Churchill Pacific Asset Management, the new entity to be formed through Churchill Financial's planned acquisition of Centre Pacific, will market a new collateralized loan obligation this fall. The Centre Pacific team is currently in the process of warehousing assets for the new vehicle. Churchill Financial announced last week it was acquiring Los Angeles-based Centre Pacific, a collateralized debt obligation manager that has $3.5 billion in assets under management (www.creditinvestmentnews.com). The firm will continue to work as a standalone asset manager. A purchase price was not disclosed.
The new CLO will be a traditional cash flow deal, similar to those that Centre Pacific has historically managed. It will be the first product done under the Churchill Pacific name. Ken Kencel, ceo of Churchill, anticipates the group will do its first middle-market CLO in the first half of 2007. Heather Creeden, ceo of Centre Pacific, was traveling and could not be reached. Kencel declined to comment about the CLO the firm is currently warehousing.
Centre Pacific first wrote to note holders and investors explaining that the management team along with Centre Partners Management, was evaluating a range of strategic alternatives regarding the future development of the firm. It hired Bank of America to assist in that process. Centre Partners, which is Centre Pacific's primary owner, will be an investor in Churchill Financial. In turn, Churchill Financial Holdings will contribute equity to future vehicles done by Churchill Pacific.
Centre Partners had been actively speaking with potential buyers when Churchill became aware of the opportunity in May and contacted the firm. Other interested buyers could not be determined. But it was not until late July, early August that the two parties began serious discussions. They entered into a letter of intent in August. David Jaffe, managing partner at Centre Partners referred calls to Robert Juneja, managing director and partner at Bear Stearns Merchant Banking who serves on the board of Churchill Financial. Juneja did not return a call by press time.
Kencel said Centre Partners was looking for a firm that could expand on its syndicated loan focus to include mezzanine financing, middle-market lending and even potentially distressed investing. "It was recognized pretty early on, from the initial meetings, that we brought something unique to the table," he said. "We could bring a very active pipeline of middle-market transactions that they would have the opportunity to review and participate in from a strategic standpoint."
Churchill was formed in February by Bear Stearns Merchant Banking and Churchill Capital and focuses on providing senior and mezzanine debt financing to smaller middle-market companies. Speaking in April, Kencel said the firm was looking at the CLO space and he anticipated it would launch its first CLO sometime between October and January 2007 (CIN, 4/28). It did not have a CLO group so this was an opportunity to bring on a whole team.
The management team at Centre Pacific will stay in place and join Churchill Pacific, which will remain in Los Angeles. Centre Pacific was formed in 2000 by a Transamerica team. It will be led by Creeden with other senior members including: Stephen Ahern, John Casparian and Kevin Hickman. Centre Pacific has closed seven CDOs, most recently Trinity CDO, a $300 million mezzanine asset-backed obligation. It also operates a $150 million total return swap facility. Its other portfolios include three CLOs, two collateralized bond obligations and a $1 billion collateralized synthetic obligation.
