We’re hearing about layoffs and office closings at Orix Capital Markets, Bank of Ireland, Newstar Financial and National City. That’s in addition to the cuts we recently reported at Churchill Financial and Freeport Financial.
To be more specific:
Bank of Ireland laid off 10% of its staff around a month ago, a source close to the situation said. It doesn’t plan any further reductions, and has around 30 on its staff now. The layoffs are concentrated in the origination side and were driven by a lack of deal flow. Bank of Ireland declined to comment.
Orix Corporation, a Dallas-headquartered lender, shut down its Chicago operations and consolidated much of its New York middle market leveraged lending staff in Dallas, two sources said. The firm didn’t return calls by press time.
NewStar Financial, a Boston-based commercial finance company, laid off a handful of originators who were working from their home offices in Chicago, South Carolina and San Diego, two sources said. The firm didn’t respond by press time.
National City held layoffs last Thursday, letting go both originators and portfolio managers in Cleveland. The layoffs affected much of the middle-market sponsor group, a source said. National City declined to comment.
This all doesn’t bode well for the middle market lending world, especially when considering the distress recently experienced by BDCs like: American Capital, which is expected to request another waiver on its credit facility; Allied Capital, which recently defaulted on its revolving credit facility; and CapitalSource, which would have done the same had it not obtained a waiver from Wachovia Corp. and Bank of America, peHUB reported.
But for buyout pros seeking finance, it’s not the end of deal-doing. The layoffs don’t necessarily indicate a lender is in distress; it means there’s no deal flow. Lenders are experiencing the effects of the empty pipeline, a ripple effect of the Lehman Brothers crash. Until companies feel comfortable enough to start selling, M&A action will remain motionless, and the private equity money on the sidelines will continue to do just that.
If anyone has further info, including names or offices, let us know anonymously via our tip line.