Terrapin Tees Up Direct-Lending Vehicle

Terrapin Asset Management wants to raise up to $100 million for a vehicle set up to lend to small manufacturers.

Specifically, Terrapin Income and Credit Partnership Fund, which launched a few weeks ago, would write small-balance loans of $2 million to $3 million with maturities of no more than two years. The vehicle, something of a hybrid between a hedge fund and private equity fund, is raising capital in stages, with plans for a series of monthly closings. Investors face a lockup consistent with the liquidity of the underlying investments ó presumably about two years.

The New York firm is best known for managing funds of hedge funds that currently have about $370 million under management overall. But Terrapin founder Nathan Leight has been known to pursue specific investment opportunities via single-manager vehicles, such as when Terrapin launched a fund in 2009 to tap into the Federal Reserveís Term Asset-Backed Securities Loan Facility.

The TALF-focused vehicle, overseen by portfolio manager Sanjay Arora, is now in wind-down mode. Arora, who joined Terrapin in 2007, has been reassigned to launch the direct-lending vehicle.

The planned fund is positioned to profit from the dearth of credit available to small companies from traditional lenders. In designing the vehicle, Leight was cognizant of the liquidity problems that tripped up many asset-based-lending funds during the credit crisis. Hence the two-year cap on loan maturities and the corresponding lockup on investor capital.

Prior to founding Terrapin in 2002, Leight was a distressed-investment specialist at Ezra Merkinís Gabriel Capital. Before that, he was a managing director at Dillon Read.

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