Frederick F. “Rick” Wolfert CEO Tygris Commercial Finance

The week of May 19, 2008, did not start out as a promising one. Investors had gone into the weekend chewing on news from Fitch Ratings that the U.S. leveraged loan market had just experienced its worst quarterly performance ever.

On Monday morning, the Risk Management Association followed up with a report that middle-market nonaccrual and delinquency levels had reached their highest point in four years.

And as the markets opened on Tuesday May 20, Oppenheimer analysts were warning that the credit crisis would extend well into 2009, with $170 billion in additional write-offs expected by the end of the year.

Then it hit the wires. With the financial support of a group of private equity firms led by New York-based Aquiline Capital Partners, leasing industry veteran Frederick E. “Rick” Wolfert announced he was launching a major new company and, to everyone’s surprise, he had managed to pull together the largest initial capital raise in commercial finance history in the midst of the biggest market downturn in more than a decade.

The new company would take the name Tygris — Latin for tiger, and symbolizing strength, swiftness and vitality.

Just over a year earlier, Wolfert had left his job as vice chairman at CIT Group’s Commercial Finance unit on what were widely reported to be less than amicable terms.

Wolfert joined CIT in 2004 to head the company’s commercial finance business. During his three years with the company, he successfully led a major transformation and strategic redesign of the business while solidifying his legacy as one of the finance industry’s most respected personalities.

Prior to joining CIT, Wolfert was president, chief operating officer and a member of the board of directors of Heller Financial Services. When GE bought Heller in October 2001 for $5.3 billion, he transitioned to a role as president and CEO of GE Healthcare Financial Services, and is credited with spearheading the integration of the two companies’ healthcare businesses into one of the largest financial services providers to companies in the healthcare industry.

In 2007, Wolfert began exploring opportunities to, in his words, “leverage my 30 years of industry experience but also maintain my passion for the industry.” Following his departure from CIT he says he was engaged in discussions with a number of private equity firms. In the summer of 2007, an industry colleague named Sandra Wijnberg, now chief administrative officer at Aquiline, introduced him to Jeff Greenberg.

Greenberg — the son of famed AIG chairman and CEO Maurice R. “Hank” Greenberg and the former chief executive of risk and fund management company Marsh & McLennan — 
founded Aquiline Capital Partners in 2005.

The same month that Wolfert was preparing to leave CIT, Greenberg was closing on Aquiline’s $1.1 billion inaugural fund — Aquiline Financial Services.

Over dinner in New York, Greenberg articulated his vision for a unique commercial finance venture. Almost immediately the two men saw eye to eye.

“I found very quickly that Jeff Greenberg and the Aquiline team were philosophically aligned — these are individuals that have run large corporations, they understand what it takes to build a leading franchise,” Wolfert remembers. “There was a strong level of alignment in terms of the best way to capitalize on this kind of opportunity.”

Wolfert formally joined Aquiline in November 2007. In what would turn out to be the biggest understatement of the year, the company issued a press release saying Wolfert would be charged with assisting Aquiline in “evaluating opportunities in the commercial and specialty finance sectors.”

Barely six months and some 90 individual pitches later, Wolfert’s “assistance” had been parlayed into a $2.1 billion capital raise, four-times larger than anything the industry had ever seen, and the establishment of Tygris Commercial Finance.

Pounding the Pavement
For Wolfert, the first step in making Tygris a reality was to assemble a first-rate management team — something he wasted no time in doing. The core group consisted of seasoned veterans of the financial services industry, each bringing a unique perspective and skill set to the team.

Wolfert had little trouble getting together the best and brightest. There was Steven F. Kluger, coming from his role as president and CEO of GE Capital Markets Services; Stuart A. Armstrong, joining from Black Diamond Commercial Finance where he served as president and CEO; Laird M. Boulden, who left a position as president and CEO of RBS Asset Finance to join his former colleague and boss; Tim J. Eichenlaub, who had previously worked for Wolfert as senior managing director and group head for CIT’s Sponsor Finance business; and T. Doug Hollowell, the group’s legal expert, who had once served as general counsel of Merrill Lynch Capital and executive director at Morgan Stanley Corporate Treasury.

Just about everyone on the team had worked together in some capacity — primarily at Heller Financial, and subsequently GE. That chemistry has proved to be essential during the formation of Tygris.

