Ares Management has signed an agreement to acquire the asset-based lending portfolio of First Capital Holdings, a commercial finance company and a portfolio company of H.I.G Capital that provides asset-based loans and factoring to small and middle-market companies. This transaction is expected to close during the second quarter and will be funded by Ares with a combination of debt and equity. H.I.G Capital, Morgan Stanley Alternative Investment Partners, and JP Morgan Asset Management acquired a majority stake in First Capital’s common stock in May 2010.
“This acquisition is another important milestone in the continued growth of the commercial finance platform within the Ares Direct Lending Group,” said Mitch Goldstein, Senior Partner in the Ares Direct Lending Group. “We have a long held view that commercial finance is an important and growing sector that requires a broad and strong direct lending platform like ours in order to originate, underwrite and service loans.”
First Capital provides working capital financing to small and middle-market companies engaged mainly in manufacturing, distributing and business services with annual sales greater than $1 million. Lines of credit are in the form of asset-based loans, factoring or invoice purchasing arrangements ranging from $200,000 to $25 million. First Capital was formed in 1988 and is headquartered in New York with additional offices in Atlanta, Boynton Beach (located north of Boca Raton), Chicago, Dallas, Los Angeles, and Oklahoma City (www.firstcapital.com).
With this transaction, the Ares Commercial Finance platform, which is part of the firm’s Direct Lending Group, will have approximately $700 million of loan commitments. The Ares Commercial Finance team, which has seven US office locations, will be expanded with members of the First Capital investment team.
“We are pleased to acquire this high-quality portfolio, and we welcome the team from First Capital,” said Jack Reilly, a Partner in the Ares Direct Lending Group. “We are excited to have the expertise of the First Capital team, which we believe will be highly complementary to ours and will help us achieve further success and scale in our commercial finance business.”
The Ares Commercial Finance platform provides asset-based and cash flow loans to small and middle-market companies, as well as asset-based facilities to specialty finance companies. Asset-based lines of credit may be structured as working capital financing, special accommodation financing, turnaround financing, debtor-in-possession financing, acquisition financing and specialty lender financing. Target credit facilities range in size from $1 million to $30 million, are typically held to maturity, and are not dependent on syndication for approval.
“Investors continue to benefit from Ares’ ability to provide a broad array of credit strategies, especially in sectors where banks are increasingly either unable or unwilling to provide sufficient capital to companies or sponsors to meet the demand,” said Michael Arougheti, President of Ares Management. “We expect to continue to expand our commercial finance platform in order to meet the evolving needs of our investors for attractive and differentiated investment alternatives.”
Ares Management has $86 billion in capital under management and invests in private equity, leveraged loans, high-yield bonds, distressed debt and private debt. The firm is headquartered in Los Angeles (www.aresmgmt.com).
H.I.G. Capital specializes in providing capital to small and medium-sized companies and invests in management-led buyouts and recapitalizations of manufacturing or service businesses. H.I.G. Capital has more than $17 billion of capital under management. The firm was founded in 1993 and is based in Miami with additional offices in Atlanta, Boston, Chicago, Dallas, New York, San Francisco, London, Hamburg, Madrid, Milan, Paris, and Rio de Janeiro (www.higcapital.com).
© 2015 PEPD • Private Equity’s Leading News Magazine • 4-20-15