Another Middle Market Lender to Go Public

A number of managers are raising funds to make middle-market company loans, a niche seen as attractive in part because some of the hedge funds that used to be in the business retrenched or stopped operating after the crisis of 2008.

As a result there is less competition and borrowers are willing to pay relatively high rates, says an investor.

Managers that have private funds in this credit strategy often look to tap the public stock market. A recent example of this trend is Orchard First Source Asset Management,  which plans to convert an established  private fund into a publicly traded company.  Garrison Investment Group, founded by former partners at Fortress, is going the same route.

Middle-market companies have revenues of between $50 million and $300 million. Because the loans are small and the process labor intensive, large banks are not dominant in this niche, which has attracted hedge funds and loan securitization.

But collateralizing loan obligations have been more difficult since 2008.  Public markets offer stable capital; hence the public floats.

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