Magic Johnson and TCW form lending venture for mid-size firms
Former L.A. Lakers great Earvin "Magic" Johnson, who has spent his post-basketball career developing commercial real estate ventures in underserved urban neighborhoods, now is targeting another market that he figures is in need of help: lending to mid-size companies.
Johnson’s firm, Magic Johnson Enterprises, is teaming with L.A. money manager TCW Group Inc. in a joint venture that will provide credit to middle-market businesses, the two companies said Monday.
The venture, TCW CapitalAssist Management, plans to make secured and unsecured loans with capital raised from institutional investors. The business won’t target urban companies exclusively, but Johnson is expected to be an advocate for those firms in particular.
Johnson’s company has "a demonstrated expertise [in] urban areas that we do not have at TCW," said Mark Attanasio, a senior executive at TCW.
The venture would be an extension of what TCW already does: The company, which manages about $108 billion in assets, has a leveraged finance group that invests in high-yield, or "junk," bonds, bank loans and other credit instruments. That unit, with $16 billion in assets, is headed by Attanasio, who trained under Michael Milken at Drexel Burnham Lambert in the 1980s.
Attanasio, who also owns the Milwaukee Brewers, said he met Magic Johnson Enterprises President Eric Holoman at a lunch held at billionaire Ron Burkle’s home in June.
Initial discussions were about raising financing for Johnson-related business deals, Attanasio said. "Then we recognized that there was an even larger opportunity to address" in middle-market firms nationwide, he said.
Johnson, who has built movie theaters, Starbucks stores and other retail businesses in urban locations around the country over the last 20 years, said the venture with TCW addresses a need he has seen mushroom since the credit crisis has worsened over the last two years.
"We were getting all of these calls" from businesses about credit, Johnson said. "We didn’t know how to help them."
The "middle market" means different things to different financiers. Attanasio said the TCW/Johnson venture wasn’t setting a minimum size for the companies it expected to target, but that it would seek to make individual loans worth millions of dollars rather than "$100,000-type loans."
Although credit-market conditions have eased somewhat this year, that has mostly been true for larger companies, Attanasio said. "Your basic middle-market company hasn’t really participated in the credit rebound," he said.
But that also should mean plenty of opportunities for investors looking to put cash to work lending to solid businesses, he said.
"From investors’ standpoint it’s a good place to look for returns," Attanasio said.
-- Tom Petruno
Top photo: Earvin "Magic" Johnson. Credit: Kevin Winter / Getty Images
Bottom photo: TCW Group Managing Director Mark Attanasio. Credit: TCW