Callodine Commerical Finance Seeks a Bigger Piece of the Private Credit Pie

The Callodine Group became one of the newest entrants to the asset-based lending and private credit sector when it acquired Gordon Brothers Finance Company and rebranded it as Callodine Commercial Finance. With an experienced team in place, the new entity is looking to attack a market rife with opportunities. 

To some, the U.S. economy was already gearing up for a recession prior to the onset of the COVID-19 pandemic this year, but the pandemic only accelerated those trends, which has led to more opportunities in the ABL market. Of course, the pandemic-fueled recession isn’t the only reason for the boon in ABL, as such financing structures have become increasingly popular all on their own.

With ABL becoming an increasingly attractive segment due to the growth in opportunities, more and more companies are

entering the fray. Just this year alternative investment financial technology company Yieldstreet launched its own private business credit business and more have followed since. One of the most recent entrants is the Callodine Group, an investment management firm that launched in 2018 under the guidance of founder and CEO James Morrow, a former portfolio manager at Fidelity Investments. Callodine’s strategy is built on income-oriented investments, which led it right to ABL and its acquisition of Gordon Brothers Finance Company in early November.

‘We Run Hard’

Starting at the top, Callodine Commercial Finance is led by Gene Martin as CEO, Oz Street as COO and CFO, Forti as head of origination and David Vega as head of credit. All four have a tremendous amount of experience in the financial services world, specifically in the ABL side of the industry, and were in similar roles at Gordon Brothers Finance Company before joining Callodine.

The strategy of bringing in an experienced team makes sense because of the nature of ABL, which cannot be picked up in a short time.

“We’re nimble. We’re very precise. And everyone on the team can sell, underwrite and manage credit,” Forti says. “We’re just lucky to have 10 or 11 folks that really are just coming together as one. And that’s the way we focus on the market — we run hard.”

Although Callodine hopes to support the new team and allow it to do what it has always done best, growing the business also will be a key imperative. Part of that will come by means of adding personnel to complement the professionals already in place.

Creating that destination feel will be much easier with the expanded reach that the Callodine platform and its investment strategy will provide for Martin and company.

Callodine Commercial Finance also will benefit from having multiple financing partners, including KKR, East Asset Management and Axar Capital Management, along with BlackRock, which was Gordon Brother Finance Company’s sole financial partner.

“Callodine is going to give us a broader reach and access to larger companies, larger financings, and certainly it creates a larger balance sheet for us,” Forti says. “Callodine is going to give us the polish and the muscle just to attack the market better.”

Martin says that structure discipline is critical in the ABL market, particularly when it comes to underwriting, so he does not anticipate any changes on that front for Callodine Commercial Finance. However, he does see there being some change in pricing, especially as the company’s expanded resources open larger deals.

As for where Callodine Commercial Finance plans to fit in the marketplace, Martin says it will be a partner rather than a competitor to senior lenders and banks, which is something Martin says has always been part of the company’s strategy, even when it was still under the Gordon Brothers banner.

Callodine Commercial Finance can lend against intellectual property and other alternative asset classes and provide stretch financing on working capital assets, according to Martin. Those are just some of the unique offerings the company brings to the market, and the plan is to keep expanding on those offerings to continue to capitalize on opportunities in the market and grow the business.

“This is all about growth for us, and we see a wealth of opportunities are there in this space,” Martin says. “As that ABL pie grows, we want to get our fair share of it and maybe a little bit more than our fair share.”

Phil Neuffer is managing editor of ABF Journal.