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BMO Executives Split, But Maintain Focus
Asset Backed Alert, Harrison Scott Publications Inc. (February 16, 2007)
Six experienced bankers have quit the U.S. securitization group at BMO Capital to set up a firm that will arrange, issue and invest in structured-product transactions.
The departing staffers, led by Pete Walsh, left BMO on Feb. 5. Their new Chicago-based operation, Six Degrees Capital, opened for business last week with $100 million of startup capital from an undisclosed backer. The outfit expects to raise an additional $400 million by yearend.
Plans call for Six Degrees to be a routine issuer of collateralized debt obligations backed by investment-grade structured products. The firm is also setting up an alternative-investment fund that would buy mezzanine and equity pieces of CDOs and other structured-finance instruments.
Some of the fund's CDO investments would come from Six Degrees' own deals. And the vehicle's structured-finance holdings will likely involve transactions that the firm plans to put together for clients - offerings that would often finance uncommon assets, such as intellectual-property cashflows and loans to mid-size businesses.
Walsh's team also focused on those types of deals at BMO, where their typical approach was to arrange structured transactions for clients and then funnel the resulting bonds into a commercial-paper conduit known as Fairway Finance.
But now the group can target riskier investments, and the bigger returns that usually go with them. "At BMO, we focused on triple-B [rated securities] and above," Walsh said. "Now, we can go from triple-A down to equity."
At BMO, the investment-banking arm of Bank of Montreal, Walsh and David Kucera ran an origination and structuring effort in Chicago, as part of a U.S. securitization team headed by Jeff Phillips.
The staffers who left BMO with Walsh are Kevin Gibbons, Scott Franklin, Bill Barbino, Tony Harris and Courtney Midanek. They were joined by Midanek's husband, Sam Midanek, who worked on Web design and marketing for the Toronto bank, and Gary Cohen, a longtime friend of Walsh.
Cohen previously founded an Internet music service that's now called AOL MusicNow and continued to run the venture after selling it to Time Warner.
Six Degrees plans to add six more staffers this year, including three to five structured-finance specialists who would work in a New York office that should open around April, Walsh said.
The launch of Six Degrees comes as asset-finance specialists have been increasingly leaving their employers to strike out on their own - often in a buyside capacity.
Former Colonial Asset Management executive Alan Brody and ex-S&P manager Richard "Guido" Gugliada, for example, are now working together at an investment shop called Epirus Capital.