Jefferies Group Inc. Boosts Lending In Diversification Pitch
February 25 2011 - 3:08PM
Dow Jones News
Jefferies Group Inc. (JEF) is doubling its resources in middle
market lending and adding commercial real estate lending as part of
an effort to diversify its traditional investment banking and
trading businesses.
On Friday, the firm and Massachusetts Mutual Life Insurance Co.
announced they would inject another $500 million into a
five-year-old joint venture, Jefferies Finance, that provides loans
to middle-market and larger corporations and financial sponsors.
That follows an announcement earlier this week that Jefferies had
teamed up with the Government of Singapore Investment Corp.
(GIC.YY) and Mark Finerman's LoanCore LLC in a $600 million joint
venture to originate commercial real estate loans.
Middle market lending is seen as a growth area for banks now
that other previously hot businesses, especially in trading, are
being constrained by new regulation. And there is plenty of
competition in the field, from large U.S. commercial banks like
J.P. Morgan Chase & Co. (JPM) and Bank of America Corp. (BAC)
to specialized commercial lenders like CIT Group Inc. (CIT).
Jefferies has been diversifying in recent years, adding to its
advisory and cash equities capabilities to become more of a
full-service investment bank. Brian Friedman, the chairman of the
firm's executive committee, said in a telephone interview Friday
that consolidation on Wall Street and among regional banks had
created opportunities in middle market lending.
New England alone was once home to regional lending giants Fleet
Financial Group and Bank of Boston, but both companies got
swallowed up in acquisitions and are now part of Bank of America.
Fewer choices among large commercial banks created a vacuum for
newer lenders.
In addition, corporate and acquisition finance completes
Jefferies' product offerings, Friedman said. "The capacity to
provide direct financing to companies through Jefferies Finance is
fundamental to our business and part of our integrated
offering."
Among Jefferies Finance's recent deals, it was a joint lead
arranger on a $408 million loan to finance Film Yard Holdings'
acquisition of the Miramax film library from Walt Disney Co. (DIS);
a $230 million loan to finance Leonard Green & Partners' buyout
of AspenDental; and a $200 million credit facility for Dave and
Busters.
Among arrangers of syndicated loans in large middle market deals
involving financial sponsors, it ranked sixth last year, according
to LoanConnector.com, a unit of Thomson Reuters.
Commercial lending was one of the only industry loan categories
to grow in the fourth quarter, according to data from the Federal
Deposit Insurance Corp. Total assets of insured institutions fell
by $51.8 billion in the quarter, including declines in trading
assets, real estate construction and development loans, and
non-credit card consumer loans. In contrast, commercial and
industrial loans in the industry rose by $11.8 billion, the second
consecutive quarterly increase.
Jefferies Finance has loaned $20 billion over five years, in
increments ranging from $100 million to $1.5 billion. The joint
venture began in 2004. Mass Mutual affiliate Babson Capital
Management LLC manages the portfolio of loans underwritten by
Jefferies.
The new commitment includes $250 million from each partner,
raising the total commitment to $1 billion. Each firm will fund
equally an additional $1 billion revolving credit line to support
large loan underwritings by the finance unit.
-By Liz Moyer, Dow Jones Newswires; 212-416-2512;
liz.moyer@dowjones.com
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