Bear Stearns Forms New Mezzanine Group

Bear, Stearns & Co. this month launched its mezzanine group in an attempt to take advantage of the debt market left behind by high yield issuers.

The firm?s Mezzanine Capital Group comes to market headed by Senior Managing Director John Sabre and Managing Director Alex Bolen, both of whom were founders of First Dominion, as well as Vice President E.G. Morse and Associate Dave Orth. Bear Stearns will provide initial capital for the group?s operations, although third party contributions are expected to follow.

“This is an effort to address the high yield market?s increasing reluctance to support deals less than $150 million in size,” Sabre said. “The high yield market has pulled away from that space because fund managers don?t believe they?re getting paid for illiquidity of issuances that are $150 million or less. Nonetheless, private equity firms will still have an appetite for that product, which has to be filled with another product, and that product today is mezzanine.”

Sabre, who was also a founder of Indosuez Capital, added, “We?ve been touting the one-stop shopping mantra for eight years now both at Indosuez Capital and First Dominion. We?ve had a high repeat rate of LBO sponsors coming back to us and we think they like it a lot.”

One-stop shopping institutions are designed to allow deal sponsors to go to one institution and check the debt capital requirements of their list, as opposed to refereeing a lot of the discrepancies that can break out in various parts of the capital structure.

The new mezzanine group will finance companies in all industries that are being accessed by the high yield market, including technology, telecom and general industrial companies.

Sabre added that Bear Stern?s deal flow “looks really good,” with a lot of it coming from the investment banking side. “We just started here Oct. 2 and a lot of investment bankers are calling us up and showing us new ideas.”