Two banking veterans are teaming up to start a specialty finance company called Novus Capital. Tim Conway, once head of loan syndications, high-yield bonds, asset-backed securities, acquisition finance and merger advisory at FleetBoston Financial Corp.'s Fleet Capital Markets, and Peter Schmidt-Fellner, former co-head of high-yield origination and co-head of sales and trading for both investment-grade and high-yield for J.P. Morgan, are behind the new Boston-based company. Novus is in the fundraising stage.
Novus will operate in three different areas--middle-market lending, real-estate lending and the asset-backed business, stated Conway. He explained that a significant vacuum caused by banking consolidation is spurring the business. "We see huge opportunity in these markets and we have put together a very good team to attack the markets. We have the best team in the business," Conway proclaimed. Novus will comprise between 50 and 100 people, but he declined to name individuals hired so far.
Capital Z Financial Services Partners, a private equity firm focused on the financial services industry, is the lead sponsoring investor, noted Mani Sadeghi, a partner at Capital Z. "The goal is to be a significant participant in these markets, but significant in niche areas," Sadeghi said. Funding is coming from the Capital Z Financial Services Fund II, a $1.84 billion fund. Sadeghi would not say what investment Cap Z has made, but he noted that other private equity funds are expected to invest in the new business. In addition to private-equity funding, Novus anticipates using CDO/CLO technology to fund itself. The aim though is not to be a CDO business, Conway clarified. Novus is expected to be up and running in three months.
Firms such as Merrill Lynch Capital have been built in recent years to tap into the middle-market and several Wall Street veterans have moved to set up funds or firms in an attempt to fill a perceived void. Last year GoldenTree Asset Management, which is raising a middle-market fund, lured Jonathan Ezrow, who was co-head of high-yield capital markets at Credit Suisse First Boston. Friedberg Milstein, a New York-based institutional asset manager, recently hired Eric Green from J.P. Morgan Partners as a senior partner, to launch a fund. Conway believes that more capital has come out than has gone back in and the small handful of new entrants is a positive that provides liquidity.
Schmidt-Fellner left J.P. Morgan last May. A 22-year veteran of Wall Street, he was one of the founders of the high-yield business at Chemical Bank. Conway left Fleet in 2002. Prior to joining Fleet he ran the loan business at Citicorp. The two worked together at Citi.