JMP acquires Cratos for $4 million in cash, $3 million indemnification

By Susanna Moon

Chicago, April 13 - JMP Group Inc. acquired all of the membership interests of Cratos Capital Partners, LLC and its subsidiary, Cratos Capital Management, LLC, along with some securities of Cratos CLO I, Ltd., according to an 8-K filing with the Securities and Exchange Commission.

JPM Group acquired Cratos through its majority owned indirect subsidiary, JMP Credit Corp.

Cratos is an alternative asset manager of collateralized loan obligations, and Cratos CLO I is a diversified portfolio of $467 million par amount of first-lien corporate loans for which Cratos is investment adviser.

JMP Credit acquired the membership interests in Cratos from a financial institution and private partnership for $4 million in cash and further agreed to indemnify the recipient of a contingent $3 million payment from Cratos CLO I against future claims.

The company said it expects to consolidate the operations of JMP Credit and Cratos CLO I into its financials beginning with the second quarter of 2009.

"We believe that establishing JMP Credit Corp. and acquiring Cratos is an important step towards our goal of expanding JMP's alternative asset management franchise," chairman and chief executive officer Joseph Jolson said in a press release.

"We welcome Bryan Hamm, Craig Kitchin, Fred Passenant and their colleagues to JMP and expect that their corporate credit expertise will enable our firm [to] capitalize on the attractive investment opportunities available today in corporate loans and distressed debt," Jolson said.

JMP Credit also will receive a co-investment by Cratos management that will be accounted for as a minority interest.

As result of the Cratos acquisition, JMP Group said it will be required to consolidate Cratos CLO I's financial statements with its own under GAAP accounting rules, resulting in a significant increase in the total assets and total liabilities.

The Cratos CLO I debt, however, is nonrecourse to Cratos, and the $446 million net par amount of outstanding CLO debt does not represent a financial obligation of JMP Group, JMP Credit or Cratos Capital, according to the release.

JPM is a San Francisco-based full-service investment banking and asset management firm.

Cratos Capital is a commercial finance company based in Alpharetta, Ga.

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