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HSBC hires Morrish and Heath for loans trading team

Grieg Morrish and Mark Heath have left BNP Paribas and Commerzbank, respectively to join HSBC’s loan trading team. Both will be joining late summer.

Morrish, who will be a crossover loans trader at HSBC, joins from BNP Paribas’s secondary loans trading team. Morrish left his post at Invesco in 2011 to move to BNP Paribas. Heath was previously a senior loan trader at Commerzbank, and will be joining HSBC as a par loan trader. – Nina Flitman

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Golub hires Cushman from GE Antares for middle market origination

Golub Capital has hired Chip Cushman from GE Antares to originate middle market loans.

Cushman will cover the New York metro and D.C. metro areas and be based in New York. He joins as a managing director.

At GE Antares, Cushman was responsible for developing relationships with private equity firms and originating new loans.

At the same time, Golub Capital announced that Matt Fulk and Craig Palmer would assume new roles in origination, from underwriting.

“Stepping into their new business development roles will further support Golub Capital’s intention to increase its client base,” a May 15 statement from Golub said.

GE announced in April it would divest GE Capital, including its $16 billion sponsor finance business. GE Antares specializes in middle market lending to private-equity backed transactions. – Abby Latour

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Middle market: Monomoy Capital taps Robbins to head credit strategies

monomoy capitalMonomoy Capital Partners has hired David Robbins as Managing Director and Head of Credit Strategies. Robbins will lead the firm’s investments in debt securities of distressed and underperforming businesses.

Robbins joins from H.I.G. Bayside Capital where he was a managing director responsible for leading investments in distressed debt and positioning Bayside to take control of middle market companies through financial restructurings. Prior to that, he held positions GSC Group and the Blackstone Group.

New York-based Monomoy Capital Partners is a private equity firm focused on value investing and business improvement in the middle market. The firm targets middle market businesses with annual revenue of $100-600 million in a wide range of industries that face operational, financial, and strategic challenges. – Jon Hemingway

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Ares Capital sees opportunity, uncertainty from GE Capital sale

Ares Capital expects new market opportunities to arise due to the exit of GE Capital from its lending venture, but also sees uncertainty in the near future over the fate of the program.

GE announced in April it would divest GE Capital, including its $16 billion sponsor finance business. Ares has had a lending partnership with GE Capital since 2009, called the Senior Secured Loan Program (SSLP).

Addressing the planned GE Capital sale in a quarterly earnings call, Ares Capital CEO Kipp deVeer said Ares plans to continue supporting sponsors and businesses, either directly or through a new program with a new partner. This new partner may be looking to expand their lending to the middle market, or be entering the business for the first time.

“We believe that partnering with us and SSLP, or a similar joint venture, will be attractive to a number of third parties, and we are having active and productive dialogues with a few potential partners about buying GE’s interest, or about starting a new program,” said Ares Capital deVeer said on the earnings call on May 4.

He cautioned that there was no guarantee that Ares would reach a deal. In recent weeks, Ares has been working with potential parties, including non-U.S. regulated banks and non-banks such as asset managers, insurance companies, and combinations thereof.

“We’re feeling reasonably optimistic that we will find some interest,” deVeer said. “We’re down the path with a lot of different kinds of people, and it’s too early to understand who is going to be the most interested.”

In the meantime, it’s business as usual for the SSLP. There are five deals in the SSLP’s pipeline expected to close, deVeer said.

GE Capital is not allowed to unilaterally sell the loans in the SSLP. If no partner is found, the SSLP could be gradually wound down through repayment of the loans. The weighted average life of the SSLP loans was 4.3 years at the end of the first quarter.

The exit of GE Capital, and its access to lower-cost capital, will trigger a seismic shift in middle market lending overall, as well as result in a more favorable competitive landscape, deVeer said. It is further evidence of banks’ unwillingness to lend to middle market companies.

“This exit creates a significant opportunity for our company to grow our position in the market. It positions us to be a more active originator and syndicator of first lien senior debt, which traditionally has been a core business at GE Capital,” deVeer said.

“There is real room to occupy a place in that market as GE exits the business,” he added. – Abby Latour

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Monroe Capital hires Rodgers to lead U.S. Southeast originations

 

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THL Credit unveils two hires in Los Angeles for direct lending

THL Credit Advisors announced two new hires in its Los Angeles office.

