Golub Capital Plans $150M IPO For Debt Funds

Firm: Golub Capital

Division To Go Public: Golub Capital Partners

Proposed IPO Amount: $150 million

Price Per Share: Undisclosed

Underwriter: Wachovia Securities

Legal Counsel: Dechert LLP, Clifford Chance US LLP

Golub Capital Partners, a recently formed arm of mid-market lender Golub Capital, earlier this month filed for an initial public offering of common stock to the tune of $150 million. The public entity, a holding company for several Golub Capital funds, is slated to trade on the Nasdaq under ticker symbol GCAP.

Golub becomes just the latest private money manager to try to tap the public markets for cash. In February, New York buyout and hedge fund manager Fortress Investment Group (NYSE:FIG) became the first of its kind to go public via a largely successful $634 million IPO. Meanwhile, The Blackstone Group, also based in New York, has registered for a monstrous $7.75 billion public offering, which includes a $3 billion stake in the general partnership that’s to be sold to the Chinese government. And there’s speculation that other large firms, such as The Carlyle Group, aren’t far behind.

Golub Capital Partners’s primary holdings will be three investment vehicles, including the recently-closed, $1 billion Golub Capital Partners V LP. The other two funds include the $800 million Golub Capital Partners IV LP, vintage 2004, and Golub Capital International Ltd., which closed on $300 million in early 2006.

These funds are used to make debt and equity investments in middle market companies generating EBITDA of between $5 million and $40 million. The general partnership collects annual management fees of 1.25 percent of the value of each fund’s investments, and a 20 percent carried interest fee on net profits, according to the filing.

Through its funds, Golub Capital provides first-lien senior secured loans, second-lien loans, subordinated debt and one-stop loans, which are a mix of senior and subordinate tranches. Typical investments range from $5 million to $75 million.

The firm recently provided a $22.5 million subordinated debt and equity package to back Graham Partners’ buyouts of Atlas Aerospace LLC and Vitron Manufacturing Inc., and a senior secured financing tranche to support North Castle Partners’ dividend recapitalization of Octane Fitness Holdings Inc.

Golub Capital Partners also plans to acquire, for 40,000,000 of its common shares, equity interests in three Golub Capital collateralized debt obligation (CDO) funds and a 49 percent interest in GC Funding Warehouse Corp., a division of Golub Capital affiliated with a $300 million warehouse credit facility, according to the S-1.

The interests in the three CDO funds—Golub Capital Loan Trust 2005-1, Golub International Loan Ltd. I, and Golub Capital Partners Funding 2007-1 Ltd.—combined with the warehouse facility, will give Golub Capital Partners exposure to approximately $1 billion worth of credit assets, according to the filing.

Proceeds of the IPO will go toward paying down borrowings under the $300 million warehouse facility. Golub Capital did not disclose the expected price range for the common shares in the S-1 regulatory filing sent to the Securities and Exchange Commission. Wachovia Securities is serving as underwriter for the IPO.

Golub Capital was founded in 1994. The firm counts 55 employees, including 19 senior investment professionals, in offices in New York, Atlanta, Chicago and San Francisco. As of Dec. 31, 2006, the firm’s overall portfolio included more than $1.4 billion in loans and loan commitments.—A.N.