When Michael Freeburg and I founded Catalus almost three
years ago, we purposefully structured the fund so that we could evolve and
react to shifts in the market. Our goal
was to always be identifying the most attractive risk/reward weighted
opportunities for our investors.
We originally set out with a focus on middle market
mezzanine lending, as we believed there was an opportunity in an under-invested
niche. A massive change has occurred in
the debt markets since our inception, which has proven our investment thesis to
be correct, but also has caused it to be no longer valid. Mezzanine lending has enjoyed tremendous
performance in the last three years, resulting in a flood of capital to be
raised by new and existing firms. Our
assessment of the market is that it is experiencing high competition, declining
pricing, deteriorating credit profiles, and increasingly aggressive lenders –
so basically everything that we try to avoid.
Catalus has evolved into a special situation focused
investment fund which identifies under-served niches. Here are some examples of deals we look at
frequently:
- Distressed assets and businesses
- Bankruptcy
- Litigation
- Partner disputes
- Unique geographies and/or business models
- Companies focused on a specific and/or unpopular niche
- Bridge loans
- Cash flow light/asset heavy capital raises
- High level of general complexity
While we like to be in a debt position, we’ve been
increasingly considering preferred equity and equity co-investment deals. In some rare cases we’ll even consider
acquiring something, as we did in St. John, but that won’t happen often.
After all, who can resist the most prestigious property on
the #1 ranked Caribbean island? More
details to come…
