Babson Capital's New Lending Group Starts Up
Mergers & Acquisitions talks to Babson managing director Ian Fowler about the new middle-market lending group
MassMutual, the parent of Boston-based investment manager Babson Capital Management LLC, is getting involved with middle-market lending through Babson's new arm, run by managing director Ian Fowler. The company already has a history of lending, through Antares, which was sold to GE Capital in 2005, and Babson, which has been providing mezzanine loans since the 90s.
Now that it's non-compete clause with GE Capital has expired, the company is ready to get back into the space by providing senior-secured loans through the new middle-market lending group.
Why are you launching it now?
There are two main reasons for it now: one is that our customers, middle-market sponsors, have been telling us they'd like us to get back in the market.
The second is that companies are looking for a stable source of capital. They know MassMutual has been a stable provider of capital in the space. From a market perspective I think we see a need for more capital. There are a couple reasons for that. There's a significant private equity overhang and a lot of capital that has been raised by PE firms that needs to be invested. There's also a lot of portfolio companies that need to be divested and sold.
From the regulatory side, if you look at Dodd-Frank and Volcker and Basel III, a lot of regulatory conditions will limit the traditional bank's ability to provide loans, and it creates opportunities for new players like ourselves to come into the market.
Underneath all of this, if you look at all the deals that were done over the last two, three, four years, all of these loans have to get refinanced over the next three or four years. It's over 400 billion in middle market loans that have to get refinanced.
Who do you expect to compete with?
We look at it in a couple of different ways - one is that there are various providers of capital in this space. We intend to partner with a lot of them. We're working with a number of finance companies and banks right now. If customers look to us to lead transactions, we will certainly lead those transactions.
What types of financing products are you looking to offer?
In my group, we're really focused on senior-secured loans. Most of them will be cash flow loans and we'll look at some asset-based loans to sponsor-backed middle market companies.
Has the new group extended any financing yet, and if not, when do you expect it to?
We're very close. We really launched last month and we have a full pipeline of opportunities. There are several transactions that we're wrapping up our due diligence on and we expect to close a few deals in the next month. Three deals should close in the next 30 to 60 days.
For more information on related topics, visit the following: