In just under a decade since its inception, New York-based investment banking boutique Westwood Capital has managed to not only focus its business on traditional M&A and corporate finance transaction services, but also on more specialized market services - such as project finance, restructuring and structured finance underwriting in esoteric, novel asset classes. "Our corporate finance activities and structured finance activities provide liquidity to lenders and also to small-to-mid-sized businesses with novel or emerging assets," said Matthew Pechinski, managing director.
To be sure, Westwood is a major player in the asset-based lending, factoring, and specialty commercial finance spaces. But more specifically, Westwood caters directly to financial service providers - namely, non-bank financial institutions, said Pechinski. Non-bank financial institutions, or NBFIs, are financial institutions outside the traditional banking sector and outside the supervision of the Federal Reserve Bank. Examples include merchant banks, finance companies and credit unions.
"In M&A, we pick up a lot of assignments advising banks and other parties in connection with their commercial finance operations, often assisting our clients with identifying and implementing the most efficient execution to expand or sell off these operations," Pechinski explained.
Indeed, Westwood's structured finance business is just as particular. Again, the firm serves, for the most part, the financial services industry, but not with traditional loan or credit deals, said Pechinski. Rather, Westwood prefers to deal with first-time issuers in esoteric, one-off securitization transactions. These transactions often require custom tailored structures to address specific and unique risks. "We have done securitizations on loans for garden equipment, self storage units and other proprietary products," Pechinski said, for example. Westwood is also in the midst of refinancing a structured financing that the firm put in place a few years ago for Supportkids Inc. - a company that helps collect unpaid child support from delinquent parents, Pechinski also noted, pointing out another example of Westwood's esoteric structured transactions.
With such specialized business focuses for M&A and structured finance, it is no surprise that Westwood applies the same attitude to its project finance business strategy. The firm focuses exclusively on hotel, resort and gaming property-related transactions, and has only recently added natural resource entities to its list of project finance clientele.
Westwood especially prides itself on the waves it has made in project finance for the hotel, resort and gaming sector, Pechinski said. Back in 1998 when Westwood advised Aladdin Gaming on the approximately $1 billion redevelopment of the Aladdin Hotel & Casino in Las Vegas, Westwood decided to bring structured finance concepts to a project finance assignment, Pechinski said. "[This transaction] resulted in more efficient financing, primarily because many components were financed individually that would have been more costly to finance as a whole," Pechinski said. As a result, "Aladdin was able to deliver a financing package with an average cost of funds roughly 300-to-400 basis points below the cost of funds incurred by similar contemporaneous projects [on the Strip] primarily financed with traditional junk bonds, such as [those for] the Bellagio and the Venetian," Pechinski said.
In addition, one particular financing method first applied to the Aladdin transaction - the elevated use of first mortgage financing - has since become more popular in the gaming sector. "A big component of the Aladdin transaction was the utilization of first mortgage financing in a more substantial manner than had been employed traditionally in the gaming industry, and this element of the Aladdin financing has been getting more traction in the gaming space since," Pechinski said. "The [Aladdin] transaction is indicative of the structured interdisciplinary approach that Westwood brings to its project finance transactions," he added.
Westwood also knows a thing or two about restructuring. The firm focuses on structured finance issues related to restructurings of financial services companies, Pechinski said. "There are a number of securitizations that need to be unwound.... There are highly sophisticated structured transactions [and we have to be] able to analyze them, assist counsel and [address] the debtor's capital structure," he said. Pechinski, a lawyer himself, noted that Westwood provides litigation support for restructurings as well.
Ultimately, Westwood's expertise in the commercial finance industry allows it to provide its clients with unique financial solutions. "Our goal is to deliver senior level attention to clients who might not get that elsewhere on the Street," Pechinski said.
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