(Corrects time period in paragraph 5)
* Firm to buy $2 billion special situations funds unit
* Deal to close by year-end
* TCW plans senior debt fund in 2013
By Jessica Toonkel
NEW YORK, Dec 3 TCW Group Inc said it is buying
a special situations funds group that would allow it to enter
the direct lending business for middle market clients, ahead of
its own sale to private equity firm The Carlyle Group LP.
TCW, a Los Angeles-based investment firm with $135 billion
of assets under management (AUM), said on Monday it is acquiring
the $2 billion AUM direct lending funds of Regiment Capital
Advisors LP, a Boston, Massachusetts-based investment manager.
Terms of the deal between TCW and Regiment, which is
expected to close by the end of the year, were not disclosed.
By getting into the direct lending investment business, TCW
can provide investors with stronger returns than other fixed
income instruments without forcing them to bear the risk of
equities, said Jess Ravich, who started at TCW as head of
alternative products on Monday.
Over the course of the funds' 12-year history, Regiment's
special situations funds have returned 11 to 12 percent, seizing
on opportunities presented by companies looking for capital as
U.S. banks retreat from middle market lending, Ravich told
Furthermore, since direct lending rates are not fixed,
yields on these funds would rise if interest rates go up, said
Ravich, previously a managing director and head of capital
markets at Houlihan, Lokey, Howard & Zukin Inc.
The acquisition allows TCW to serve middle market companies,
or those with $30 million to $100 million of earnings before
interest, tax, depreciation and amortization, Ravich said.
"We want to expand this business to become a relationship
lender to these companies as they grow," Ravich said.
To that end, TCW expects to introduce a senior debt fund
next year managed by the Regiment team.
Rick Miller, who headed Regiment's direct lending funds,
will become group managing director of direct lending at TCW.
Miller and Regiment's six-person investment team will remain in
Boston and New York and will continue to manage their funds.
The announcement of the Regiment deal comes after a federal
judge in Los Angeles last week issued a limited preliminary
injunction that allows the sale of TCW to Carlyle to proceed.
TCW's sale to Carlyle is expected to close in the first
quarter of next year.
(Reporting by Jessica Toonkel; Editing by Richard Chang and