Wall Street lender cuts payments in dispute over $ 12.5 billion Spac deal
Controversial three-way merger to create one of the largest investment groups in the United States has hit further turbulence after a large Wall Street loan company halted payments to one of the groups in question .
Dyal Capital, which specializes in buy minority stakes in private investment managers, is considering merging with one of the companies in its portfolio, then listing the combined group through an agreement with a special purpose acquisition company, or Spac.
The $ 12.5 billion plan has proven controversial as it is up to Dyal to compete with some of the portfolio managers in his portfolio and two of them are suing to end the deal.
In a previously unreported escalation of the dispute, an investment manager – private credit group Golub Capital, which has $ 35 billion in assets under management – halted regular cash distributions it had made to Dyal, according to people familiar with the situation.
The move came after Golub executives decided that Dyal merger plan meant they would not take further investments from the group and had to conserve cash to fund future growth initiatives, one of the people said.
Dyal, which was founded in 2011 by former executives of the failing investment bank Lehman Brothers, is currently a division of US asset management firm Neuberger Berman. Over the past decade, she has amassed stakes in leading private equity groups, hedge funds and direct lenders.
In December, it announced its intention to merge with one of its portfolio companies, private lending group Owl Rock Capital, and then merge the combined entity with a publicly traded Spac company created by HPS Investment Partners. The combined group would be called Blue Owl.
Golub and another Dyal portfolio company Sixth Street Partners, two large lending groups that see Owl Rock as a close competitor, have launched lawsuits claiming the combined group would enjoy unfair advantages such as access to confidential information and the right to influence their business decisions.
Golub sold a minority stake to Dyal in August 2018. Its moratorium on cash distributions to shareholders – which began in late 2020 – will also end quarterly payments to founders Lawrence and David Golub as well as other investors. The suspended payments are expected to be worth more than $ 100 million over several years, one of the people said.
A $ 9 billion Dyal fund raised in 2019 was among the beneficiaries of distributions, and the suspension makes it more dependent on distributions from other portfolio managers in its portfolio.
In a letter Golub sent to Dyal in February, the group said it now intends to keep most of its profits with the company for at least several years.
Golub Capital declined to comment.
“Dyal supports the growth of our partner managers and Golub’s decision to conserve cash and reinvest in their business to drive long-term value creation is consistent with this goal,” Dyal said in a statement. “Golub’s decision should benefit both Golub and investors in Dyal Fund IV, which owns the interests in Golub.”
The lawsuits have called into question the creation of Blue Owl, a group that would rank alongside Carlyle Group and Ares Management as one of the largest listed private equity groups in the United States. Sixth Street and Golub say their legal deals with Dyal give them the right to stop a merger on terms that have been announced.
One of the first court confrontations is scheduled for Wednesday, when Sixth Street asks a Delaware judge to block the deal on current terms.
Dyal argued in court documents that Sixth Street misunderstood its contract or was using the controversy to extract concessions.