Peltz's Trian Is Eying Debt Fund, Sources Say

Activist investor Nelson Peltz's firm is in talks with a group of debt investors at New York-based Trimaran Advisors over some manner of partnership, say executives who have spoken to the parties involved.

Peltz may invest in a fund run by Trimaran, which manages $1.5 billion in debt securities of highly leveraged companies, or bring some of its managers on board to his own Trian Fund Management, the sources say. Trimaran portfolio manager David Millison, like Peltz, is a former executive of Drexel Burnham Lambert, the storied junk bond underwriter that collapsed in 1990.

The combination would allow Peltz to take advantage of dislocations in the debt market, while Millison -- particularly if he joins Trian -- would be able to tap into Peltz's fundraising network, the sources say. Trian is an investor in Wendy's International WEN, the hamburger chain recently bought out by Peltz's Triarc CompaniesTRY, franchisor of the Arby's fast food chain. Details of the discussions between Trimaran and Trian could not be learned.

Trimaran Managing Partner Dean Kehler, reached by phone, said he could not discuss the situation. Millison declined to comment and Peltz did not respond to calls or email messages.

Millison has been managing about four or five structured debt vehicles known as collateralized loan obligations (CLOs), which are pools of leveraged loan securities divided into pieces, known as tranches, representing varying levels of risk. Investors buy the tranches that best suit their tolerance for risk.

Though many structured debt vehicles of this type have performed poorly over the last year due to the credit crunch, Trimaran had been performing well, continuing to post annual returns on equity in the high teens to low twenties, according to a source with direct knowledge of the fund's returns. But CLOs may not be the only vehicle planned. According to Trimaran Advisors' Web site, "the firm expects to expand its product offering to invest in other asset classes through various credit hedge funds in the near future."