Scargo Hill Capital, LLC, announced its formation to provide senior secured capital solutions in the lower middle-market across retail, consumer products and the broader supply chain. The firm boasts a partnership of retail industry, commercial finance and asset management leadership with significant domain expertise and experience spanning multiple credit cycles. Scargo Hill is led by co-founders Andrew H. Moser, Managing Partner and Chief Executive Officer, Thomas J. Lynch, Managing Partner and Chief Risk Officer, and Mark E. Gallivan, Principal. The firm’s partnership also includes strategic and lead investors, Schottenstein affiliate SB Capital Group and Stephen G. Miller, CEO of 360 Merchant Solutions.

“The ongoing credit challenges and widening gap across lower middle-market companies has made it very challenging for them to access adequate liquidity,” said Mr. Moser. “Scargo Hill has been created to provide a full range of senior secured capital solutions to a sector that our management team has been dedicated to serving for nearly 25 years.”

Scargo Hill was formed as an institutional asset management platform focused on providing investors with access to senior secured private debt that addresses an identified credit market dislocation in the industry’s lower middle-market, especially among emerging growth retail companies and consumer wholesale brands.

“Scargo Hill combines the lending capabilities of a commercial finance company with the investment management capabilities of an institutional asset management platform to bring a truly differentiated offering to the market,” said Morten Kucey, Managing Director of SB Capital Group. “We’ve operated in the retail sector for over 80 years, and one constant has been the need for capital to fuel growth. Scargo Hill will serve as an innovative capital solutions provider and partner to help its borrowers and investors achieve their goals.”
 
“Historically, asset-based lending has been most closely associated with financing for troubled companies, but Scargo Hill’s primary focus will be on providing transition capital to fuel ‘turn-ups’, emerging companies and consumer brands,” Moser added. “With the retail and consumer sector changing dramatically before our eyes, Scargo Hill is asset-based lending reinvented.”

Scargo Hill employs a rigorous underwriting process supported by in-depth collateral monitoring and financial analytic tools and resources rooted in sound credit disciplines and decades of relevant asset disposition experience, techniques and strategies.

“The Scargo Hill team has extensive historical experience valuing merchandise as it moves through the supply chain and is positioned to provide optimal asset yield and enhanced availability to its borrowers,” said Stephen G. Miller, CEO of 360 Merchant Solutions. “360 is privileged to be a vital part of the future of this specialized lending group.”

“Traditional sources of capital have become extremely burdensome and challenging to access for companies seeking growth capital or for those in transition,” said Moser. “For emerging growth companies seeking increased liquidity to manage through transitional business cycles while still building brand value, inventory continues to be a largely untapped form of collateral to secure non-dilutive capital solutions.”

Scargo Hill believes that access to capital will increasingly come from non-traditional or alternative sources to bank capital where borrowers can find timely, relevant solutions, and investors can find strong risk adjusted returns, and low correlations to traditional asset classes.

“In the years since the financial crisis, private debt has further emerged from a niche market to become a significant institutional asset class and the demand from both investors and borrowers continues to grow,” said Mr. Lynch. “The persistent dislocation in the credit market for lower middle-market companies has created a compelling investment opportunity. Scargo Hill’s portfolios will be constructed utilizing a manufacturing versus selection process, meaning we will source, underwrite, monitor, and intervene proactively when necessary to protect and safeguard invested capital.”