Katonah Capital, the loan asset management subsidiary of Kohlberg & Co., has proposed that Sankaty Advisors, Blackstone Debt Advisors and INVESCO Senior Secured Management act as the replacement managers for a group of Katonah funds.
Katonah was forced to find replacement managers following the departure of JoyceDeLucca to form Kingsland Capital. DeLucca's departure triggered the key man provision in the majority of the funds. She left ahead of the firm being sold to Allied Capital, taking a significant portion of the staff with her (LMW, 2/7).
If the move is approved by the required investors in the deals Sankaty will take control of Katonah II, Katonah III and Katonah IV. Blackstone is being proposed as the manager for Katonah I and Katonah VI. INVESCO for Katonah V. The approval by a majority of the equity investors in Katonah III, IV and V is required to approve the respective replacement portfolio managers, according to a Katonah statement. The approval by a majority of the holders of Class A Notes and the equity investors is required to approve the replacement portfolio managers for Katonah VI. In the case of Katonah I, the consent of the fund and MBIA as insurer is required to approve the replacement portfolio manager for Katonah I.
No consent is required for the replacement portfolio manager for Katonah II. If the required approvals are obtained, Katonah Capital intends to enter into sub-advisory agreements with the three firms. Each proposal is expected to take effect promptly after receipt of the necessary approvals.
"Given tightening interest rate spreads and the intense competition for loan and bond allocations, our investors feel that CDO investment managers with significant scale and whose organizations have broad relationships in the investment community offer the best alternative for the continued management of the funds," according to a statement from Katonah. A spokesman for Kohlberg in the statement adds, "Our confidence in these firms is demonstrated by the fact that Kohlberg affiliates have not, and will, not sell any of our equity investments in the various funds as part of this transition process. These firms will therefore be overseeing our investments as well as those of our fellow investors."