“Rick and I have known each other a long time and when he told me about Tygris I thought it was very interesting,” says Boulden, who was one of the first to sign up. “I understood exactly where he was heading with Tygris; my only concerns were whether we could raise capital given the current market — the answer to which ended up being a resounding ‘yes.’”

Says Armstrong: “I saw that Rick Wolfert and Steve Kluger, who I knew from my GE days, had joined Aquiline as advisors. I met with Rick and Steve once I heard what they were planning to build in Tygris, and it was pretty much a no-brainer to go over and join them.”

From the fall of 2007 into the spring of 2008, Wolfert and his team pounded the pavement putting together the capital it would take to get Tygris off the ground. As Wolfert and his partners at Aquiline saw it, anything less than $1 billion would be insufficient to establish the new company as a relevant player. It was clear from the beginning it wouldn’t be easy. By the fourth quarter of 2007, the subprime housing crisis had evolved into a full-fledged credit meltdown and liquidity was scarce.

“There were six of us in New York with a pitch book and lots of high hopes,” Boulden recalls. One by one the team began pulling together investors. “We launched with approximately 90 investors,” says Wolfert, “including a number of the leading private equity firms in the world.”

Equity powerhouses like New York’s New Mountain Capital and Texas-based TPG Capital jumped in as lead investors, while other key investors included Diamond Castle Holdings and Hamilton Lane. Beyond its initial equity raise the company managed to secure $1.5 billion in committed credit facilities and established significant relationships with financial institutions including Deutsche Bank, Credit Suisse, SunTrust Robinson Humphrey, Barclays, Wachovia and Wells Fargo Foothill.

“We think we got the ‘best of the best’ in terms of the investors that ultimately backed Tygris,” says Wolfert. “We presented investors with a thorough understanding of the magnitude of the market dislocation and our approach to address the opportunity. We spent a lot of time recruiting the management team of Tygris, and at the end of the day, this is all about betting not only on a strategy, but first and foremost, betting on the management team.”

Closing the Circle
By the beginning of the New Year, Tygris was starting to coalesce. Backed by incomparable management and investment teams, Wolfert was by now in acquisition talks with two independent leasing companies — MarCap, a middle-market healthcare equipment finance company headquartered in Chicago, and New Jersey-based US Express Leasing (USXL).

As Wolfert explains: “We had identified three businesses that we wanted to really focus on, those being small-ticket leasing, mid-ticket equipment finance and middle-market corporate finance. And our game plan was to identify acquisitions that would give us immediate access to infrastructure so that we’d get to market quickly.”

Wolfert says that after speaking with both companies, and explaining Tygris’ strategy and equity commitments from highly respected investors, both were eager to become part of Tygris.

On May 29, Tygris completed its acquisition of USXL, bringing company president Jim McGrane along for the ride. Both Boulden and McGrane were group presidents at Heller in the 1990s reporting to Wolfert. The three eventually went their separate ways, but maintained relationships with each other during the subsequent years.

“We not only had a working relationship, but also a mutual respect between all of us. What is really appealing about the management team of Tygris is that many of us crossed paths and worked together at one time in the past,” says Boulden.

For McGrane, Tygris represented an opportunity of a lifetime for USXL. “As an independent company we were experiencing the full force of the dislocation in the capital markets due to the de-leveraging and liquidity crunch, particularly in the ABS market.” McGrane remembers. “We saw everything tightening up, so frankly it was kind of scary.”

McGrane says he was immediately interested when he heard what Wolfert was putting together. “I’ve known Rick for more than half my life, since 1980 — we kind of grew up in the industry together and we worked alongside of each other,” he says. “I worked for him at Heller, and I was a consultant for him at various points of time in my career. When he was starting to put the Tygris thing together my first reaction was ‘holy smokes how do we get to be part of this?’”

Meanwhile, in Chicago, Boulden was working on getting the MarCap acquisition finalized. A leader in the provision of healthcare finance, MarCap works directly with ambulatory surgery centers, hospitals, cancer centers, dialysis centers, diagnostic imaging centers and provides funding for healthcare equipment manufacturers. On June 17, that company, too, officially became part of Tygris.

With a foundation now in place, the core management team at Tygris began to refine its vision for a multitiered finance company with the ability to leverage both an existing portfolio of business and create a platform for growth.

To this end the company was divided into three main units each with a defined function and product scope, but with ample opportunity for crossover between the units.

“Most of the startups out there are monoline-type businesses,” Boulden explains. “The three business units will utilize, as much as possible, the group-level resources and shared services platform.”

