Investment bank SPP Capital Partners recently released a tombstone ad that serves as a sober reminder of our times.
Rather than advertising closed M&A transactions or new debt placements, the ad highlights five companies that have received help from the New York firm’s new Waiver, Amendment and Extension practice. SPP Capital professionals involved in the new practice serve as third-party advisers and negotiators to help companies avoid credit-related covenant breeches.
“Historically we did this type of work off the side of our desk, but, given the meltdown, this is the first year we dedicated a team to proactively offer our services to clients before bankruptcy counsel and creditor’s counsel get involved,” SPP Capital Managing Director Stefan Shaffer, told Buyouts.
The dedicated practice, a few months old, already constitutes about a third of the firm’s business, Shaffer said. SPP Capital Managing Partner Todd Kumble and Partner Don Graham oversee its day-today operations.
“There are a lot of deals that were done over that ‘06-‘07 vintage that are either kicking into their amortization schedule now or that just simply can’t hold on any longer under their current structures,” Shaffer said.
Twenty-year-old SPP Capital is already well-versed in the credit markets. The firm manages private capital formation—including the placement of senior and subordinated debt—for 11 North American banks, including US Bank, Comerica Bank and BB&T Capital Markets. The firm also has a stable of more than 40 equity sponsor clients.
Deal flow for the new practice breaks down about 50/50 between sponsor-backed companies and other clients, Shaffer said. In addition to simply providing advice, Shaffer said SPP Capital’s Waiver, Amendment and Extension practice also serves as an impartial bridge between the borrower and lender at a crucial moment for both parties. “Very often, by the time discussions reach forbearance or something along those lines, the relationships [between borrower and lender] have become frayed,” Shaffer said.
Shaffer sees the waiver, amend and extend practice continuing to grow through at least the first half of 2010. “For the most part this will be driven by macroeconomic conditions,” he said.