Contrarian Capital Vet Launches Credit Fund

Stephen Czech is a man on a mission. Just two months after leaving his post at Contrarian Capital Management, Czech is ready to launch his new credit fund.

With a headquarters in Stamford, Conn., and fundraising prospectuses drawn up, the new firm hopes to drum up $1 billion in commitments for the new vehicle, a source close to the situation said. Operating under the name SJC Capital Partners, the fledgling firm plans to employ an in-house fundraiser to generate the commitments over the next two to three years. SJC Capital seeks money from institutional investors, funds-of-funds managers and wealthy individuals and family offices.

SJC Capital intends to provide first- and second-lien capital to borrowers in North America and Europe generating more than $50 million in revenue and $5 million in EBITDA. The firm will provide debt to back leveraged buyouts, as well as to portfolio companies and public and private mid-market companies. The investment strategy would mirror that of Contrarian Capital’s lending arm, which Czech managed since Contrarian Capital tapped him five years ago to launch the effort.

The only difference between Czech’s new fund and the one he left is that Contrarian Capital Finance (the name of that firm’s lending arm) managed a $300 million to $400 million fund. SJC Capital is kicking that up to $1 billion. The firm believes now is an ideal time for such a fund, since competing lenders like CLOs and banks have experienced credit-crunch-induced liquidity shortages, our source said.

Czech, who spent much of his career at DLJ and Credit Suisse before joining Contrarian Capital Management, plans to tap Wall Street colleagues to build a team of senior leveraged finance professionals to manage the fund.

In the meantime, Czech is working to resolve a legal dispute with his former employer. Czech filed suit against Contrarian Capital’s head, Jon R. Bauer, over Czech’s unpaid compensation, which he claims he has been unfairly denied. Czech was dismissed after taking a five-week leave of absence when his son was diagnosed with an inoperable brain tumor. After his departure, Contrarian Capital offered limited partners the opportunity to maintain or withdraw their investments, and their decision to withdraw led the firm to disband the Contrarian Capital Finance fund, according to our source.

It’s unclear how the lawsuit will affect the new firm’s launch.

Czech declined to comment, citing the pending lawsuit. Likewise, Bauer and Contrarian Capital declined to comment.—E.G.