MarCap was integrated into Boulden’s Chicago group, known as Tygris Asset Finance. The unit will focus on the U.S. market, partnering with corporate customers to provide financial solutions to be utilized for the purchase of new and used business critical assets, recapitalizations, and acquisitions. With offices in Fairfield CT, Orlando FL, Birmingham AL, Philadelphia and San Francisco, Boulden plans to grow the business to $5 billion to $6 billion in assets over the next five years.

McGrane’s USXL continues to operate from its headquarters in New Jersey and will become Tygris Vendor Finance, providing sales aid financing solutions for equipment vendors nationwide. McGrane says the division will continue to market UXSL’s existing verticals — namely office imaging, healthcare, C&I, graphics and technology, and also plans to undertake an expansion effort. McGrane says the unit is expecting to end up at roughly $2 billion to $3 billion in assets when the dust settles.

Topping out the Tygris franchise, Armstrong is charged with running the asset-based lending group, Tygris Corporate Finance, which is headquartered in Wilton, CT.

Tygris Corporate Finance provides senior secured cash-flow, asset-backed and asset-based credit facilities to companies for a broad range of solutions including traditional balance sheet refinance and recapitalizations, growth capital, turnaround and bankruptcy/exit financing, and acquisition financing. The unit’s industry verticals include aerospace and defense, energy and restructuring. Other verticals covering healthcare, media and communications, and sponsor business will be established in the near future.

To head up the restructuring team, Armstrong brought in an old colleague, Ron Kubick. Kubick met Armstrong at GE Capital in the late 1990s and eventually went to Barclays where he headed up the strategic finance group. Like the other team members, when he heard about what was brewing at Tygris, he knew he wanted to be a part of it.

“Stuart went to Aquiline and mentioned the opportunity,” Kubick says. “Since I’d worked with him before, there was a lot of chemistry. The fit was very good, the opportunity was exciting and I think the business model is perfect in addressing today’s market.”

Armstrong and Kubick represent the de novo arm of Tygris with Tygris Corporate Finance, a unit they are building from the ground up. Armstrong says his unit could not be better positioned to enter the market with the equity backing of the Tygris investors coupled with the drying up of bank financing.

“I think it will be easy to differentiate ourselves in a number of ways,” he says. “We have a vertical strategy with dedicated teams, comprised of people that, similar to Ron, have deep industry expertise and live their industries 24/7. We will not be generalists; we are looking to be value-added partners for our customers.”

Moving Forward
With the initial excitement of the Tygris launch now in the background, Wolfert and his team are getting down to business. When the Monitor spoke with Tygris’ leadership, the company already had roughly 225 employees and was still working on establishing a corporate headquarters. For a group of finance industry veterans who have collectively seen it all, launching into the unknown on such a sturdy ship represents something new and promising.

“We really have an opportunity to broaden our horizons,” says McGrane. “We’re not going to throw our roots away, we’re going to continue to stay focused on what made us successful up to this point. I love the idea of being part of this team because it’s a super team and it just gives us more breadth so we’re real excited about it.”

“The most important thing to me is to create an atmosphere where everybody becomes part of the solution and that we can work together in our various teams and among each other’s teams to really build a first-class organization,” says Boulden. “I think everyone here feels really empowered and energized to be part of something like this.”

Wolfert says that down the road he’d like to take the company public, though he admits that’s likely a couple years away. In the shorter term, he says he’d like to develop some type of depository capability, and to this end is in the process of filing an application for Tygris to launch an industrial loan corporation, or ILC.

“Concurrently, we think there are some opportunities to acquire some of the struggling banks, the distressed banks that are in the papers all the time,” he says. “I think that’s another area that’s going to be at the top of our minds in terms of priority.

“We’re also working on a number of other acquisition opportunities. So at this point, there’s a lot of balls in the air, some could construe those at challenges, we view that as our job and our focus daily in terms of just making sure we keep the company pointed in the right direction.”

Tygris Corporate Leadership Team (Left to Right): Steve Kluger (EVP, Capital Markets & Corporate Strategy); Denis Stypulkoski (EVP, Chief Information Officer); Tim Eichenlaub (EVP, Chief Risk Officer); Sara McAuley (Chief Human Resources Officer); Rick Wolfert (CEO); Laird Boulden (President of Asset Finance); Stuart Armstrong (President of Corporate Finance); Jim McGrane (President of Vendor Finance); Doug Hollowell (EVP, General Counsel & Head of Depository Strategy)