Add Eric Gleacher to the list of 1980s Wall Street superstars to throw his weight behind a publicly traded buyout vehicle.
Gleacher Partners filed with the Securities and Exchange Commission to raise $500 million for a business development corporation to invest in mezzanine financing of private companies. Gleacher, who became famous running the mergers-and-acquisitions department of Morgan Stanley, joins his old Drexel rival Leon Black and Kohlberg Kravis & Roberts in advancing private equity's cause on public markets.
Gleacher Partners is about the 10th private investor to set up a business development corporation -- similar to a closed-end investment fund -- since November, when private equity firms caught on to the public alternative to costly and slow private fundraising.
The firm did not return calls seeking comment, though it is now in a quiet period as it prepares the actual initial public offering. Gleacher's best-known private investments include California Pizza Kitchen (CPKI), WebMD (HLTH) and Cosi Sandwich Bar (COSI).Gleacher Investment Corp., as the publicly traded entity will be known, will invest in debt and equity securities of privately held middle-market companies with about $25 million to $500 million of annual revenue, or about $5 million to $50 million of annual operating earnings, according to the filing documents. Because of the way the law governing business development corporations works, Gleacher can invest up to 30% of its capital however it wishes, and must invest the remaining 70% developing domestic companies. KKR, Black's Apollo Management and the Blackstone Group were among the first to file initial public offering documents for their public funds. They were quickly followed by smaller but similarly well-known private investment groups such as Evercore Partners, Porticoes Investment Management and Gores Technology Group, prompting some concern that supply would get ahead of demand and that later entrants to the party would fail to raise much capital. But the recent performance of Apollo Investment Corp. (AINV - Get Report) probably has investors rereading their prospectuses. All the business development filings feature this line of bold type: "Shares of closed-end investment companies frequently tend to trade at a discount to their net asset value. These factors will increase the risk of loss for purchasers in this offering." Shares of Apollo, which raised $930 million on strong investor interest, hit a high last month of $15.44, were trading Tuesday at $13, just a few weeks after they hit the market.