Tree Line Capital has partnered with Enhanced Capital to launch a lower middle-market direct lending platform for businesses with EBITDA of $2 million to $20 million. The new lender will be led by founding and managing partners Tom Quimby and Jon Schroeder.
According to Messrs. Quimby and Schroeder, over the past 20 years, commercial bank consolidation has resulted in reduced participation in the business loan markets and especially the lower middle market. Billions of dollars of lending capacity has exited this sector, despite a large supply of borrowers in need of private capital to finance growth.
“There are many high quality and growing businesses that are not being adequately served by traditional lenders. These businesses require a lending partner that can provide long-term support in all phases of a cycle,” said Mr. Quimby. “Direct lending is a relationship business, and Tree Line Capital was formed to offer borrowers and sponsors a flexible, patient, and cycle-supportive approach,” he concluded.
Tree Line invests from $5 million to $50 million in North American companies with revenues of $15 million to $250 million and EBITDA of $2 million to $20 million. The types of facilities offered include first lien, second lien, unitranche, mezzanine, and equity co-investment. Sectors of interest include industrial, energy, business services, consumer & retail, healthcare, aerospace & defense, and manufacturing.
“We provide our investors access to a unique market segment that offers favorable risk-adjusted returns through the construction of a portfolio of senior secured loans,” said Mr. Schroeder.
Tom Quimby and Jon Schroeder have extensive asset management experience which provides Tree Line with access to broad market relationships, deal structuring expertise, and rigorous underwriting and portfolio management. Tree Line Capital Partners is based in San Francisco (www.treelinecp.com).
“We are very excited to welcome Tree Line into the Enhanced Capital family of funds. Enhanced Capital is now able to offer our investors an additional product that complements our existing suite of current income and credit focused solutions. We believe this will be a differentiating factor as we continue to build our brand and distinguish ourselves from our competitors,” said Michael Korengold, President and CEO of Enhanced Capital. “The management team at Tree Line is well known in direct lending and we are excited to work in partnership to build a leading direct lending platform.”
Enhanced Capital is a diversified private investment firm focused on investing in small and mid-sized companies overlooked by traditional sources of capital due to location or size. Since 2000, Enhanced Capital’s funds have financed businesses through a variety of state and federal public-private investment programs, including its federal SBIC fund which invests from $3 million to $20 million per transaction in companies with revenues of at least $10 million and EBITDAs of at least $2 million. Enhanced Capital is headquartered in New York (www.enhancedcapital.com).
In 2013, Stone Point Capital, which is the manager of the Trident Funds, acquired an equity interest in Enhanced Capital. Both the Trident Funds and members of the Enhanced Capital management team are part of the Tree Line investor group.
2014 PEPD • Private Equity’s Leading News Magazine • 10-20-14
