Fifth Street’s Tannenbaum relinquishes BDC duties

The chairman and chief executive of Fifth Street Asset Management plans to focus on institutional growth and strategy expansion, while handing over the reins of the BDCs to other executives.   

Len Tannenbaum, the founder, chairman and chief executive of Greenwich, Connecticut-based Fifth Street Asset Management, which oversees two public BDCs, has resigned from his role as chief executive of the vehicles. The Fifth Street Finance Corp (FSC) has promoted Todd Owens to chief executive and Ivelin Dimitrov to president, while the Fifth Street Senior Floating Rate Corp (FSFR), has appointed Dimitrov as chief executive and Owens as president, Fifth Street announced last week (22 January). 

Owens remains the co-president of FSAM, while Dimitrov has the title of chief investment officer. 

The announcement follows the firm’s public listing in October which aimed to raise its profile among institutions and in other strategies.  

“The public offering of FSAM in late October has already had a positive impact on our business. The increased transparency improved capitalization of operating as a public asset manager has accelerated our conversations with institutional investors and we are increasingly confident in the ability to grow our institutional business,” Tannenbaum said on the firm’s earnings call on 16 December.  

“The IPO has proven to be valuable as we pursue a strategy to develop an institutional business in Japan, which we anticipate will include opening a Tokyo office in 2015,” he added. 

His other plans for the business include CLOs, hedge funds and other structures to raise more institutional capital. “We are evaluating options regarding the securitization of Senior Loan Fund I, continue to ramp up Senior Loan Fund II and are in the process of raising our third senior loan fund, the Senior Loan Fund III,” Tannenbaum said on the call.  

The firm also plans to continue growing its hedge fund, the Fifth Street Opportunities Fund, which opened to outside capital in the beginning of last year and now handles $60 million. 

Tannenbaum also has plans for a dedicated aircraft leasing strategy. “We expect to launch an aircraft leasing fund in the near term, which will lever the expertise and experience of our aircraft team,” the founder said. He added that the firm’s executives had recently concluded a capital raising road show and he plans to use some of the funds raised as well as personal cash to seed new ventures. “The aircraft fund will be seeded with $20 million of capital from management, primarily myself, in the form of a GP investment,” Tannenbaum said. 

While he thinks investment opportunities for the two BDCs are still plentiful, he noted that they are unlikely to raise new equity in 2015, which is part of the reason the firm is expanding into other areas. Fifth Street’s BDCs, like many others, have been trading below book value, which blocks them from fresh equity raises. 

“We do not intend to issue equity at either BDC below book value. As a consequence, we have not been able to raise equity capital in the fourth quarter and our ability to raise additional equity capital in the future is dependent upon meaningful increases in our BDC stock prices,” Tannenbaum said. 

The Fifth Street Finance Corp.’s stock declined to around $8 last week (23 January) from a high of around almost $10 over the summer. It originally opened at $13 in June 2008 and reached a high of almost $14 in February 2011. The Fifth Street Senior Floating Rate Corp. has declined even further; from a high of $15 last March to a low of $9.76 on 16 December. It ended trading last week at $10.49. 

The firm has also lined up credit facilities with banks and joint ventures with family offices as a way to shore up capital beyond fresh BDC equity. Fifth Street Asset Management listed on October 30 at $16 per share. The stock has since declined to about $13.85 on 23 January.  

The Connecticut investment firm handles $6 billion across all of its strategies.