This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Kohlberg Leans Into Loans

Kohlberg & Co. wants to give investors a way into an expanding but risky area of the debt market.

The private equity company filed Friday to raise $225 million by selling the public shares in a closed-end investment fund. Kohlberg's Kohlberg Capital affiliate will use proceeds to acquire a $200 million fund made up of first- and second-lien loans.

Second-lien loans give less creditworthy companies better access to capital. Lenders get higher interest payments but also a greater risk of default. Loan issuance has risen sharply in recent years, according to industry data.

"Issues in the second-lien loan market have been recently reached unprecedented levels," says Faris Khan, editor-in-charge of syndicated loans at the Loan Pricing Corporation. "Second-lien loans are relatively new, but overall credit markets have been extremely bullish for close to 18 months."

As the market for second-lien loans heats up, profiting from closed-end fund deals becomes easier.

"They are taking an illiquid asset, like these loans, and people can effectively own small portion of the loan without having to deal with the illiquidity," says Matthew Rhodes-Kropf, finance professor at Columbia Business School. "As liquidity picks up, shares of a fund will trade higher than the underlying value of the fund. So someone like Kohlberg gets more likely to do this deal in a market that is becoming more liquid."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.64 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs