In the final weeks of 2015, the industry learned that commercial finance veteran, Stuart Armstrong, had partnered with Two Sigma Private Investments to form Great Rock Capital Partners. Serving as this new venture’s CEO and CIO, Armstrong seeks to take advantage of the investment opportunities available in the middle market by drawing on his years of commercial finance experience and deep industry relationships. ABL Advisor spends time with Armstrong to find out more.

ABL Advisor:  Stuart, thank you for your time. Could you give our readers a sense of your professional experience leading up to the formation of Great Rock Capital?

Stuart Armstrong:  I’ve been in the Commercial Finance industry for more than 25 years; approximately half of that time was spent at GE Capital in various corporate lending verticals. Post-GE, I’ve been involved in a series of startup finance companies which eventually led me to the formation of Great Rock Capital in the second half of 2015.

ABL Advisor:  Please explain Great Rock’s relationship with Two Sigma Private Investments (TSPI).

Armstrong:  I partnered with TSPI to form Great Rock Capital and they are our lead investor to both make loans as well as provide capital to help set up the company. TSPI is the private markets division of Two Sigma, investing the proprietary capital of the firm. Two Sigma is a systematic investment manager that applies cutting-edge technology to the data-rich world of finance. They have approximately $32 billion of assets under management.

ABL Advisor:  Please share Great Rock’s geographic scope, borrower sectors and transaction sizes the firm will concentrate on.

Armstrong:  We are primarily focused on the North American market and, to limited extent, the creditor friendly countries of Western Europe.  We are fairly agnostic on market sectors but we do like companies with significant assets and industries that are infrastructure heavy, such as commercial & industrial, transportation, consumer & retail, and healthcare. Our transaction sizes range from $10 million up to $100 million.

ABL Advisor:  In terms of staffing, where are you now and where do you see Great Rock in one to three years?

Armstrong:  That’s a very good question, I don’t have a specific target as it will depend on Great Rock’s growth and profitability ... we are definitely not a “build-it and it will come” platform. We have a keen focus on balancing our revenues and costs; and that may mean we will need to stay lean and be patient.

ABL Advisor:  Please describe Great Rock’s mission in the marketplace.

Armstrong:  Great Rock’s objective is to help fill the gap in middle-market lending created by the financial crisis and ongoing pullback by traditional banks. Having said that, we are looking to partner with the banks so they can provide their customers with the additional liquidity needed to either win new business or to retain existing customers. We believe we are a very good strategic partner for banks by either providing an asset-based stretch tranche behind them, or to lend on assets such as equipment, real estate and/or foreign assets that they do not want to lend against.

ABL Advisor:  As a follow up, it seems many financial entities have been launched in recent times aimed at providing financing to middle-market companies. Please speak to what makes Great Rock unique in this sense as well as to the strengths and advantages that the firm can bring to it's borrowers and financial partners.

Armstrong:  First and foremost, we want to establish ourselves as a reliable and trustworthy partner to our customers and financial partners. That may seem obvious, but it is a standard that is often not met; and it is critical for us to build a reputation for delivering on what we propose. This is especially important for customers facing liquidity challenges.

Strategically, one primary difference is that we are an asset-focused lending platform and not a sponsor-based cash-flow platform. Great Rock is much more concerned about a company’s asset values than lending on a multiple on their EBITDA. Our customers are typically looking to increase their liquidity either due to growth needs or because of an operational or financial restructuring issue. Additionally, they often need that increased liquidity in a tight time frame. We have been doing this for more than 25 years, so we have a very good understanding of asset values. Also, we have virtually no bureaucracy, so we can make decisions very quickly. These two strengths allow us maximize our customers’ liquidity and provide it to them with certainty in a very short time span so they can get back to executing their business plans.

ABL Advisor:  Recently, GE Capital sold off the lion’s share of its commercial finance business geared toward middle-market companies. What, in your estimation, is the void GE’s exit leaves behind and how can commercial lenders and financing partners to the middle market fill that void?

Armstrong:  GE Capital was obviously a major player in the middle market. Although I don’t know exactly how much lending capacity it removes, it most certainly reflects the continuous change that has been rolling through our marketplace. The only certainty is that change will continue, and that should create opportunities for nimble, credit-driven platforms with patient capital.

ABL Advisor:  Lastly, what is your take on the impact of so-called Fintech and alternative players on the commercial finance marketplace and its practices? Are we in the midst of an upheaval that will alter the way lenders approach new business in the future?

Armstrong:  Whatever you want to call it -- Fintech, alternative or specialty -- that lending market is here to stay. The number of niche players in the middle-market space will continue to grow. Some will do well and some will fail. Each player is trying to bring something unique to the market which means the market is constantly evolving. I think it’s an exciting time in the industry and we are excited to launch Great Rock Capital.