Westmoreland Capital Management, a structured credit boutique founded in December 2001, has shut up shop after falling victim to the market slowdown caused by tightening credit-default swap spreads. The firm had been planning to introduce its first product, a USD1 billion managed synthetic collateralized debt obligation, since last year when tightening spreads reduced the arbitrage and made the deal unfeasible. Carter Rise, founder and ceo of Richmond, Va.-based Westmoreland, did not return calls.
Westmoreland's brief had been to focus specifically on the creation of synthetic structures such as collateralized debt obligations, noted one official familiar with its business plan. On the firm's Web site, which has now been closed, Westmoreland had stated it would compete in the crowded structured product arena by managing assets exclusively according to credit versus total return strategies. Rise left his post as managing director and group head of financial services at Prudential Securities in New York in 2001, which included managing the firm's asset-backed group, to start the venture.
Although Westmoreland boasted a strong management team the firm suffered from bad timing as it, alongside all synthetic CDO players, was hit by the lack of arbitrage opportunities in a tight credit market. While some firms have been able to survive this difficult period by relying on other product lines, Westmoreland's closure demonstrates the danger of relying on a single strategy, noted observers.
Westmoreland's senior management owned in excess of 20% of the firm. Venture capital firms Monument Capital and Jefferson Capital Partners also provided start up-capital. Officials at Monument and Jefferson did not return calls.
Other staffers affected by the closure includeBret Costain, managing director and head of structuring in New York. Westmoreland reportedly employed over 10 credit professionals.