MCG Capital Corp. is planning to securitize approximately $350 million in loans to small and middle market U.S. businesses, via Wachovia Securities, formerly First Union Securities (see ASR 7/16/01, p. 4).

This hybrid small business deal/CLO will be the second such term deal off Wachovia's "medium business loan" securitization platform. Last year First Union brought a similarly structured $150 million deal for mezzanine lender American Capital Strategies, called ACAS Business Loan Trust 2000-1.

The primary difference in the two deals is the collateral makeup. ACAS specializes in mezzanine finance, often retaining a degree of equity ownership in its borrowers, while MCG's portfolio is made up by senior loans, in the form of management buyout loans, business growth, acquisition, restructuring and liquidity loans. The company specializes in lending to media and telecommunications companies

MCG has described its lending as "venture debt," and has originated more than $2 billion in loans since inception, according to public statements.

MCG is the former small- and mid-capitalization lending division of Signet Bank, which was acquired by First Union in 1997. MCG was spun-off in 1998, via a portfolio buyout and equity partnership of MCG's management, Goldman Sachs, First Union, and Heller Financial. The portfolio sale was worth approximately $220 million.

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