Lynn Tilton is on a mission. Each day the founder of distressed buyout firm Patriarch Partners hears from more than 20 worthy middle market companies in need of rescue financing.
The high volume is due, in part, to the lack of access to capital for middle market companies. They are too small to qualify for money from government plan TARP, and traditional sources of capital for middle market companies have retreated from the market to lick their wounds.
Tilton has a solution to the middle market capital drought which involves using money allocated for PPIP alongside cash from private investors. She’s proposed the plan, called SME Rescue Loans Program, to the Treasury and White House in a white paper (posted below). I spoke with her about the plan’s terms, incentives, and status.
PPIP hasn’t exactly gotten off the ground. Why will this plan be more attractive to investors than PPIP, particularly since it gives the first loss to private investors?
The reason PPIP hasn’t gotten off the ground is not because it hasn’t been attractive to investors. The problem is that you’re not getting banks to sell their mortgage assets because they’ve been given TALF, and so they’ve been able to take themselves out of the mess they were in. They’re not looking to sell their mortgage assets at a discount.