Sun exits mortgage company for 10x

The distressed buyout specialists will generate a return of 10 times their initial investment in mortgage originator First NLC, following its announced $88m acquisition by Friedman, Billings, Ramsey Group.

Investment firm Friedman, Billings, Ramsey Group announced today an agreement to acquire First NLC, a portfolio company of Boca Raton, Florida-based private equity firm Sun Capital Partners, for $88 million (€66 million) in cash and stock. The deal, expected to close in the first quarter, will generate a return of approximately ten times Sun’s initial investment.

In late 1999, Sun Capital acquired 55 percent of the company from IMC Mortage, an industry rollup, investing $4 million of equity capital. The private equity firm teamed with First NLC chairman and chief executive officer Neal Henschel and his son, president and chief operating officer Jeff Henschel, the other stakeholders in the company.

Since the Sun acquisition, First NLC has significantly expanded its loan origination volume, from approximately $300 million to over $3 billion through management initiatives and a string of acquisitions. In an interview with PrivateEquityOnline, Sun principal Michael Kalb noted, “This was an opportunity where we got involved in a business at a cyclical low and were confident that we could turn it around.”

In March 2004, First NLC filed for a $57.5 million initial public offering but later postponed the equity sale due to market conditions.

Sun Capital, founded by managing directors Rodger Krouse and Marc Leder in 1995, has additional offices in New York, Los Angeles and London. The firm is currently investing Sun Capital Partners III, a $500 million buyout fund, and Sun Capital Securities Fund, a $300 million special situations fund.

In November 2004, Sun acquired Honeywell’s International Performance Fibers business for an undisclosed sum. A few months earlier, the firm joined Cerberus Capital Management, Lubert Adler and Klaff Partners in the $1.2 billion acquisition of department store chain Mervyn’s.