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Middle-Market Firms Starved for Credit: Third Ave. CEO


Middle-market companies are still having more difficulty accessing capital because the big banks “don’t want to take a lot of risk,’ Third Avenue Management CEO David Barse told CNBC Thursday.

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“It’s very easy to lend to big companies. You get lots of syndications of those loans,” said Barse, whose investment advisory firm has $12.5 billion under management. “There’s lots of interest driven, in part, by flows. Flows have been strong. For the first time this week we’ve seen flows into equity funds. Flows are still very strong into fixed-income funds, high-yield funds. That’s driving demand for the big deals.”

But other, smaller companies are still having a harder time getting credit, said former Treasury official James Millstein, who left the Obama administration last year to form Millstein & Co., which specializes in restructurings. Millstein and Third Avenue said Wednesday they are working togetherto develop ways to invest in companies in financial distress. Third Avenue is becoming a minority investor in Millstein and Barse will sit on the company’s board.

“One of the consequences of the crisis of 2008 is that the middle-market companies are largely dependent upon, as are small caps , bank finance," said Millstein. “When the banking industry is retrenching and deleveraging there’s less of that available to them.”

On the other hand, he noted, “large-cap companies, some middle-cap companies, can access the bond market, which has been incredibly strong since the crisis.”

“Credit formation in the small business sector is really the problem facing the country” and is probably where the greatest opportunity lies for his company’s venture with Third Avenue, Millstein said.

“We’re going to look at specific companies” for investment, Barse added. “We’re going to figure out where the opportunity lies…I think we’ll make some fantastic investments for our clients.”