FriedbergMilstein has engaged GSO Capital Partners as a sub-advisor to three of its funds, FriedbergMilstein Private Capital Fund I, FM Leveraged Capital Fund I and FM Leveraged Capital Fund II. The deal was effective as of Monday. Barry Friedberg, one of the founders, will still be involved and thus no key-man issues will result. It is unclear what his exact responsibilities will be, but as a sub-advisor GSO will take on some of the investment-responsibilities for the funds.
The specific rationale for the move could not be determined. Responding by email Friedberg said, "I am spending my time talking with investors, representatives of the underwriters of our CLOs, and our employees. It is better for these constituencies that I not be available to the press at this time."
One observer noted FriedbergMilstein already invests in a number of GSO-sourced and -originated deals and knows the GSO senior principals well. This is likely why the firm chose GSO. Since GSO, founded by Bennett Goodman, bought RBC Capital Markets' collateralized debt obligation business in July 2005, GSO has originated a little over $3 billion in deals. Neither Goodman nor a spokeswoman responded to a call by press time.
Personnel issues are still being sorted out, but it is believed Eric Green, senior partner at FriedbergMilstein, has left the firm. Contact information for Green could not be found.
FriedbergMilstein manages over $1.5 billion in committed capital focused on the middle market. According to its Web site, it has five funds: FriedbergMilstein Private Capital Fund I, a $584 million CDO investing in mezzanine debt and second liens; FM Leveraged Capital Fund I, a $384 million CDO investing in first and second liens; FM Leveraged Capital Fund II, a $411 million CDO investing in first and second liens; FM/CN Capital, a $100 million fund investing in mezzanine debt and structured equity; and FM Mezzanine Partners, a $40 million fund to invest in mezzanine debt and private equity transactions.
It is unclear what is happening to the FM/CN Capital fund and the FM Mezzanine Partners fund. It is also unclear if the funds that are being sub-advised will receive new names.
GSO inked a deal in 2005 to buy RBC Capital Markets' collateralized debt obligation business, led by Dan Smith (LMW, 7/25/2005). In December, GSO closed on a permanent capital vehicle, Abingdon Finance, a $100 million managed closed-end fund, with the end goal of the fund to be publicly traded (CIN, 1/15).