Churchill Financial is looking to increase its assets. The New York-based middle-market finance company is not only bulking up its portfolio, but also adding breadth with the recent opening of a Chicago office and several new additions to its team in New York.

Churchill recently added four to its underwriting and portfolio management team in New York, including Arminda Youse-Warde as vice president in portfolio management and Sheldon Howell, Andrew Hull and Carol Loundon as senior associates with a focus on underwriting new financing transactions and managing the loan portfolio. "It was a natural outgrowth of the portfolio increasing," said George Kurteson, head of middle-market finance.

When Churchill Financial opened its doors in February 2006, the team had five members. "When I joined [later that month], we needed origination and we needed underwriting and portfolio professionals. I started recruiting to build out the basic origination and underwriting staff," Kurteson said. By June 2006, the firm was staffed well enough to go out in the market and start doing business aggressively, he said.

And from June 2006 through the end of that year, the firm made about $300 million in senior loans. Churchill Financial's current portfolio is now at approximately $600 million in senior loan commitments, and its goal by the end of 2007 is to reach $900 million to $1 billion in senior loan commitments, Kurteson said. "As you continue to build the portfolio, people can just handle so much, and you need to continue to add to the underwriting and portfolio staff."

A New Frontier

The firm has not only added staff to its existing locations, but has also ramped up additional offices. Churchill opened a Chicago office late last month, with Hugh Wilder, previously a senior managing director at GE Commercial Finance in San Francisco, joining as managing director and head of the branch. Kevin Murray, who was previously a managing director at GE Corporate Financial Services, also joined as managing director of the firm. "Hugh and Kevin both have a lot of experience in Chicago and are well known not only to the sponsors out there but also to a lot of the people we compete with, so they will be able to generate business two ways: directly from the sponsors and by doing small club transactions with the other lenders in Chicago," Kurteson said.

And the office will continue to expand. "Chicago is the power alley of the lenders that we compete most directly with. We felt that just putting one person on the ground there was not sufficient. We want to have a national footprint, and will probably roll out maybe one larger office at a time, so Chicago was the next natural progression," he said. Churchill's Chicago office is expecting to add five to seven people by the end of the year and has already started interviewing some vice presidents and associates.

The firm is also looking to hire in Los Angeles and potentially in San Francisco, with Churchill's Wilder building the group.

The firm's biggest office in New York, with a team of approximately 35, focuses on senior lending and one-stop financings in the lower-middle market. The firm zoned in on this area from its inception, when the company commissioned a study that indicated the most underserved part of private equity lending was in the lower-middle market. "What we have targeted is lending to companies with Ebitda of $5 million going up to $35 million. And in fact, $5 million to $20 million is where we are getting the most traction, because the sponsors see there is a lender willing to pay attention and work hard to get transactions done in the lower middle market," he said.

In Minneapolis, a team of approximately 17 - which formerly made up Churchill Capital's mezzanine finance business until Churchill Financial acquired it in April - focuses on standalone mezzanine financing. And both groups are cross-trained in the different products, so they really bulk up Churchill Financial's origination force, Kurteson said. "Both origination teams will be able to carry both products into the market and cross-sell for each other."

Ready to Strike

While the investment environment is becoming increasingly competitive, not only from new firms entering the market but also from established firms that have "widened their strike zone," Kurteson said, the firm welcomes the competition. "We work on one deal at a time, to use a sports metaphor."

The deals that Churchill tends to focus on fall into two categories. The first consists of transactions with companies that have solid fundamental characteristics, including strong market share, a product that differentiates itself, high barriers to entry and a strong management team. The other type of company that the firm looks for is more of an actuarial type of company, which has a variety of customers - with no one client having a significant concentration - and various products with many different suppliers. "More specifically, a company where no one event or customer leaving can really have an effect on the business," Kurteson said.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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