March 2012

Salus Capital Partners – Industry Veteran Finds Innovative Approaches to Serve Many Constituents

ABL industry veteran Andrew Moser follows both his head and his heart. A self-described “24/7 kind of guy” has assembled a team under the Harbinger Group Inc. umbrella to bring innovative approaches to small- and middle-market borrowers, investors and lending partners.

When it comes to spending time with Andrew Moser, one thing becomes abundantly clear. He has a keen ability to follow both his heart and his intellect. And it makes perfect sense. A business major with an emphasis on accounting by training and an entrepreneur by nature, he describes himself as a “24/7 kind of guy.” With what seems to be a limitless supply of energy, he warns from the onset of the interview, “You might have to keep me moving along … I’m passionate about this business and could talk about it forever.”

The native New Yorker hails from Westchester County and he good naturedly points out he might be Dobbs Ferry’s second most famous son after social media wunderkind Mark Zuckerberg. He explains, “I’m a typical New Yorker … I have family all over, but I’ve been in the Boston area for more than 20 years now. I went to Bryant College in Rhode Island and that’s what originally drew me up here and in time, I met my wife. She’s a born and bred Bostonian so I stayed up here and the rest, as they say, is history.”

As the president of the recently formed Salus Capital Partners, Moser explains that the experience he gained, the mentors who encouraged him and the opportunities he grasped during his 20-year career led him to this new venture. “I never really had aspirations of a lending career. I was interested in finance at the time and like so many others, I thought it was accounting … I got pretty far along in intermediate audit and tax and decided it definitely wasn’t for me. As I was looking to start my career in finance, I landed a job at Ames department stores.”

Moser’s tenure at Ames – from 1988 to 1992 — was marked by times of turnaround and distress. He says, “As Ames was going through its challenges, I think my time there was one of the greatest opportunities I could have ever had. I wasn’t married yet and I literally worked until midnight and was back in the office at 5:00 am. I remember thinking at the time, ‘I’m never going to be paid for any of this work,’ but that proved to be wrong. My boss was John Sullivan and he was a great mentor. He took great care of us and I got incredible exposure to things that most people at my age didn’t get to see and didn’t get to do.”

From that point forward, the thought of turnarounds, overcoming challenges and fixing things appealed to him. Moser moved from Ames to Laura Ashley. The challenges at the UK-based retailer served as an opportunity for Moser to meet and work with another mentor, Lester Friedman at Gordon Brothers. “When I joined Gordon Brothers, I knew very little about the liquidation business and in those days, Gordon Brothers was mostly in the jewelry business … it was nowhere near where it is today. It was looking to transform itself into much more than a jewelry appraiser and had aspirations of becoming a leader in the asset disposition business. So this too was a terrific opportunity to meet so many people in the business and work directly with many businesses.”

At Gordon Brothers, Moser also met Ward Mooney, who in a consultant’s capacity, advised the then 90-year-old liquidation firm to launch an asset-based lending venture to small businesses in turnaround situations that had been turned away by bankers. Intrigued by the idea, Gordon Brothers’ Michael Frieze gave the go ahead. With that, Mooney and Moser set about to launch Gordon Brothers Business Finance Company (GFBC), which in time became Bank of America Retail Finance.

The years that followed brought about leadership roles at firms like The Ozer Group and Paragon Capital, with partner and mentor Stewart Cohen, which in time became Wells Fargo Retail Finance through its partnership with the Foothill Capital. The years of problem solving associated with turnarounds and distressed situations taught Moser a valuable lesson – he isn’t a banker at heart.

From Wells Fargo Retail Finance, Moser joined CapitalSource at John Delaney’s urging. There he and his team built a nearly $1 billion retail lending business. He recalls, “It was a great time and I got to work with another great mentor, Brian Corsini, who remains a friend to this day. But a move to suburban Washington D.C. just wasn’t in my future so I moved to GMAC Commercial Finance, which had a retail portfolio but not a great deal of expertise to run it. There much of my team, which had been together for many years at this point built out an ABL platform and portfolio that became very successful.  Faced with broader issues at the parent level, GMAC changed directions and moved up market focused on sponsored transactions. “It became an entirely different business,” he notes.

The year 2007 brought on a great deal of self-reflecting for Moser and he moved away from commercial finance and formed the Kairos Group. “I was looking to do a bunch of things … to raise money for companies seeking capital and to leverage my contacts within the commercial finance industry. As the name from Greek mythology suggests, this business was all about opportunity and opportunistic moments. Looking back, it was probably the worst time to go about looking to raise capital for small businesses.”

But Moser, who by his very nature strives to uncover opportunities even in the most adverse of circumstances did make an important realization in 2009 … the time was right to re-enter the commercial finance space. He recalls a situation he and his longtime colleague Daniel O’Rourke encountered in securing a $5 million asset-based loan for a Kairos client. “I remember approaching as many as 30 or 40 banks for this ABL line. And Dan and I said to one another, ‘If it’s this impossible to do this, then we need to get back into the business.’ And that’s what really drove me to find another finance company.”

