http://www.summit-investment.com/
Does anyone have any info on these guys? It looks like a mix of all three to me.
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Private capital, including both debt and equity. Looks like they do private distressed debt (bank loan purchases) and mezz/mid-market debt (special opportunity capital) and private growth equity (partner capital).
Distressed and mezzanine debt can really vary between the hedge fund world and the private equity world, but in this case I imagine it's much closer to PE. Given that they're focused on the lower-end of the mid-market (loan facilities from $1-$50mm, companies with rev from $20-$200mm), any thing you do regardless of where you are in the capital structure becomes increasingly close to private equity because of a lot of different reasons:
1) Very illiquid: The holdco PIK notes for a multi-billion buyout may be actively quoted, the bank debt on a company with $50mm in revenue certainly will not.
2) Access to management/private information: Usually lenders to companies of this size are pretty involved with the sponsor and management and will have a private equity-like amount of "inside" knowledge with which to make their decisions, unlike hedge funds which as a rule are active in public or more liquid private markets.
3) Sophistication of the borrowers: When you are dealing with smaller companies you may end up in a situation where even as a lender you're spending an equity-like amount of time dealing with each credit because unlike being the lender to a large publicly-issuing company, there may be serious weaknesses in management ability, financial reporting, etc.
4) High chance of loan-to-own: If you're buying a small bank loan from a commercial bank there's a good chance that you're the only in-the-money stakeholder in the business and unless things turn around and you get refi'd you have to be prepared to take the keys and liquidate or reorganize/operate the business (obviously you need to be prepared for this to HAPPEN in any distressed situation, but as a rule distressed hedge funds don't get their hands dirty actually firing people, selling collateral, etc whereas a company in this space can't always support engaging consultants or other advisors).
This is great thanks.
Just a guess, but I take it you work in distressed assets.
Can you give an opinion on an analyst position at this firm? I would like to eventually get out of CO and go to SF/NY/LA, and I am concerned that this firm is too niche to really gain valuable experience.
To me, bank debt purchases sounds fairly removed from the PE/HF space, and very specialized, along the lines of a debt collection agency or something.
That's a question that's very relative, especially in this job market. I think it sounds like a pretty good option assuming the pay and culture are decent, but I'd love to live in Denver. One thing to ask is how their fund is structured and how much capital they currently have to deploy as that will tell you a lot about the mid-term stability of the firm.
As far as moving away from Denver, there are certainly a lot of investment groups that have a similar strategy around the country, especially if you extend up into the broader middle-market and include firms like Golub, Sankaty Mid-Market, Garrison, CIT, various BDCs, etc just to name a few. However, the founders seem to share a pretty similar background so their network/deal-sourcing channels may be fairly narrow.
On the loan thing: there's a big difference between a corporate loan, even one for $1mm to a failing company, than a deadbeat's flat-screen TV loan. Understanding liens and collateral is something that's of real value. Lots of very highly-regarded distressed and PE investors do basically the same thing, except with companies whose debt is syndicated instead of held by a commercial bank.
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