TPG Plans BDC For Mid-Market Loans

Private equity giant TPG Capital‘s special situations investing team is registering a business development company, it said in a filing, taking advantage of a gap in the market in providing capital to mid-market companies.

TPG Specialty Lending invests mainly in senior secured and mezzanine loans to middle-market companies, according to the filing.

Filing to be a business development company can bring the advantage of public liquidity and can also have tax advantages.

The Specialty Lending team is led by Co-Chief Investment Officers Alan Waxman and Joshua Easterly.

TPG said in a letter to investors last year that it hired Waxman, formerly a partner at Goldman Sachs specializing in distressed and asset-backed distressed markets, in order to build a debt investment team.

Waxman was the co-founder of the Goldman Sachs Specialty Lending Group and Easterly was the former co-head of the same group at Goldman.

TPG Specialty Lending is focused on companies with annual earnings of up to $250 million.

Business development companies are closed-end investment funds that are publicly traded on stock exchanges. Designed to provide capital to privately owned businesses, BDCs can provide both equity and debt financing.

TPG joins rival buyout firms in the BDC market. Apollo Global Management also has a BDC, Apollo Investment Corp., which provides subordinated debt and equity capital to middle-market companies. Kohlberg Kravis Roberts & Co. also operates one, KKR Financial Holdings LLC.

Separately, a number of private equity firms have either gone public or are making plans to list themselves. However, a source close to TPG said the firm itself has no plans to go public.

Blackstone Group went public in 2007, KKR became publicly traded in 2009 and Apollo is on the way to becoming listed. Carlyle is also considering going public, a source previously told Reuters.

TPG is one of the world’s largest private equity firms with assets under management of more than $48 billion.

Megan Davies is a Reuters correspondent in New York.