John Uhlein, Founder and Managing Principal for Grenadier Capital
John Uhlein is a moderator for the upcoming 3rd Securitization Finance Summit, and is also running a luncheon workshop. He has been active in the securitization sector for many years. After working as a lawyer at Skadden Arps on the first mortgage and auto-securitizations in the mid-80’s, John then went to Kidder, Peabody as a banker working on a variety of securitizations from GNMA to manufactured housing. These different securitizations were considered ground breaking advancements at the time. John then went into the financial guarantee sector, where he was effectively a lender to the whole gamut; ranging from auto, MBS, to the whole business of securitizations. Some of John’s favorite deals were whole business securitizations for Dunkin Donuts and Spirit Pubs (in the UK). He has now returned to getting directly involved in deals as an investor and arranger.
Q: What was your particular role in closing the deal with Visio Financial Services?
A: Grenadier Capital, though it’s broker dealer, acted as Placement Agent. I put some of my own capital into the deal, and brought in outside lenders who I have worked with in the past. The team at Visio is very professional and I shared some of my experiences regarding the timing of raising capital at different levels of the capital structure. I believe these ideas helped develop their own capital raising strategy and reduced their overall cost of funds. While this deal took over a year to complete, it had more to do with the desire to get the best possible funding costs. I believe we managed to achieve that, as funding costs have come down considerably over the last year as more lenders have entered the market.
Q: How will closing this deal affect Grenadier Capital’s future investments?
A: A successful execution and happy client is obviously a good marketing tool. I also find that I am getting more calls from the capital providers (funds) which are seeking high quality deals, resulting from the exposure gained from the deal with Visio. I also hope I will see more opportunities to invest. This is very different than what I used to do, but for right now, I am enjoying focusing just on doing deals.
Q: Where are investors finding yield in today’s market? Will Grenadier Capital continue closing deals like Visio in the future?
A: I am talking to several specialty finance companies that are beyond the proof of concept stage, but volume for each of these is still below $50 million (such as Visio). At those levels, the bigger players will not participate due to lack of scale, but the smaller players will be rewarded with additional yield, but need to do the diligence required. Closing Visio has definitely led to a positive shift, as I have been receiving a much higher volume of calls from people looking for capital.
Q: Over your time in this field, how has the securitization market changed?
A: I have lived through several bubbles, and I even hear stories surfacing now of certain areas getting over heated. The fundamentals of securitization have not changed, but the ability to tranche risk and allocate it to different buckets of capital make it much more difficult to assess where the risk is, and whether incentives are aligned. The various proposed regulations and risk retention proposals are trying to address this, but I do not think they will ever fully succeed. If there is an investor willing to take a risk, knowingly or not, it will be sold. That risk is what keeps me and many others still employed.