s financing was provided via a three-tranche credit facility with ratings from DBRS ranging from AAA(sf) through BBB(sf). Natixis served as sole lead arranger and placement agent.

Portfolio assets will be sourced through Fifth Street’s middle-market origination platform.

Fifth Street Senior Loan Fund I is a $210 million fund that closed in February 2014.

Fifth Street Management is an alternative asset manager that manages a number of private funds and is the SEC-registered investment adviser of publicly-traded business development companies Fifth Street Finance Corp. and Fifth Street Senior Floating Rate Corp., which trade on the NASDAQ under the tickers FSC and FSFR respectively. – Jon Hemingway