DeLucca Departure Leaves Katonah With Key Man CDO Headache

Joyce DeLucca has left Katonah Capital, which she formed in 1999 with Kohlberg & Co., to form Kingsland Capital and now three Katonah analysts and principals, Brian Carlson, Tom Liu and Robert Perry have also resigned, loan sources said.

  • 04 Feb 2005
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Joyce DeLucca has left Katonah Capital, which she formed in 1999 with Kohlberg & Co., to form Kingsland Capital and now three Katonah analysts and principals, Brian Carlson, Tom Liu and Robert Perry have also resigned, loan sources said. As first reported on Loan Market Week's Web site last week, sources familiar with the situation say DeLucca's departure was prompted by Kohlberg's attempts to sell Katonah's collateralized debt obligation management contracts to Allied Capital Corp.'s leveraged loan and bond management arm Callidus Capital Management.

Calls to Samuel Frieder and Christopher Lacovara, principals at Kohlberg and members of Katonah's management committee, were not returned. DeLucca, who was a managing principal and portfolio manager, did not respond to messages. Neither Rick Ivers, founder of Callidus, nor an Allied spokesman returned calls.

The departures could create a massive headache for both Kohlberg and Allied, as there are key man provisions in some of Katonah's six CDOs that have now been tripped, said sources. Kohlberg would be unable to transfer deals with the key man trigger to any firm without the consent of the investors, sources familiar with the situation said. Katonah manages approximately $2.25 billion in assets under management.

If the investors did approve a change of manager, there is a strong possibility they would go with DeLucca, who has been managing these deals, sources noted. The Callidus team is highly experienced and well regarded. Ivers and another co-founder, Mavis Taintor, were managing directors in the leveraged finance group at Credit Suisse First Boston. Taintor also worked at Salomon Smith Barney, where she was a founder of and ran the bank loan group with Ivers from 1996 to 1998. At Callidus, they also have the resources and platform of Allied to support the loan effort, said one loan banker.

But DeLucca has managed these deals for five years. "The likelihood of Callidus being approved is close to zero," another portfolio manager speculated. "If Allied wanted to buy they should have made sure [DeLucca] moved over to Callidus," he added. DeLucca is also said to have plans for managing fresh CDOs and already has in place a credit line, said a rival manager. "Joyce is top-notch talent," he added, noting that she will have no problems raising fresh capital.

  • 04 Feb 2005

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