Cerberus Capital has snared a team of ex-Heller Financial pros to form Dymas Capital last week, and is gearing up to fill the void created by lender withdrawals for private equity middle-market deals. Explaining the timing and strategy of forming Dymas, Andy Marek, managing director, said, "There are not many cash-flow lenders serving the middle-market. There have been some new entrants but the foreign banks and domestic institutions have retrenched." The private equity firms are flush with cash right now and they need debt-capital, noted Al Ricchio, also a managing director at Dymas.
Difficulties encountered after the late 1990s era of high leverage levels has caused double-digit withdrawal from lenders and the market is now underserved, Marek believes. Lenders struggling with portfolio issues and the effects of banking consolidation have left a liquidity void in cash flow lending, he added. Ken Leonard, managing director, said, "Demand will fluctuate with the economy." Many sellers are sidelined right now, but we expect middle-market demand to pick up either as the economy improves or as companies are forced to sell. Leonard previously led GE Capital's merchant banking syndications team after GE acquired Heller.
Over the next few weeks the unit will look to round out a team of up to sixteen professionals with four additional hires. Other ex-Heller pros on board include Liz Price and Tim Davitt, who are senior directors, and Chris O'Donnell and Jackie Hermie as directors. Dan Lee has also been hired from Salomon Smith Barney as a director. The Chicago-based team will look to work with private-equity sponsors nationwide, providing cash-flow, asset-based loans, sub debt and co-invested equity capital. Most industries will be covered, though there is some reticence over startups and healthcare companies with reimbursement issues. There are already a couple of deals in the pipeline, Marek said. "Our initial funding is coming from Cerberus," he added. "In the near-term, Cerberus will also be evaluating the execution of a CLO as a means to more efficiently deploy its capital on a leveraged basis," he added.
Dymas' entry occurs after another team of Heller vets, including Robert Radway, moved to Merrill Lynch Capital at the start of the year (LMW, 1/21). Other recent entrants include Royal Bank of Scotland, Madison Capital Funding and RBC Capital Markets. The Merrill Lynch team will chase the relationships formed at Heller, he acknowledged, but should also be seen as complimentary. The introduction of more players will assist liquidity, he noted.