Thomas Lane has joined THL Credit’s direct lending business, where he will originate, structure, and underwrite media and information services investments. He joins as a managing director.

Previously, Lane was managing director at Wells Fargo Capital Finance, where he focused on asset-based and cash flow lending. Lane also held positions in the field audit and relationship management areas, and as a credit manager at IBM Credit Corporation, CIT, Heller First Capital, and Fremont Financial Corporation.

Brett Hinton will focus on new business development across THL Credit’s direct lending and tradable credit platforms. He joins as a director. Hinton worked at Fortress Group for the past six years, in a distribution, origination, and fund advisory role. He previously was a senior acquisition and investment analyst at InterContinental Hotels Group, an analyst at Genesis Capital, and an analyst at UBS Financial Services. – Abby Latour

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PennantPark, a BDC, to buy assets of struggling rival lender MCG Capital

PennantPark Floating Rate Capital, a business-development company, announced plans today to expand its portfolio through the acquisition of MCG Capital, a struggling lender to middle-market companies that had taken steps to wind down its portfolio.

PennantPark Floating Rate Capital, which trades on the NASDAQ under the symbol PFLT, will acquire MCGC in a $175 million cash-and-stock transaction, or $4.75 per MCGC share. MCGC stockholders will receive $4.521 in PFLT shares and $0.226 per share in cash from PennantPark Investment Advisers, and possibly an additional $0.25 depending on PFLT’s NAV over a 10-day period.

MCGC shares jumped 10% today, to $4.51, from $4.10 at yesterday’s close on the Nasdaq.

Boards of both companies approved the transaction. Stockholders of both companies need to agree to the transaction. The deal is expected to close in the third quarter.

The equity base of the combined company is expected to total $376 million.

“A balance sheet of this size will allow the combined company to be a more important provider of capital to middle-market sponsors and corporate borrowers,” a joint statement today said.

“PFLT expects, over time, to deploy most of MCGC’s cash into an investment portfolio consistent with that of PFLT’s existing loan portfolio.”

The deal is a boon to MCGC shareholders. In October, MCG Capital announced it was winding down its portfolio and buying back its stock with asset-sale proceeds, citing a credit-cycle peak. In February, MCG Capital announced it was exploring a potential sale.

“Our stockholders should benefit through resumed receipt of dividends and ownership in a company with a strong balance sheet and proven track record,” said Richard Neu, Board Chairman of MCG Capital.

PennantPark Floating Rate Capital shares traded higher after the announcement, touching $14.23, but have since erased gains to trade steady, at $14.15 on the Nasdaq, which was overall lower. Investments in middle-market companies can be difficult to acquire, except over an extended period. Buying an entire portfolio can be an attractive way to acquire a significant amount of assets at once in the competitive marketplace. Investors of debt in middle-market companies usually find economies of scale from larger holdings.

Another huge portfolio of middle-market assets is currently on the auction block. GE unveiled plans this month to sell GE Capital, the dominant player in middle-market lending. Leveraged Commentary & Data defines the business as lending to companies that generate EBITDA of $50 million or less, or $350 million or less by debt size, although definitions vary among lenders.

MCG Capital, formerly known as MCG Credit Corp., was a specialty lender focused on telecoms, communications, publishing, and media companies that was spun off from Signet Bank. Over the past decade, the company managed to shed some underperforming assets and diversify, but the company remained saddled with legacy assets from poorly performing traditional businesses.

PennantPark Floating Rate Capital is an externally managed business-development company, or BDC. The lender targets 65% of its portfolio for investments in senior secured loans and 35% in second-lien, high yield, mezzanine, distressed debt, and equity of below-investment-grade U.S. middle-market companies. The portfolio totaled $354 million at year-end on a fair-value basis.

PennantPark Investment Advisers receives fees from PennantPark Floating Rate Capital for investment advising, some of which are linked to performance of PFLT.

In December, MCG Capital announced the results of a Dutch auction, saying it bought 4.86 million shares for $3.75 each, representing 11.2% of shares outstanding, for a total of $18.2 million. MCG also reinstated an open market share repurchase program. In total, MCG Capital bought more than 31 million shares in 2014, totaling more than $117 million.

