David L. Babson & Co. is spreading its wings. The Mass Mutual subsidiary is looking to play in Europe. The firm has bought Duke Street Capital Debt Management, an investor in the European leverage loan market. Duke has more than E1.5 billion in assets under management and was brought to Babson’s attention when it led the negotiations of another deal Babson was involved in.
“We have been looking at the leveraged loans business in Europe for years. The key was finding the right people at a local level. We did that with Duke,” says Roger Crandall, a managing director with Babson.
Duke invests in senior loans, mezzanine loans and buyout-related high-yield bonds. The firm has raised two funds and is looking to close on a third this summer. Its first fund, Duchess I CDO, S.A., closed with E1 billion, and its second, Duchess II CDO, S.A., closed with E550 billion. Its third fund, a Collateralized Debt Obligation fund (CLO), and is expected to bring in about E450 billion. Duke’s investments are split 50/50 between the U.K. and the rest of Europe.
While the Duke name is most likely going to change to Babson by the end of the summer, the two entities are expected to remain completely separated. “We are planning on continuing the existing business and growing it. It doesn’t make any sense to do anything else. Babson and Duke are in different markets. The buyout market has been growing in Europe and there are a lot of financing opportunities. We expect that to continue to be strong,” said Crandle.
Despite having an infrastructure in Europe, Babson’s newest fund, Tower Square Capital Partners L.P., will stay focused on the U.S. and Canada. Raised in February, Tower is already 40% invested and invests in mostly manufacturing-type companies. The fund focuses on leveraged buyouts, recaps, and growth financings of small- and medium-sized businesses.
Tower was the firm’s first mainstream alternative investing effort, however Babson’s parent company is Massachusetts Mutual Life Insurance Co., which has raised other private equity funds in the past.
While Babson was raising the Tower fund, the firm made trips to Europe and Asia and while the fund managed to garner some capital in Europe, it had no luck in Asia
Tower’s LP base is mainly made up of big institutional investors from North America. There are also some high-net-worth individuals and foundations on board.