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Tall Tree Ramps Up First CLO

Tall Tree Investment Management, a new firm comprising former staffers of Van Kampen Investments/Morgan Stanley Investment Management, is preparing its first collateralized loan obligation.

Tall Tree Investment Management, a new firm comprising former staffers of Van Kampen Investments/Morgan Stanley Investment Management, is preparing its first collateralized loan obligation. The Chicago-based group is putting together a $300 million deal called Founders Grove CLO Ltd. Along with its first CLO, Tall Tree is currently in the process of completing due diligence to award a $400-500 million widely syndicated collateralized debt obligation to an underwriter, said William Lenga, ceo. He said he hopes to open a warehouse for that fund in January and expects it will close in mid-2006, depending upon market conditions.

Along with Lenga, the group includes: Bradford Langs, Michael Starshak, Douglas Winchell, Sean Kelley and Blaine Reed, all of Van Kampen. Orlando Purpura joined from AllState Investments, where he was a portfolio manager, but he previously worked at Van Kampen from 2000-2003 as an analyst. Brian Buscher, Frank Sherrod and Zara Tan work on the operations side.

The group opened the warehouse for Founders Grove in September and has been acquiring assets since then. The Goldman Sachs-underwritten CLO is a single-investor deal, so the group is just doing a debt placement. Lenga estimated it will have about a $50 million revolving feature within the capital structure and said it will also have a substantial bucket for second-lien loans. It will also be able to buy delayed-draw term loans, letters of credit facilities, debtor-in-possession loans and also has a small bond capability and the ability to buy foreign loans. The group had not worked with Goldman before, but Lenga said the decision to use that bank was based on where the equity for the fund is coming from.

The group has an initial equity commitment sufficient to raise between $800 million and $1.5 billion of CLO assets and plans to do about two deals a year until the firm gets to that $1.5 billion level, around early 2007. It then intends to extend its issuance platforms to include other credit portfolio management opportunities in the form of credit opportunities funds, distressed debt funds, separately managed accounts, retail closed-end funds and sub-advisory accounts. Lenga said the group hopes to move on to a credit opportunities hedge fund so the firm has greater flexibility.

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