By Jonathan Schwarzberg
NEW YORK, Dec 3 (Reuters) - Credit asset manager Golub Capital is looking to take advantage of volatility in the leveraged loan market to expand its business into larger deals such as healthcare analytics provider MedAssets' US$2.7bn leveraged buyout by private equity firm Pamplona Capital, which is the firm's biggest deal as an arranger.
The MedAssets deal comes at a time when banks, hit by increasing regulatory scrutiny, have been forced to sell loans for lower-rated companies at deep discounts due to market turbulence as investors have grown selective and risk averse since late August.
A US$1.5bn buyout loan for department store Belk priced at 89 cents on the dollar on Nov 18 while a US$5.5bn buyout financing for software company Veritas was postponed on Nov. 17.
Although banks remain under pressure amid tough market conditions, Golub Capital is viewing this as an opportunity to step up and work more closely with private equity sponsors.
"We like choppy markets because it makes our value proposition more compelling," said David Golub, president of the firm. "This is a good market for us."
The firm takes a different approach to many banks involved in broadly syndicated deals as Golub Capital is comfortable underwriting deals to syndicate as well as buy and hold positions.
LARGEST DEAL
Although Golub is not leading MedAssets' US$1.73bn buyout financing, the deal is the largest on which the firm has taken an arranging role, as non-banks continue to take ground from traditional arranging banks.
The firm has been developing its distribution capability and strengthening its team and announced that it had hired Joe Wilson from Citigroup (N:C) as head of sales and trading in early November.
"We've been taking steps to position ourselves to be an even more strategically valuable partner to private equity firms," said Golub.
Golub is providing commitments to the MedAssets deal and helping to arrange the financing through subsidiary GCI Capital Markets along with Barclays (L:BARC), Morgan Stanley (N:MS) and Macquarie.
The financing commitments include a US$1.13bn first-lien term loan and a US$500m second-lien term loan, alongside a US$100m revolving credit facility. Pamplona has agreed to provide up to US$1.238bn of equity financing.
The deal is not a simple buyout financing. As part of the deal, Pamplona is selling the target's spend and clinical resource management unit to healthcare services company VHA-UHC Alliance when the buyout closes, which was attractive to Golub.
Pamplona will hold onto the revenue cycle management part of the MedAssets business and combine that with the private equity firm's portfolio business Precyse.
"What you end up with at the end of the day is a credit that is much more typical of our upper middle market clients," Golub said.
Golub has also acted as an arranger on recent buyouts of Shoes for Crews and Affordable Care in the upper middle market sector, an area that has seen stiff competition from corporate buyers but is still producing deals.
"Middle market and upper middle market sponsors are struggling a bit with competition from strategic buyers, but I think in both markets there are interesting deals that are getting done." (Editing By Tessa Walsh and Jon Methven)