Madison Capital, OFS Launch $225M Loan Vehicle

Madison Capital Funding LLC, the private equity financing arm of New York Life Investment Management Holdings LLC, signed a deal last month with middle market lender Orchard First Source Capital Inc. to create a new $225 million senior loan funding vehicle. And the firm said it’s open to doing more deals like this.

Madison Capital will take the new fund, OFS Capital WM LLC, and $45 million of equity from OFS, leveraging the money 4:1 through bank financing to create the $225 million of capacity, said Chris Williams, a co-founder and senior managing director at Madison Capital. “It allows us to take our hold sizes up significantly.”

The vehicle will enable Madison Capital to raise its loan investments up to $45 million. Today, the firm typically provides $20 million to $25 million per deal, sometimes as much as $30 million, Williams told Buyouts.

OFS, of Rolling Meadlow, Ill., declined comment. The firm, founded in 2000, typically makes loan investments of $3 million to $20 million, focusing on sponsor finance for companies with revenue above $30 million and EBITDA above $5 million, according to its Web site.

Madison Capital will manage the underwriting infrastructure for the new vehicle, Williams said.

OFS originally had planned a collateralized loan obligation structure for the new vehicle, but that market collapsed in the financial crisis, and OFS now has filed for a business development company license, Williams said.

“This investment will be the first deal for that entity,” he said. “CLOs are very complicated structures. This is very simple.”