Fraser Sullivan Investment, the firm co-founded by John Fraser and Tighe Sullivan, has launched its first collateralized loan obligation, Fraser Sullivan CLO 1. The $500 million CLO will comprise roughly 90% senior secured first-lien loans and about 5-10% of high-yield bonds. Within the senior secured category there will be a standard bucket for second liens, but Sullivan said they will not be a large part of the portfolio. Deutsche Bank is underwriting the deal, which should be priced in mid-February. Sullivan said the equity and mezzanine pieces are well oversubscribed and the pair just got back from a marketing trip in Europe to discuss the top part of the capital structure.
Fraser is an Angelo, Gordon & Co. alumnus, who managed five leveraged-loan funds before he left the firm last April. Sullivan was most recently a managing director at Deutsche Bank in high-yield sales. Fraser is the chief investment officer of the firm and the portfolio manager, while Sullivan is the chief operating officer and in charge of trading. The new firm, officially started last summer, will be marketing a credit opportunity fund in the spring and plans on closing on the bottom money by summer 2006. In the fall they plan on ramping up the second cash-flow CLO. All three funds will be done with Deutsche Bank.
The bank was a natural choice for the firm because of Sullivan's relationship, as well as their reputation as a top-tier CDO writer. "When John and I got together there were a number of capital providers [looking to work with us]. We tried to figure out the best fit strategically and the best fit ended up being Deutsche Bank," he said.
The pair started their careers together 23 years ago at Chase Manhattan Bank and came close to going into business together five years ago, but the timing wasn't right, Sullivan said. "What I wanted to do for a long time was start a buyside firm with people I know and people I respected," Sullivan said. He said the timing was right for both of them personally and conditions in the market were also right. "We both had very successful careers at larger firms and it was time to start our own partnership with some very experienced credit professionals."
Along with Fraser and Sullivan, the firm includes three senior analysts and partners including David Endler, David Nadeau and Matt Sosland. Endler was most recently a senior analyst at Oaktree Capital Management; Nadeau was most recently a co-portfolio manager at Citigroup Global Investments and Sosland was an analyst at Bear Stearns Asset Management in the high-yield group. Heather McNally is the firm's operation manager, most recently working at Fortress Investment Group. The firm will be looking to hire three more analysts with about three-to-five years experience by summer.