Amalgamated builds up PE lending arm

The bank’s transition into asset-based lending for private equity-backed deals could be part of a niche financing trend for medium sized banks, says Amalgamated investor Wilbur Ross.

Amalgamated Capital, the leveraged finance division of Amalgamated Bank, has expanded its product offering to include both leveraged cash flow and asset-based financing to back private equity deals with transaction sizes between $5 million and $15 million, the bank said in a statement. 

Amalgamated Capital will combine its leveraged finance capabilities with asset-based lending to focus on lower mid-market and middle market companies with revenues between $50 million and $200 million. Around 40 percent of its asset-based originations come through private equity sponsors, executive vice president Robert Love said in a statement. 

The labour union-owned bank’s announcement comes just weeks after it received a $100 million equity commitment from WL Ross & Company and The Yucaipa Companies in exchange for a 40 percent stake in Amalgamated’s common stock. The deal, which is subject to regulatory and shareholder approval, is expected to close in the fourth quarter of 2011.

Wilbur Ross

Amalgamated’s expansion into asset-based lending is a natural extension of the bank’s finance division, WL Ross founder and chief executive officer Wilbur Ross told Private Equity International. Last month, Amalgamated committed to an asset-based senior credit facility led by Keltic Financial Services for Apollo Retail Specialists, a Palm Beach Capital portfolio company.

“They have, for quite some time, been participating in syndicated LBO loans – syndicated by other parties,” he said. “The only difference here is that now they would be probably the lead lender, maybe even the only lender, and it would be smaller transactions rather than gigantic KKR or Blackstone things.”

Ross equated the bank’s strategy to firm portfolio company Sun National Bank’s move into healthcare financing. Since 2009, the New Jersey-based bank has committed more than $100 million in healthcare financing throughout the state, according to its website.

“You’re going to start to see medium-sized banks trying to develop little specialties, and then carve out niches for themselves because that way they can bring some intellectual value added to a particular part of lending, and hopefully come up with high rate of return, low-risk loans,” he said.

The bank’s new strategy is even less of a surprise given the private equity background of its new president and CEO Ed Grebow. Prior to joining Amalgamated in April, Grebow was a managing director at JC Flowers & Company, where he oversaw the firm’s $25 billion acquisition of Sallie Mae in 2007, according to Amalgamated’s website – a deal that ultimately fell through.

Amalgamated Capital was launched in 2009 and controls $4.5 billion in assets.