Bank of New York Forms SBIC Group for Sub Debt –

The Bank of New York has formed a new Small Business Investment Company that will act as a junior capital partner in private equity transactions.

BNY Capital Partners, L.P. will operate primarily as a mezzanine provider to financial sponsors, but also will make equity commitments, said Stratton Heath, the managing director that will head up the new effort. Mr. Heath would not disclose the capital base BNY Capital will have but said it will call down capital from the parent bank as needed.

“We will evaluate outside money down the road, but the current fund is proprietary,” Mr. Heath said.

The bank has participated in the private equity market since the mid-1980s, primarily as a limited partner, while dabbling in direct investing. Mr. Heath said the new vehicle formalizes the bank’s direct investing effort. Sample L.P. commitments by the bank include participation in Kohlberg Kravis Roberts & Co.’s 1996 and 1987 funds and Thayer Equity Investors IV, L.P. Mr. Heath said one thrust of the new effort will be leveraging relationships with financial sponsors, as well as garnering proprietary deal flow through business relationships from other facets of the bank’s operations.

BNY Capital Partners will invest in acquisitions, growth financing and recapitalizations in areas where the bank has experience. These sectors include general manufacturing, distribution, services, media and telecommunications.