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TPG Capital Said to Hire GSO’s Paolillo to Run New CLO Group

TPG Managing general Partner James Coulter
TPG Capital managing general partner and founding partner James Coulter. Photographer: Thomas Lee/Bloomberg

TPG Capital, the private-equity firm run by David Bonderman and James Coulter, hired Douglas Paolillo to run a new group that will manage collateralized loan obligations, according to four people with knowledge of the matter.

Paolillo, previously a managing director at Blackstone Group LP-owned GSO Capital Partners LP, will be based in New York, said the people, who asked not to be identified because the hiring hasn’t been announced publicly. Owen Blicksilver, a spokesman for TPG with Blicksilver Public Relations Inc., and Paolillo declined to comment. Christine Anderson, a Blackstone spokeswoman, declined to comment.

TPG, based in Fort Worth, Texas, joins Apollo Global Management LP and Blackstone Group in diversifying away from leveraged buyouts and into managing CLOs. Sales of the funds quadrupled to $55.4 billion in 2012 and issuance is forecasted by Wells Fargo & Co. to reach $80 billion this year.

Paolillo joined Blackstone in 2002 and helped develop the New York-based private-equity firm’s corporate debt group, according to his profile on the Blackstone website.

Leon Black’s New York-based Apollo was the largest U.S. CLO manager by assets with $14 billion as of December, according to a Feb. 28 report from Standard & Poor’s. New York-based GSO, the credit investment arm of Blackstone, was the fourth largest in the U.S. with $11.5 billion under management.

Direct Lending

Found in 1992, TPG has invested in companies including Avaya Inc., Caesars Entertainment Corp. and Energy Future Holdings Corp. It formed a business development company in July 2010, TPG Specialty Lending Inc., which had $1.5 billion of committed equity capital as of Jan. 31, according to a March 15 regulatory filing.

The fund makes direct investments in senior secured and mezzanine loans made to U.S. companies that have earnings before interest, income taxes, depreciation and amortization between $10 million and $250 million, according to the filing.

Investors have been buying portions of CLOs, a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return, which offer better yields than comparably-rated products. Spreads on existing AAA CLO pieces were 130 basis points more than the London interbank offered rate Feb. 21, according to Morgan Stanley data.

That compares with 25 basis points for credit-card debt Jan. 17. Libor is a rate at which banks say they can borrow in dollars from each other.

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