Clearlake Buys CLO Specialist WhiteStar to Bolster Credit Effort

(Bloomberg) -- Clearlake Capital Group has acquired a majority stake in WhiteStar Asset Management -- an investment firm that specializes in collateralized loan obligations -- as it seeks to bolster its credit capabilities.

The combined firm’s assets under management now total about $24 billion after adding the roughly $6 billion overseen by Dallas-based WhiteStar, Clearlake managing partner and co-founder Jose Feliciano said in an interview.

“From the very beginning, our vision was to become a multi-faceted firm with private equity, special situations and credit, but we have been disciplined and waited for the right time in the cycle,” Feliciano said, referring to the firm’s delayed entry into the CLO business. Its prior debt focus had centered on non-controlling structured equity and credit investments.

The CLO market was hit especially hard by the coronavirus-fueled selloff earlier this year, weighed down by a surge in leveraged loan downgrades. But prices have rebounded in recent weeks, and managers increasingly see opportunities to profit by distinguishing performing loans from ones more likely to default.

Santa Monica, California-based Clearlake began conversations about the strategic transaction before the Covid-19 pandemic hit, Feliciano said. It’s buying the stake from Pine Brook Capital Partners and WhiteStar management. The latter, led by Chief Executive Officer Gibran Mahmud and Chief Operating Officer Philip Braner, will retain minority ownership in WhiteStar.

“We’re excited to finally be in the long-only performing-credit space and believe this could be a significant growth platform for us through the launch of CLO vehicles, other funds, or potential acquisitions,” Feliciano said. “This will give us a window into the broader credit world and opportunities that we had never focused on, and it’ll give WhiteStar a window into how we think of businesses in our core sectors of technology, industrials and consumer.”

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WhiteStar has issued seven CLOs under the Trinitas Capital Management name, enabling it to quadruple its assets to $6 billion in about three years.

“We are confident our new partnership will accelerate growth” in the key areas of CLOs, CLO investing and new product offerings, Mahmud said in an emailed statement.

Clearlake is funding the transaction in part from proceeds raised through the sale of a stake in the firm to Goldman Sachs Group Inc.’s Petershill unit and Neuberger Berman’s Dyal Capital Partners. Terms weren’t disclosed.

Berkshire Global Advisors advised both Pine Brook and WhiteStar, while GreensLedge Capital Markets advised Clearlake.

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