New York Life Investment Management is forming a lending unit designed to fund middle market leveraged buyouts, said Hugh Wade, senior managing director. Madison Capital Funding will have the full backing of NYLIM with transaction sizes ranging from $15 million to $200 million, according to Corporate Financing Week, an LMW sister publication. Wade said the unit is similar to that of Massachusetts Mutual's Antares Capital.
NYLIM has been investing in bank loans but this will be its first venture into originating and structuring these types of bank loans, Wade explained. He could not elaborate on whether NYLIM has built its portfolio on the primary or secondary market. Madison Capital is most interested in more leveraged transactions, he added. Wade declined to say what average spread over LIBOR the firm would seek, adding that spreads would depend on the type of credit, market conditions and the type of company.
"We feel it is an excellent time to enter the leveraged senior debt market and this new business extends our service offerings to include yet another asset class," said Gary Wendlant, chairman and ceo of NYLIM. The company provides a greater ability to lead transactions and generate more fees, added Wade. The firm is making the move now because leveraged finance multiples are low while pricing is high, he explained. Many banks are pulling back from the leveraged lending arena as defaults wallop portfolios and exposure to certain sectors is topped out. That has created a void that insurance companies can fill. The asset class is attractive to insurance companies because they are not bound by the same stringent capital requirements as banks, he added.
Madison Capital, based in Chicago, has six founding partners. Joining Wade are Terry Capsay, Trevor Clark, Tom Klimmeck, Craig Lacy and Chris Williams. The six had worked together at Continental Bank, prior to it being bought by Bank of America, and have been in the leveraged finance business for between eight and 16 years. The company expects to close on its first transaction in mid-April and its pipeline is rapidly growing, Wade said. He declined to comment further.