Some people play golf or tennis as a hobby, but for Cheryl Carner shopping is her thing. So it wasn’t surprising when Carner, now a managing director and the national director of retail finance with CapitalSource, took a job in the executive training program at TJ Maxx right out of undergraduate school in 1991. Responsible for making sure all 400-plus TJ Maxx stores had the correct amount of merchandise, Carner was on her way to becoming to a fashion buyer.
But somewhere along the line Carner’s career path shifted, and in 2004 she found herself at CapitalSource. “If you had asked me in graduate school, I would have never envisioned that I would be a lender,” says Carner. “It’s been 14 years since I started in finance and it was a complete accident.”
Financing private equity deals may not have been on Carner’s list of dream jobs, but the role suits her. Carner has been heading up CapitalSource’s retail division, which certainly plays to her strengths. Recently she has helped finance Berkshire Partner’s buyout of Citizens of Humanity (a designer jeans company) and Bruckmann Rosser Sherrill & Co.’s takeover of The Marshall Retail Group (not to be confused with the department store).
While unexpected, Carner’s transition from fashion to finance was natural. After completing an MBA program at Babson College, Carner began working in the strategic planning division of Marshalls clothing stores (the department store). But in 1995 when TJ Maxx acquired Marshalls, Carner decided to explore different options. She came across Gordon Brothers Retail Finance, a finance company making asset-based loans to retail operations. The lender, which has since been subsumed by Bank of America, was looking for a person who had worked in the retail industry to help them navigate their way through the sector.
“They decided having a retailer on staff may help them mitigate some risks,” Carner describes. “I had my MBA and understood business fundamentals, but I didn’t have a background in lending. They took a risk.”
Carner’s experience at Gordon taught her the ins and outs of the asset lending business. She was soon appraising businesses and structuring transactions, and by 2003, she was leading the group. Still, Carner had spent little time working on LBOs.
“I had done a few transactions with private equity firms, but I mainly worked directly with companies, not financial buyers,” she says.
When an opportunity came about at CapitalSource, however, Carner jumped at the challenge. CapitalSource, which manages an asset portfolio of approximately $20.1 billion and has more than 550 employees, provided a destination where Carner really thought she could grow.
Her intuition, it turns out, proved to be right. “Cash flow lending and asset-based lending are very different, but I was confident that I could learn and I already had real industry expertise.”
Her solid business sense and passion for the retail industry proved to be a good fit for CapitalSource. And her deep industry knowledge has made her a go-to lender for investors in the industry.
“She understands the retail market very well and always does her homework,” says Steven Liff, a managing director with Sun Capital Partners. “She first looks to understand a businessits needs from a financing, investment and business standpointand then makes an informed business decision as opposed to looking at numbers on a page and making a quick judgment. And the latter approach is not atypical in the leveraged finance industry.”
Since joining in 2004, Carner has lent on a wide array of retail deals, and transactions involving clothing stores are just the tip of the iceberg. “I fell in love with retail when I was working a part time job in high school at a mall, but I read about a dozen deal books a week, and I am interested in all kinds of companies now. I like the retail space because it touches the consumer and I can identify with it. Everyone shops and eats at restaurants.”
As Carner’s interest in different facets of the retail space grew so too did CapitalSource’s business. In 2005, the lender moved into the casual dining space for the first time with an $83 million commitment to PNC Mezzanine’s buyout Au Bon Pain. “When I came here, CapitalSource was looking at retail, but they didn’t like to do restaurant transactions,” she says. “At the time restaurants were still quasi under banked.”
But getting comfortable with the Au Bon Pain deal took time, as the transaction was very complex in terms a tranches of debt and the amount of growth capital needed. But Carner felt Au Bon Pain had a lot of the characteristics that CapitalSource typically looks for: It’s a 30-year-old brand and provides a differentiated offering. “They are fast food with a focus on nutrition and a different flavor profile,” she says. “This was a big transaction in my career. We tried something different and it’s working.”
As for the retail space in general, Carner says everything is moving ahead. That doesn’t mean, however, that the ride is altogether smooth. Fall’s summer-like temperatures make it difficult for the consumer to get into the shopping spirit. “Everyone in the retail space is holding their breath waiting for the cold weather and an interest rate decrease. Nobody is expecting this year to be a blockbuster year, but holiday season has to be decent. The reality is that an eight-week period makes a retailer’s year,” she says.
Despite the potential troubles in the retail, the good news is that Carner thinks the financing landscape is leveling out. “The lending market was clearly in turmoil, but in the last 30 days the middle market has firmed up. Transactions are getting done, even if it’s with a little less leverage. The leverage levels earlier this year were not sustainable. The private equity community understands that,” she says.