GSC Capital Partners, which has more than $9 billion in assets under management, plans to recapitalize the company and convert from a partnership with a few owners to a more broadly owned entity, said Andrew Wagner, managing director and cfo. "The principle driver is to refinance the balance sheet and have common stock we can give out to the employees to better align interest with management," he said. Following the recapitalization, employees will own 88% of the firm. GSC had been contemplating the move for about a year.
Wagner could not comment on rumors that this may be the first step toward becoming public. "We have no plans to be public any time soon," he explained. "[But] it will be a lot easier to become public if we are a corporation." As a corporation instead of a partnership, the entity pays taxes as opposed to individual members. He admitted it was a tactic different than most asset managers.
GSC has grown from about 30 employees five years ago to more than 130 employees now. The firm is considering expanding into new areas, including the short-term distressed trading space. It has long been involved in controlled distressed investing over the long term, but has been toying with the idea of complementing that area with a more hedge fund-like approach. Wagner said if the firm does decide to make such a move it would hire some individuals with expertise in the area. He also thinks there are other areas of structured finance GSC may be interested in, such as synthetics and derivatives and said it may also be looking at more real estate opportunities as well.
UBS launched a $140 million deal to support the planned recapitalization and incorporation last Wednesday. The financing includes a five-year, $20 million revolver and a six-year, $120 million term loan "B." Price talk is LIBOR plus 3% on the revolver and LIBOR plus 33 1/2% on the "B" loan. The deal will pay out a $40 million dividend to legacy partners and will also be used to refinance GSC Partners' existing obligations by redeeming a portion of its Series A & B preferred partnership interests, fund general corporate purposes and pay related fees, according to Moody's Investors Service.