Twin Brook Capital Partners grew significantly 2017, including doubling deal value from the previous year, raising a second fund of $2.3 billion, and building the three-year-old firm into a major source of loans in the lower middle market, earning the firm Mergers & Acquisitions' M&A Mid-Market Award for 2017 Lender of the Year. The Chicago firm is the middle-market direct lending subsidiary of Angelo, Gordon & Co., a $28 billion alternative investment firm focused on credit and real estate investing. Twin Brook was founded in 2014 by seasoned middle-market lenders Trevor Clark and Christopher Williams, who had previously co-founded Madison Capital Funding. Twin Brook announced recently that Williams has stepped back from his role to attend to a health issue with an immediate family member. We asked Clark about the firm's growth and its future.
Competiton among lenders is fierce. What differentiates Twin Brook from other lenders?
It is easy to boil down competition in lending markets to a simple formula of lowest price and highest leverage. While this might be the case for other lenders, our experience in the lower middle market has been much different. Private equity backed companies in the lower middle market require lending relationships that are active partners in the execution of their complex growth strategies. We believe a lender’s proven history of reliable execution is much more important than a 50bps savings in the cost of debt for a private equity group looking to double the size of their lower middle market company. The fact that the senior members of the Twin Brook team have been actively lending to lower middle market companies for over 15 years clearly differentiates us from other lenders. When you consider that our team has closed over 1,000 unique transactions over that period of time, has not moved “up market” like other middle market lending groups, and has been a consistent market participant even in times of market stress – it becomes clear that we have a model that is quite distinctive among the lending community.
Walk us through the growth Twin Brook has experienced since its founding.
We have experienced tremendous success in all phases of our business since our founding at the end of 2014. From the assembling of our 50+ person team in Chicago, to the closing of 191 unique transactions (deploying $5.7 billion in commitments), we are very proud of what has been achieved in a very short period of time.
What are the challenges of rapid growth, and how is Twin Brook meeting them?
The long-term success of a middle market-focused lending business will be driven in large part by the quality and discipline of its credit function in combination with the capacity to source high quality deal flow from a broad network. During times of rapid growth, lenders will sometimes be less disciplined in their credit review or loan documentation process for the sake of efficiency, which can lead to poor credit outcomes. Since the founding of Twin Brook, we have worked to establish a firm culture that follows a “credit first” mentality. This mind set has allowed us to avoid letting volume goals get in the way of proper credit decisions. We maintain this credit focus by investing in a deep and experienced team, having long-term incentives aligned between credit and origination and having a world class parent in Angelo Gordon that shares our long-term commitment to this asset class.
What can you tell us about the recent announcement regarding co-founder Christopher Williams?
In March, Chris stepped back from his role to attend to a health issue with an immediate family member. This said, Chris remains an employee of Twin Brook and actively involved on the investment committees on which he serves. It's business as usual at Twin Brook. I continue to lead our business, supported by a deep, talented team of over 50 professionals. We have the resources, experience and capacity to manage through Chris’s absence without impact, and we continue to thrive in today’s lending environment.
What are Twin Brook’s plans for future growth?
When we look at our plans for Twin Brook over the next five years a couple of themes emerge. First and foremost, we will maintain our unwavering support for our lower middle market-focused private equity clients – and expect to maintain our market position as one of the most active and respected lenders in this space. In addition, we have been approached by a number of different groups in regard to expanding the universe of transactions that we choose to pursue. We are continuing to evaluate these different market opportunities and would expect to see an expansion of the Twin Brook strategy at some point in the future.