The Distressed Debt Report - February 21, 2006

Big I-Banks Bringing More Groups Into Middle Market Second Liens

The $170 million in syndicated second lien financing that Goldman Sachs Credit Partners arranged for J.L. French Automotive Castings two years ago probably looked like a good deal at the time. Now it looks as if the financing may have contributed to the chain of events that will cause J.L. French’s parent company to lose control of the auto parts firm. Full Story

Lenders see opportunity in the ongoing explosion in retail lending, despite the low margins that the sector offers. The volume of asset-based loans of more than $50 million each to U.S. retailers surged to $16.6 billion last year, from $10.9 billion a year earlier, according to Standard and Poor’s Leveraged Commentary & Data. The survey encompassed retail originations reported to S&P, excluding restaurants and retailers that only sell food or drugs. Full Story

A new fee that the Small Business Administration is proposing could lower returns for mezzanine funds operating under the SBA’s Small Business Investment Company debenture program. “The potential for harm is great and the proposal seems very ill-conceived,” said Lee Mercer, president of the National Association of Small BusinessInvestment Companies, or NASBIC, a Washington-based trade group. Full Story

• Babson Closes $1B Mezzanine Fund
• Holtzman, Prentice Use $50M in Loans to Win Whitehall Bidding
• Ontario Teachers Invest $700M in York Street Fund
• Allied Provides $164M for Hot Stuff Foods Buyout
• MCG, Ares Provide Sub Debt for OnCURE Acquisition
• MBNA Partners with Venture Fund
• Hirings and Firings

Bonus compensation rose about 10% on average last year for executives in the secured lending units of the largest banks. Senior loan originators at middle market banking units reaped base salaries ranging from roughly $100,000 to $130,000, plus a bonus ranging from 15% to 30%, said John Morris, a headhunter for global recruitment firm MRI Huntsville Executive Search. Total compensation by his estimate ranged from $115,000 to $169,000. Full Story