Moser and O’Rourke met with Bert Knotts, a former banking regulator turned private consultant who introduced the two to New Alliance Bank in 2009. He explains, “New Alliance was a sleepy $9 billion institution based in New Haven, CT. The bank had pristine credit quality but had never been able to grow its portfolio.”

After exploring a number of options, New Alliance approached Moser with the opportunity of launching a de novo ABL platform. “In October 2009 – and this is probably my proudest moment – we started with only a pencil and paper and built it from scratch. The bank’s executives offered a tremendous amount of support. In the first year we were there, the portfolio saw its first growth in three years. We took the net interest margin to levels it had never been before and made a significant contribution to the bank. And here’s the best part … we did 20 deals in our first year, including one for Gracious Homes.”

With discernable pride in his voice, Moser sums it up by saying, “We built a tremendous business, a no- loss portfolio with metrics that were exceeding everything we could have imagined. It was a profitable business inside of the first six months and we were able to bring on a great team made of up senior as well as younger professionals. It was a fantastic time.”

August 2010 brought about the news of New Alliance’s consolidation with First Niagara Bank and by April of the following year the merger was made official. “First Niagara did all the right things in putting us in a position to grow, but being the entrepreneurial guy that I am, the acquisition gave rise to a very different credit culture. When all was said and done, I just didn’t feel like I was going to be able to do things I wanted to do there. That’s what led me to think about going private again.”

Yet, Moser had to grapple with the realities of what going private entailed.  He explains, “I had to do a lot of inner reflection and I had my taste of raising capital at Kairos and I would never say it was my favorite experience, nor am I the best at doing it. But the good news was that through the strong relationships we had developed over time, we met with the folks at Harbinger. We’ve always been about taking opportunities and best describes who they are as well. They have grown up in the distressed markets and really understand that world.”

The combination of Moser and his team’s reputation for innovative solutions and Harbinger’s opportunistic culture coupled with access to captive finance became an obvious fit and by December 2011, Harbinger announced its intention to launch Salus Capital Partners with Moser as its president. With him came O’Rourke as Salus’ chief credit officer and Marc S. Price as its senior vice president of loan originations and corporate strategy.

Moser states, “We’re much more than direct lending and there are three legs to this stool: our direct lending efforts, the asset management platform and the bank partnership piece to our business. I’m especially excited about. With this piece of our business, we take our ability to understand the lending environment and partner with the banks.” For Moser, the opportunity lies in the fact that the 8,000 banks across the country face the same challenges: the need to grow market share, high levels of liquidity and the need to deploy capital inside within tight credit parameters.

He notes, “We can bring these bank partners three things that many groups don’t have. First of all, we have the ability to generate transactions. Secondly, we have a great mousetrap, as we like to call it, with preservation of capital being carved out of everything we do. We’re opportunists but we’re mindful of credit first and foremost and we never lose sight of that.  And lastly, in terms of recovery, our roots are in asset disposition, so we have great expertise across all asset classes. We’ve already had four or five institutions embrace this concept and as we speak, they are deploying capital and entering into transactions that they couldn’t otherwise do on their own.”

Having reviewed no fewer than 40 deals since its inception some three months ago, Moser asserts, Salus’ direct lending business is “off the charts.” To date, deals closed include a $15 million DIP loan for RoomStore, Inc.; a $12.5 million facility for Miss Matched, Inc.; and a $3 million facility to a reseller of vintage automobiles.

Assessing the overall landscape, he notes larger banks are internally focused these days – distracted by things like legacy issues and asset quality issues as well as the host of regulatory issues brought about by Dodd Frank. The smaller banks, $2 billion and under, are also challenged. He explains, “Their lifeblood over the years has been land and construction lending. They recognize the need to expand their C&L portfolio but don’t have the expertise to do it. From the customer’s point of view, we’re hearing a resonating theme — middle-market borrowers don’t know who makes the decisions anymore.”

These factors combined made the climate right for Moser and his team of 14 professionals to jump into the lending arena. “We’re set up differently and the composition of our team is made of members with diverse backgrounds. But for the customer, we don’t like to issue discussion letters or even talk about proposing on a transaction unless we can advocate for the deal and feel our investors will embrace it. We have a very strong, timely and responsive screening process – we work hard to make sure that nothing gets lost in the shuffle.”

While the typical Salus’ borrowers may be anything but typical, deal sizes range from $3 million to $30 million. He says, “There’s no box here other than the box we create and mold around the opportunity our borrowers or our intermediaries bring us. For the most part, we compete with people who propose deals by just looking at numbers on a piece of paper.  And that’s not enough in my view.  I’d like to think that we take the time to actually listen to our borrowers and what’s important to.”

It’s what sparks his passion for the industry. But with his wife Kathleen of 19 years and four children, Moser is mindful of keeping work and life balance issues in check. With Moser’s enthusiasm, it’s of little surprise that the one thing that has kept him in the industry is the opportunity it affords to have him learn something new every day, something he carries over into his parenting. “Time and again, I find myself preaching this to my kids … you’ve got to learn something new every day. It’s why I love to talk about our business. You’re always figuring out some new approach to what we’ve been doing all these years.”

Stuart P. Papavassiliou is senior editor of ABF Journal.