GSC Group, once a bright star in the private debt universe, filed for bankruptcy earlier this week, citing a “lack of liquidity in the credit markets”, “declining asset values” and a “deterioration in investor relations”.
The firm, co-founded in 1994 by Alfred Eckert as a subsidiary of Travelers Group, said in bankruptcy documents it had about $8.4 billion in assets under management as of 31 March, 2010, down from its peak of $28 billion in AUM. The firm was originally called Greenwich Street Capital Partners and changed to GSC in 1999.
GSC will look to sell “substantially all of their assets with economic value”, senior managing director and president Peter Frank said in bankruptcy documents. The firm has received interest from a number of bidders, including Black Diamond Capital Management, Frank said.
In the downturn of the credit markets in 2008, the firm’s funds, including those related to distressed debt, US and European corporate debt, European mezzanine and US asset-backed securities CDOs, struggled, and GSC resigned as the manager of certain funds, and opted for early termination of other funds.
Limited partners in GSC funds include pensions in New York City, the Pennsylvania Public School Employees' Retirement System, College of Holy Cross and the New Mexico State Investment Council.
One of the more recent funds raised by GSC was a European collateralised debt obligation fund, which closed on €300 million in 2007. GSC European CDO V targeted 90 percent senior and 10 percent subordinated debt and invested primarily in private equity-backed deals. GSO also raised at least 11 CDO funds for the US.
Several executives have left GSC in recent years, including senior managing director Christine Vanden Beukel, who ended her 10-year career leading GSC’s European mezzanine business and re-surfaced at Clayton Dubilier & Rice last year.
Earlier this year, former GSC executive Philip Raygorodetsky joined Black Diamond Capital Management as a managing director. Eckert, GSC’s founder, and senior managing director Frank both have “negotiated employment packages” with Black Diamond for jobs after the bankruptcy sale is complete.