Gryphon Asks LPs for a Loan

Middle-market private equity firms may have a new source of leveraged financing: Their limited partners.

Erin Griffith reports for Buyouts (sub req) that Gryphon Investors recently closed a series of transactions with debt provided by its own fund investors. The first was a purchase and merger of Accelerated Rehabilitation Centers and Occusport Physical Therapy, which included mezzanine notes from Gyphon LPs New York Life and Thrivent Financial (Orix led the senior facility). The second also was a mezzanine play, with New York Life and Northwestern Mutual Life helping to finance an add-on acquisition for Gryphon post-secondary education platform Delta Career Education Corp.

This sort of thing can technically happen whenever a buyout firm has financial firms among its LP base, but that’s usually a case of coincidence. Gryphon, however, went specifically to its LPs and asked them to contact their leveraged finance arms, which is unusual. We’ve seen it before in terms of equity co-invests, but not with debt.

Maybe a preview of things to come, particularly if debt continues to be hard to come by in the middle-markets…