1. On July 1 the firm announced an equity investment in JDC Healthcare. What was the attraction to this deal?
The business has been around about 40 years. It’s a dental practice management business primarily focused on Hispanics in the Dallas-Fort Worth area. We’ve looked at this space over the last year and a half and this is the best company we’ve seen. It has very attractive unit economics and growth: Both revenues and EBITDA are growing at double digits. There are 23 locations and we think we can open more in Dallas-Fort Worth and also more around Texas.
2. Your firm engages in control and non-control private equity investments as well as structured debt investments. Why have such a varied strategy?
My partner and I, Mark Lanigan, come out of an investment banking background, we were at Drexel [Burnham Lambert], then DLJ [Donaldson, Lufkin & Jenrette], and then Credit Suisse. Our view is that, depending upon the situation, the company and the market, different opportunities require a different tool kit. When we raised our fund, we wanted the ability to have as many tools in a given situation as we possibly could. For most of our fund life the debt markets were extremely attractive, so most of our investments have been equity investments. Currently we’re looking at a lot of things that are more debt-oriented because the environment’s changed.
3. On what types of investments are you spending most of your time?
The capital markets have changed a lot. We’re not seeing a lot of down-the-middle buyouts. We’re working actively on situations now that I would describe as good businesses with issues around their balance sheet, where there’s too much leverage and they need a solution. The other type of deal is along the lines of JDC [Healthcare]. That deal fits another bucket, which is a good business that’s growing despite the economy. Good, growing businesses still need capital, and capital’s scarce right now..
4. Which sectors of the economy are attractive right now?
We’ve invested across a pretty wide swath. We’re still nervous about consumer-facing deals. Having said that, one of our best performing deals is Logan’s Roadhouse, a restaurant chain primarily in the Southeast that’s doing quite well.
5. Are you still affiliated with Canyon Capital Advisors?
We started Black Canyon in 2004 in partnership with Canyon Capital, a large hedge fund based in Los Angeles, and for the first two years we invested capital out of Canyon [Capital]. I don’t remember the dollar amount, but it was probably close to $500 million off Canyon’s balance sheet. Then we agreed to raise this private equity fund,