Amalgamated Bank, looking to pick up market share from lenders that have fled to the sidelines, last month launched Amalgamated Capital to provide senior cash-flow loans to help finance sponsor-backed deals valued at less than $150 million.
Timothy Clifford, formerly a managing director and principal at mid-market lender Churchill Financial, is taking the helm of the new lending arm as executive vice president and director. Clifford left his post at Churchill Financial earlier this year after the New York firm scaled back its origination efforts.
“Many of the lenders on the sidelines today are there because they’ve either funded themselves with short-term warehouse facilities or complex Wall Street instruments,” Clifford told Buyouts. “Our advantage here at Amalgamated Capital is stability. Our funding comes from a large retail depository base that’s long-term and sticky.”
Launched on Sept. 1, New York-based Amalgamated Capital hopes to cinch its first deal or two before year-end, Clifford said. Ideally, the lender would be sole lead arranger, or co-lead on sponsor-backed transactions involving companies generating EBITDA between $3 million and $20 million. Within those confines, Clifford said he has seen a lot of demand for senior cash-flow loans of between $15 million to $30 million, and the firm believes it can covers loans of anywhere between $5 million and $60 million. At the larger end of that spectrum, Amalgamated Capital would seek to either lead a club of lenders in the deal or participate as club member. The firm’s hold size: $5 million to $20 million.
Joining Clifford on the Amalgamated Capital team are Sean McKeever, also from Churchill Financial, and Shannon Smith, who switched to the lending arm from elsewhere in Amalgamated Bank. Expect another one or two hires before the end of the year, with more coming in 2010 as the firm grows, said Clifford, adding that the firm has no plans to open offices outside of New York.
Amalgamated Capital sees this as a particularly opportune time to expand in the mid-market leverage loan scene. Senior cash-flow multiples in the middle market range between 1.5x and 2.5x EBITDA, Clifford said, while mezzanine or some other form of subordinated debt can provide an additional 1x to 1.25x turns on top of that. Current base pricing on new loans typically ranges between LIBOR + 500 basis points and LIBOR + 700 basis points. Add to that a LIBOR floor of 150 basis points to 250 basis points, and upfront fees of between 150 basis points to 250 basis points, and you have typical senior loan pricing in the range of 8 percent to 12 percent range, Clifford said.
“That’s a pretty attractive risk-adjusted return for where you are in the capital structure,” Clifford said, adding that he expects those market terms to stick around for another year to 18 months.
Amalgamated Capital’s parent is no stranger to backing LBOs. In 2007, Amalgamated Bank was one of a long list of senior lenders that participated in the $8.3 billion buyout of food services provider Aramark Corp. led by
Amalgamated Bank’s most recent LBO-related lending activity came in March 2008, according to Thomson Reuters LPC, when it participated alongside Churchill Financial in the funding of Summit Research Labs Inc.’s purchase of Reheis Inc. Summit Research is a specialty chemical company that has been owned by