Duke Street Capital, a U.K.-based private equity firm, is reportedly looking to sell its leveraged loan asset management business, which currently has just under $2 billion in loans under management. David Wilmot, a director of Duke Street, did not return immediate calls for comment.
The business was founded in 2000 and has raised two CDOs called Duchess 1 and Duchess II. Duke Street has opened a warehouse line with a bank to buy leveraged loans and will be on the road with the notes backing its third collateralized loan obligation this year (LMW, 12/15). The CLO will be called Duchess III and will focus on European and U.K loan assets.
A CDO analyst explained to sell a CDO business a firm should have at least three CDOs under management. "You need to build a franchise before selling," he said. Other CDO businesses that have been sold recently include Barclays Capital Asset Management's U.S. and European operations. MJX Asset Management and existing management bought the U.S. CDOs and Alcentra Asset Management bought the European arm. In the U.S., Allied Capital bought Callidus Capital Management (11/24) and Octagon Credit Investors is currently being auctioned off by J.P. Morgan Partners.
"[CDO businesses] set up by professionals in the industry have more chances to be sold," the analyst said. He added that unless the management changes, the impact on the notes is inconsequential. "What really matters is the skills of the people running the vehicle," he noted.