Aquiline consortium founds mid-market lender with $1.75bn

TPG and New Mountain Capital have joined an investment in Tygris Commercial Finance Group, which in turn has agreed to acquire a DLJ Merchant Banking-backed equipment finance company.

An Aquiline Capital Partners-led consortium featuring TPG Capital and New Mountain Capital has founded an independent mid-market credit group armed with $1.75 billion (€1.1 billion) in equity capital.

Other Tygris investors included New York-based Diamond Castle Holdings and Philadelphia-based alternative asset manager Hamilton Lane.

Tygris Commercial Finance Group will enjoy the largest initial capital raise ever in the US commercial finance sector, according to a statement. The Chicago-based lender will provide liquidity and growth capital to North American mid-market businesses and will establish offices in Connecticut and New Jersey.

“Since last summer, Aquiline observed a serious shortage of financing available to middle market companies in North America,” Jeff Greenberg, managing partner of Aquiline and chairman of Tygris, said in a statement. “We founded Tygris to respond to this dramatic imbalance.”

Neither Aquiline nor TPG could be reached for comment.

Although the size of each private equity firm’s respective equity investment was not disclosed, Acquiline said New Mountain and TPG were the “lead” investors.

Tygris will be directed by chief executive Frederick Wolfert, who, along with Aquiline, originated the idea for an equity-rich mid-market credit group. Wolfert was formerly vice chairman of commercial finance for CIT Group and president of Heller Financial. 

Although Tygris did not specify revenue criteria for potential borrowers, the company did say it will concentrate on developing leading franchise positions in middle market corporate finance, middle market equipment leasing and small ticket leasing.

Tygris also disclosed that it has agreed to acquire equipment finance company US Express Leasing from DLJ Merchant Banking Partners in an all-stock transaction. It is unclear what role, if any, DLJ spin-out Diamond Castle played in the deal.

Tygris has also picked up Chicago-based credit group MarCap which specialises in middle market equipment financing for healthcare companies.

Tygris represents just the latest example of private equity firms seeking to capitalise on credit market turbulence by entering the mid-market lending space. As many traditional sources of mid-market financing have folded since the subprime meltdown last summer, and subsequent corporate credit market freeze, financing for add-on acquisitions and recapitalisations have been in short supply.

Just yesterday, American Capital Strategies purchased a $300 million stake in commercial lender Core Business Credit, which will provide financing to some of the same potential borrowers as Tygris. Earlier this year, Arsenal Capital invested $30 million in San Diego commercial creditor FirstAgain, the New York-based firm’s first financial services deal.