3i establishes US debt management business and grows AUM

Key highlights

  • 3i announces a strategic transaction with WCAS Fraser Sullivan Investment Management, LLC ("Fraser Sullivan"), a leading specialist US debt manager, to establish 3i''s US debt management platform
  • Provides access to the large and liquid US credit markets and builds upon 3i''s existing European debt management business
  • Together with the recently announced acquisition of Invesco''s European CLO management contracts, creates a leading international credit manager
  • On a pro forma basis, total assets under management ("AUM") of 3i''s debt management business are approximately US$10.2 billion(1) (£6.5 billion)
  • Reinforces 3i Group''s objective to grow its debt management business and to generate more third-party income over time

Simon Borrows, 3i''s Chief Executive, commented:

"This strategic transaction demonstrates our stated commitment to grow 3i''s debt management business and third-party income over time. The US is a highly attractive credit market given its size and liquidity and we are pleased to be partnering with such a strong and established team to access this market. With US$10.2 billion of pro forma AUM, our debt management business now has significant scale across both Europe and the US, and we look forward to further growing this business, both organically and though acquisition, as opportunities arise."

Jeremy Ghose, Managing Partner and CEO of 3i Debt Management ("3iDM"), commented:

"It is our ambition to build a global, multi-product debt platform and I am pleased to have the team at Fraser Sullivan take us one step closer to our goal. Fraser Sullivan is recognised as a leading player in the US debt market and the expanded business will strengthen our investment proposition to investors globally."

John Fraser and Tighe Sullivan, Managing Partners, Fraser Sullivan, commented:

"We are very excited to be building a leading international credit business with 3i. The powerful combination of the Fraser Sullivan team with 3i will serve as the core for a credit investment platform that can take advantage of investment opportunities throughout credit cycles. It will offer investors a range of investment vehicles with a variety of strategies and return objectives that all share the fundamental credit expertise of the combined 3i debt management team."

3i Debt Management US LLC ("3iDM US"), a newly formed subsidiary of 3i Group plc ("3i" or "3i Group"), has entered into an agreement with Fraser Sullivan, John Fraser, Tighe Sullivan and others(2,3), to establish the US platform of 3iDM (the "Transaction").

Following completion of the Transaction, all new US debt management business for both 3i and Fraser Sullivan will be implemented through 3iDM US, which will have available to it the resources of the Fraser Sullivan management team and its investment professionals. The Transaction will not result in any changes to the management of the six collateralised loan obligation ("CLO") funds currently managed by Fraser Sullivan and its affiliate, FS COA Management LLC; both of these firms will continue in their respective roles as investment managers of those CLO funds.     

Together with the recently announced acquisition of Invesco''s European CLO management contracts by 3iDM, the Transaction will increase 3iDM''s AUM to approximately US$10.2 billion (£6.5 billion) on a pro forma basis(1). When these transactions have been completed, 3iDM will manage or advise 25 funds, comprising 19 CLO funds and 6 funds across private equity fund of funds, mezzanine, senior loans, managed accounts and credit opportunity funds.

Fraser Sullivan is a leading specialist US debt management company, headquartered in New York, with approximately US$2.5 billion (£1.6 billion) of AUM, comprising six CLO funds, an unlevered senior loan fund and a credit opportunity fund. Fraser Sullivan currently employs 13 professionals and was founded in 2005 by John Fraser (Managing Partner and Chief Investment Officer) and Tighe Sullivan (Managing Partner and Chief Operating Officer).

3i Group (through its wholly owned subsidiary, 3i Corporation) will initially hold an 80% equity interest in the newly established 3iDM US. The balance of the equity in 3iDM US will be held, directly or indirectly, by John Fraser, Tighe Sullivan and three other partners(3) and will be the subject of put and call arrangements pursuant to which it is expected that 3i will own 100% of the equity in 3iDM US after three years following completion of the Transaction. The gross assets of the business being acquired are approximately US$10.9 million (£6.9 million)(4).

Following completion of the Transaction, John Fraser and Tighe Sullivan will be appointed co-heads of 3iDM''s US operations, reporting to Jeremy Ghose. Completion is expected to take place within 90 days. Stormharbour Securities advised 3i on the transaction. Fraser Sullivan were advised by Berkshire Capital.

(1) Pro forma AUM of approximately US$10.2 billion (£6.5 billion), as at 30 June 2012, assumes the completion of the Transaction and of the agreement to acquire seven European CLO fund management contracts from Invesco, and includes both active managed and advised funds. Currency exchange rates have been applied as at 30 June 2012. 
(2) WCAS FSIM Co-Investors LLC, Fraser Sullivan & Co., LLC, FS COA Management, LLC and Credit Opportunity Associates LLC.
(3) D.Endler, D.Nadeau and M.Sosland.
(4) As at 30 June 2012.

For further information, please contact:

Kathryn van der Kroft
PR Director, 3i Group plc 
Tel:  +44 20 7975 3021

Notes to editors:

About 3i Group
3i is a leading international investor focused on mid-market private equity, infrastructure and debt management across Europe, Asia and the Americas. As at 31 March 2012, 3i had total AUM of approximately £10.5 billion, including approximately £6.3 billion advised or managed on behalf of third parties.

About 3i Debt Management
3i Debt Management specialises in the management of third-party funds investing in non-investment grade debt issued by medium and large European companies. 3i Debt Management was founded through the acquisition of MIM in February 2011 and as at 31 March 2012 had total AUM of approximately £3.4 billion, managed by 24 London-based executives.

About WCAS Fraser Sullivan
WCAS Fraser Sullivan is a specialised debt management company which invests third party capital in the North American non-investment grade markets. Headquartered in New York and employing 13 professionals, it currently manages approximately US$2.5 billion of AUM through six CLOs, a credit opportunity fund and an unlevered senior loan fund.

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