Duke Street Capital Debt Management acquired by David L. Babson

01 April 2004

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David L. Babson & Company Inc. (Babson) has agreed to acquire Duke Street Capital Debt Management Ltd (DSCDM) for an undisclosed sum. The US investment management firm will acquire the London-based debt fund manager once regulatory approval has been given. Babson is a member of the MassMutual Financial Group and registered assets under management of approximately $82bn at the end of 2003. The firm is one of the largest US debt fund managers for institutional investors and high-net-worth individuals managing over $6.5bn of leveraged loans. With more than EUR 1.5bn in assets under management at the year-end 2003, DSCDM specialises in CDOs (collateralised debt obligations) backed by leveraged loans. The company is an indirect, wholly owned subsidiary of Duke Street Capital Holdings Ltd (Duke Street Capital).

Roger Crandall, Managing Director and head of Babsonâ€™s Corporate Securities Group, commented that the acquisition will help develop the companyâ€™s rapidly growing alternative asset business by providing broader access to the European leveraged loan market via a strong team. He added that the group is expecting European credit to be a growth market going forward. Babsonâ€™s chief operating officer, Bill Glavin, confirmed that a London-based subsidiary will enable Babson to expand its relationships with investors in Europe and generate more opportunities for both companies. Ian Hazelton, chief executive of DSCDM noted: â€˜Duke Street Capital has given us every support as we founded and developed this business. We have one of the very best teams in leveraged loan CDO management, and our market continues to show great growth opportunities. With Babsonâ€™s support, we look forward to even greater successâ€™. Hazelton will remain in his position, and DSCDMâ€™s staff of 17 will be retained following the acquisition. DSCDMâ€™s headquarters will be Babsonâ€™s first subsidiary in Europe.

DSCDM invests in senior loans, mezzanine loans and buyout-related high yield bonds, predominantly in Europe. DSCDM also manages Duchess I CDO, S.A. and Duchess II CDO, S.A. The company was set up in 2000 as a platform for establishing an extensive multi-fund debt management business. DSCDM successfully closed its EUR 750m maiden CDO fund, Duchess I CDO S.A., in June 2001. Duchess I is Europeâ€™s largest arbitrage CDO focusing on leveraged loans. In February 2002, as a result of Duchess Iâ€™s strong early performance, DSCDM announced an innovative Tap Issue - the first ever for a CDO fund and increasing the size of the vehicle to EUR 1bn. In conjunction with the Tap Issue, Standard and Poorâ€™s upgraded Duchess Iâ€™s rating on B Notes from BB to BB+. Duchess I was the only managed cashflow CDO to be upgraded in 2002. At its increased size, Duchess I was fully invested in July 2002.

Duchess II, DSCDMâ€™s second CDO fund focused on leveraged loans, closed in April 2003 at EUR 550m, making it the largest CDO fund to close in Europe in 2003. Duchess II has many of the same features of Duchess I, including access to a wider investment pool with its ability to invest in both sterling and euro denominated senior and mezzanine loans within the leveraged finance market. Duchess II was fully invested in December 2003. Duchess III warehouse opened in November 2003 and since then DSCDM has been acquiring assets. Duchess III will follow the same formula as Duchess I and II, investing primarily in senior secured and mezzanine loans. Duchess III is being structured and arranged by CDC IXIS.