Cyrus Capital Fills Vacancies After Bad Year

Stephen Freidheim's Cyrus Capital hired a chief financial officer last week after several key staffers left the New York firm in recent months.

Cyrus, whose assets under management have shrunk dramatically during the past year, has also seen the departure of its chief operating officer, head of research and a senior investment staffer. The outgoing chief financial officer, Cyrus Borzooyeh, and former chief operating officer, Robert Nisi, were both partners in the firm.

Borzooyeh has already begun working at Dan Stern's Reservoir Capital part time, but has stuck around Cyrus to help his replacement, Brennan McCaw, get up to speed. Nisi's replacement, David Millich, joined Cyrus a few months ago. Nisi is expected to start at a new firm next month.

McCaw previously worked for DKR Oasis Management, a joint venture between DKR Capital Partners and Oasis Management that operates Asia-focused hedge funds.

Millich was previously chief operating officer at Diamond Lake, a hedge fund firm founded by former Merrill Lynch investment banking chief Dow Kim. Diamond Lake folded last year before launching a fund. Prior to that, Millich ran the North and South American operations of Merrill's prime-brokerage business.

Cyrus, which invests mainly in credit products, had assets under management of $1.1 billion on Feb. 1, according to the firm's Web site. That is down from a peak of about $2 billion in 2008. The firm's flagship vehicle, Cyrus Opportunities Fund 2, lost 55% last year. The fund made big investments in auto companies and airlines, including Chrysler debt.

Cyrus is unlikely to earn a performance fee this year on the flagship fund, and its management fee has shrunk in line with assets. In addition to Borzooyeh and Nisi, Steven Ruggiero, the head of research, left at the end of February. Joe Kaplan, a senior investment staffer, exited in January.

The firm attributes some of the losses in its flagship fund to its exposure to Lehman Brothers, which filed for bankruptcy last September. Cyrus is hoping to recoup most of the investments held in Lehman accounts because the assets had not been loaned to other investors.

Cyrus' lead investor is Yale University. The endowment was an early backer of the firm, and its assets are managed in a separate fund that largely invests alongside the main fund. Cyrus also runs Cyrus Select Opportunities Fund, which launched last year and has $50 million to $100 million under management. The fund was up slightly in 2008.

As he continues to run the two Cyrus funds, Freidheim is developing a direct-lending vehicle with Ashok Nayyar, the former co-head of leveraged finance at Morgan Stanley. The fund, Cyan Partners, is still raising capital. Cyrus also is trying to launch a collateralized-loan-obligation business with Eric Green, a former senior partner at investment firm FriedbergMillstein.

Cyrus was a spin-off of Och-Ziff Capital, where Freidheim ran a business called Och-Ziff Freidheim. The unit targeted capital-structure arbitrage, special situations and direct-lending investments for Och-Ziff Capital. It also ran money for other investors.

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