Cerberus Expected To Consolidate Lending: Updated

Cerberus Capital Management LP is expected to consolidate its lending operations, sources told Buyouts.

The New York mega-firm offers leveraged finance through two affiliates, Ableco Finance LLC and Dymas Capital Management Co., as well as through its own Cerberus brand.

It was not clear whether both of the affiliates would be rolled into Cerberus, or whether the firm would maintain an independent identity for the lending operation. Either approach would have its drawbacks.

But the consolidation is “imminent,” likely to happen by mid-March, a rival lender told Buyouts, speaking not for attribution because of the competitive nature of the business. “They will no doubt consolidate.”

Part of the reason for acting now may be that Cerberus itself has become active again in the sponsor-finance market, said an investment banker who has done deals with the firm. And it may be because Cerberus has a degree of brand recognition that the affiliates lack, the banker said. “I don’t think anybody ever knew what Ableco and Dymas were.”

On the other hand, Cerberus as a lender has a “loan to own reputation” that could dissuade sponsors from doing business with it, because of the firm’s perceived unwillingness to be flexible if portfolio companies get into trouble, the banker said.

New York-based Ableco is an opportunistic lending company, formed by the management of Cerberus and Gabriel Capital Group, part of a hedge fund group headed by J. Ezra Merkin, whom Cerberus appointed as nonexecutive chairman of the lender GMAC in 2006 after the company’s spinoff from General Motors. (Merkin was removed from that post when the U.S. government took over General Motors in 2009, and Gabriel Capital was dissolved in 2008 after heavy losses in the Bernard Madoff fraud.)

Ableco invests in leveraged buyouts and leveraged “roll-ups,” bridge loans, recapitalizations, refinancing, debt restructurings, acquisitions and Chapter 11 reorganizations, including debtor-in-possession and exit financing, according to the Thomson One database.

Chicago-based Dymas was formed in April 2002 as a Cerberus affiliate by several former senior professionals from GE Capital’s Merchant Banking Group (formerly Heller Financial’s Corporate Finance Group), according to its Web site. Dymas provides senior, junior secured, mezzanine and equity capital.

Although Dymas’s Web site said it has successfully closed more than 100 transactions, totaling over $4 billion in commitments, both our sources said that Dymas functioned more as a sales arm for Ableco.

Representatives of Cerberus, Ableco and Dymas did not respond by deadline to requests for comment.

UPDATE: Cerberus declined comment.