- Five-year alliance with CIFC Corp.
- CIFC to manage GE Capital’s CLOs
- GE Capital gets seat on CIFC board
GE Capital Corp. could step up its corporate lending, including to sponsor-backed borrowers, by working with a CLO specialist to bundle up its loans for sale to investors in the secondary market.
CIFC Corp., a publicly traded asset management company, announced in July that it had formed a five-year strategic partnership under which the two companies would work together on mutual business opportunities. Peter Gleysteen, chief executive of CIFC, told Buyouts that the arrangement would give his company upstream access to bank loans originated by GE Capital, a commercial finance company that received a bank holding company charter in the wake of the financial crisis.
“This brings in more institutional investment capacity alongside their origination platform,” Gleysteen said. He said he believed his company was the only CLO packager who had such an arrangement with a loan originator. Collateralized loan obligations bundle bank loans and similar credit instruments for sale to institutional investors, freeing the originator’s balance sheet to make additional loans.
CIFC is one of the largest loan managers globally, with $10.3 billion across 28 CLOs, and the largest specialist in managing senior secured corporate loans, Gleysteen said. As part of the affiliation with GE Capital, CIFC will take over management of four GE Capital CLOs with $700 million of assets. GE Capital also will receive 1 million shares of CIFC common stock, along with warrants to purchase two million shares of a newly created class of non-voting CIFC preferred stock, $4.88 million in cash from CIFC, and a seat on the CIFC board.
In exchange, CIFC and GE Capital will form a “commercial council” to consider joint opportunities, with Gleysteen and Neeraj Mehta, a GE officer, acting as co-chairs of the council.
“This aligns GECC with a broad market structural trend that is accelerating,” he said. “The banks, including GECC, originate the credits, but most of the money needs to come from someplace else. The more you can integrate that into the business model, the better it will be.”
The transaction is expected to close in September. Berkshire Capital Securities advised CIFC on the transaction.