In April, MCG Capital completed a sale of Pharmalogic, marking the exit of all of the lender’s control investments. MCG Capital provided a $17.5 million, 8.5% first-lien loan due 2017, and a revolver, to facilitate the sale. Pharmalogic is a nuclear compounding pharmacy for regional hospitals and imaging centers.

MCG Capital had also struggled with a few poor, but isolated, bets, market sources said.

One misstep was MCG’s investment in Broadview Networks. The company, a provider of communications and IT solutions to small and midsize businesses, filed for Chapter 11 in 2012. MCG Capital owned more than 51% of the equity at the end of 2011.

Another black eye for MCG Capital was an investment in plant-and-flower producer Color Star Growers of Colorado. The company filed for bankruptcy in December 2013, resulting in a loss of $13.5 million that year for MCG Capital. Regions Bank claimed its losses totaled $35 million for the transaction.

MCG Capital filed a suit against the company’s auditor, alleging accounting fraud and material misrepresentation of Color Star’s financial state at the time of a subordinated loan transaction with Color Star in November 2012.

Some say the writing was on the wall as MCG Capital underwent a series of senior management changes. Keith Kennedy became CEO in April, succeeding B. Hagen Saville, who retired. In November 2012, Saville took over from Richard Neu, who stayed on as board chair. Neu was elected to the post in October 2011, taking over from Steven Tunney, who left the company to pursue other interests. – Abby Latour

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Tai joins Newfleet as firm expands into distressed debt

Newfleet Asset Management today announced it has hired Edwin Tai as a senior managing director and senior portfolio manager for distressed credit.

Tai’s position is a new one for the firm, which recently filed a registration statement with the SEC for the Virtus Credit Opportunities Fund, a new open-end mutual fund with the latitude to invest in distressed debt.

He will manage the Virtus Credit Opportunities Fund as well as act as the sector head for distressed credit in multi-sector portfolios.

Tai joined Newfleet from Third Avenue Management, where he co-managed approximately $2.5 billion in distressed and high-yield credit assets as the lead portfolio manager of the Third Avenue Special Situations Fund and co-portfolio manager of the Third Avenue Focused Credit Fund.

Newfleet also recently brought on board Patrick Fleming as a managing director and senior counsel for distressed credit. The distressed debt team also includes Manases Zarco, managing director, credit research.

The Virtus Credit Opportunities Fund plans to invest in various debt products, including senior secured loans, second-lien debt, unsecured debt, subordinated debt, structured products and short-term debt products, as well as derivatives, foreign currencies and foreign currency derivatives, SEC filings show. It intends to focus on a small number of issuers and may invest in distressed or defaulted debt.

Newfleet is an affiliate of Virtus Investment Partners, which manages more than $12 billion of fixed-income assets. – Kerry Kantin

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Ares Management fund acquires loan portfolio from First Capital

Ares Management will expand its commercial finance platform through the acquisition of an asset-based lending portfolio from First Capital.

First Capital’s investment team will join the Ares Commercial Finance team. Loan commitments under the Ares Commercial Finance platform will total $700 million through the portfolio acquisition.

New York-based First Capital provides asset-based loans and factoring to small and middle-market manufacturing, distributing, and business services companies generating sales of at least $1 million. First Capital is a portfolio company of H.I.G Capital. – Abby Latour

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Newtek Business Services hires Choksi, Fifth Street finance executive

Newtek Business Services Corp. announced that Dean Choksi would join the company as treasurer and senior vice president of finance.

Previously, Choksi was executive director of finance from Fifth Street Management.

At Fifth Street Management he assisted in the raising of over $1 billion in public debt and equity, and was the primary contact for multiple lenders for their syndicated bank credit facility. Fifth Street Asset Management manages two publicly traded BDCs, Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR).

Choksi also worked at UBS Investment Bank, where he was director of U.S. equity research, and led equity coverage of consumer finance and specialty finance companies, including BDCs.

He has also held equity research roles at Barclays Capital, Lehman Brothers, RBC Capital Markets, Wells Fargo Securities, and SoundView Technology Group.

Newtek Business Services Corp., a BDC that trades on the Nasdaq as NEWT, is an internally managed BDC that provides services and financial products to small and midsize businesses, including electronic-payments processing, lending, accounts-receivable financing, web services, and data backup and storage. It converted to a BDC in November 2014.

Early this year, Newtek Business Services was added to the Wells Fargo BDC Index. – Abby Latour

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