The firm, which has hired six new staffers, including a managing director, is near closing on a new $250 million fund to invest in credit, according to Theodore L. Koenig, the firm’s president and chief executive officer. “I envision this will be an opportune time for us to expand our business and take advantage of the market,” Koenig said.
The long-awaited fund could close in February, Koenig said. The firm, which has $500 million under management now, has been talking about returning to the capital market since November 2009. Monroe Capital also is working on two additional follow-on funds, which could close soon after the anticipated February closing. Koenig declined to discuss details of those funds.
In contrast to private equity funds, whose fundraising activities are large and infrequent, funds that invest in credit are typically smaller but their sponsors return to the market more often, Koenig said. “These are investors seeking strong current returns.”
Monroe Capital focuses on mid-market and lower mid-market companies, providing credit for buyouts, dividends, recapitalizations and deleveraging transactions. The firm, with offices in Chicago, Boston and Los Angeles, typically writes checks up to $30 million to $40 million for the senior and junior debt of borrowers in the United States and Canada with EBITDA of $5 million and up. The firm does 50 to 60 deals a year, and while it does syndicate some loans, it frequently will underwrite an entire transaction, including via unitranche financing, in which the firm provides both senior secured and junior secured debt. Monroe Capital also has the capacity to invest in the equity portion of the balance sheet.
Monroe Capital is currently lending at LIBOR plus 500 basis points and higher, and is seeing refinancing opportunities for banks that want to reduce their exposure to individual deals, Koenig said. In many cases, these were loans made in 2004 and 2005, toward the start of the asset boom of the last decade; with lending markets now recovering after the financial crisis, banks are interested in deleveraging their own positions, Koenig said. “You’re not going to see as much refinancing because of rates. It’s more because of leverage issues.”
In anticipation of a busy 2011, Monroe Capital has expanded its team with a number of new hires, including a managing director, Daniel M. Duffy, who previously was co-president of the corporate finance group and head of capital markets at CapitalSource Finance LLC of Chevy Chase, Md. The firm also named Sara E. Mongerson as director of institutional relationships and investor relations, Seth B. Friedman as operations manager, Jeffrey K. Williams as a vice president and Jeffrey M. Cupples as assistant vice president. Kyle A. Asher joined the firm as an associate. In addition, the firm promoted Alex Franky to director and principal; he joined Monroe Capital in 2005.