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Arena Investors

Arena Investors

Arena Investors is a global investment firm, institutional asset manager and merchant capital provider headquartered in New York and with offices in London, Dublin, Singapore, San Francisco and Jacksonville.

History

Arena Investors, LP was founded by Daniel B. Zwirn and Canadian investment company Westaim Corporation in 2015 as an investment management company to originate and manage mostly credit-oriented investments globally. At the time of founding, Westaim held a majority interest in the new company.

Zwirn was previously a managing director and head of the Special Opportunities Group at Highbridge Capital Management (2001-2004) and managing partner and chief investment officer of D.B. Zwirn & Co., an investment firm he created with Highbridge (2001-2009). Before co-founding Arena Investors, LP, Zwirn founded and/or led Lantern Endowment Partners, an investment fund; Applied Data Finance, a consumer finance company; and the asset-based lender North Mill Capital.

Arena co-founder Westaim Corporation is a Canadian investment holding firm focused on the financial services industry. It is publicly-traded (TSXV:WED). Besides Arena Investors, LP, upon founding the Arena Group in 2015, Westaim also established and capitalized Arena Finance Company and Arena Origination, these two latter firms together referred to as “Arena FINCOs.” Westaim’s 2015 capitalization of the Arena Group totaled ca. US $185 million.

The Arena name derives from the "man in the arena" passage from the 1910 speech Citizenship in a Republic by Theodore Roosevelt.

As of September 2021, the Arena Group companies had approximately US $2.6 billion in assets under management.

Investments and Joint Ventures

Arena Investors makes what the industry calls “special situations” credit-oriented investments, whose returns are intended to be largely uncorrelated with each other and with the financial markets as a whole. Special-situations investing often involves counterparties (borrowers) who would not be able to access capital through conventional (e.g. bank-loan, stock sale) means. Arena CEO Daniel Zwirn has stated that Arena’s loans are structured to be profitable whether or not borrowers pay them back as scheduled because Arena has access to certain underlying assets of borrowers, but that Arena prefers that borrowers pursue their businesses successfully and may even help them do so. He has called Arena’s funding of borrowers who wouldn’t be attractive to traditional lenders an opportunity for these borrowers “to bet on themselves.”

Making this possible, Zwirn has said, are three main factors: a large network of operating partners across industry sectors who help find potential borrowers and understand their industries; unlimited flexibility in investment sector and type of transaction; and a highly systematized process, based on proprietary software, for monitoring and managing assets.

Arena’s main investment areas include:

  • Corporate private credit, such as small entrepreneur-owned businesses with protected franchises.
  • Real estate private credit, such as short-term and bridge loans backed by land and properties.
  • Commercial and industrial assets, such as factoring, litigation finance, entertainment finance, aviation, royalties, and mineral rights.
  • Structured finance, such as purchasing loans and other hard collateral through securitized structuring; distressed asset-backed securities (ABS).
  • Consumer assets, such as residential mortgages, auto loans, other consumer obligations.
  • Corporate securities, such as public or private undervalued corporate bonds, bank and corporate debt, and other securities.

Arena frequently enters into joint ventures with other investing firms.

In March 2017, Arena co-led an investment group that funded the acquisition of the Italian soccer club AC Milan, in which the firm continues to hold an approximately 4% ownership position.

In fall 2017, Arena led the investment group providing $50 million to FilmRise, the indie film and TV distributor.

In June 2018, Arena Investors entered a joint venture with Horizon Technology Finance to create Horizon Secured Loan Fund I LLC (HSLF), which is owned equally between the two.

In September 2018, Arena entered into a joint venture with FirePower Capital to offer FirePower Capital's debt financing product to entrepreneurs in Canada.

In July 2019, an Arena-led group of investors funded a $50 million line of credit for OAREX Capital Markets, an Ohio-based company that buys ad-revenue receivables from digital publishers, allowing those companies to realize revenue earlier and more consistently.

In October 2020, Arena entered a joint venture with Italy-based Blue Skye Investment Group to invest in Italian mid-market corporate restructuring and turnaround opportunities.

In December 2020, Arena closed the funding phase of Arena Special Opportunities Partners I, LP and Arena Special Opportunities Partners (Cayman) I, LP funds with total committed capital of $519 million. Arena stated the funds were intended to invest in asset-backed, credit-oriented investments presented by the economic disruption and market dislocations of the COVID-19 pandemic.

In February 2021, Arena Investors entered a joint venture with Diamond Creek Capital to provide up to $100 million in funding to privately held, lower-middle-market companies primarily in Nevada and the Southwestern United States.

In April 2021, Arena provided a $25 million credit facility to RDM Capital Funding, a New Jersey-based technology-enabled specialty finance company that provides working capital to small businesses.

Assets under management

In May 2016, Westaim announced that Arena’s assets under management were “approximately $300 million.”

According to Westaim’s 2017 report to shareholders, Arena’s assets under management at the end of 2017 were US $760 million.

In July 2018, Bloomberg News, in an article quoting Arena CEO Daniel Zwirn on the dangers of risky, leveraged borrowing by many companies, said that Arena “manages about $1 billion in investments.”

According to Westaim’s 2019 report to shareholders, Arena’s assets under management at the end of 2019 were US $1.3 billion.

In November 2020, Westaim announced that Arena’s assets under management had grown to US $1.7 billion.

In January 2021, Westaim announced that Arena’s assets under management had grown to US $2.2 billion.

In August 2021, Westaim announced that Arena’s assets under management had grown to US $2.6 billion.

People

Daniel B. Zwirn, CEO/CIO of Arena Investors, is based in New York and has consistently focused on special situation investing. Besides creating the Special Opportunities Group at Highbridge Capital, he also created the Special Opportunities Group for Michael Dell’s private investment firm, MSD Capital. After leaving MSD Capital in 2001, Zwirn was backed by Highbridge Capital in forming the investment firm D.B. Zwirn & Co. with Zwirn as managing partner and chief investment officer. Zwirn also previously held positions at Davidson Kempner Capital Management, Dearborn Partners, and Lazard Frères (now Lazard).

Zwirn has been a frequent guest and source for financial media such as Bloomberg Markets/Bloomberg TV, Institutional Investor, S&P Global Market Intelligence, Pensions & Investments, and Private Debt Investor, cited for his views on credit markets, economic and fiscal policy, and special-situation investing.

An ongoing debate within the industry over when investment companies should “self report” to regulators is associated with Zwirn because of trouble he faced after discovering and then voluntarily self-reporting certain issues at D.B. Zwirn & Co. in the mid-2000s. In 2006, an internal review at the firm uncovered a number of “improper transfers among funds and improper handling of operational expenses,” irregularities that had been unknown to Zwirn.

The amounts involved were determined by the firm’s outside legal counsel to be not legally material, but in 2007, the firm disclosed the activities to investors, reimbursed them with interest, and shored up its internal financial controls. The firm had also opted to self-report the matter to the SEC though it was under no legal obligation to do so. The SEC conducted a multi-year review and then, in 2011, issued letters absolving Zwirn of personal blame and clearing the firm of any wrongdoing. Well before that time, however, under the cloud of the investigation, the firm had returned $2 billion to investors and transferred the remaining $2.5 billion in investment capital to Fortress Investment Group.

Zwirn’s decision to self-report is still part of the perennial industry debate on self-reporting a decade and a half later, both because the length of the ensuing SEC investigation (four years) may have contributed to his firm’s dissolution and because Zwirn paid from his own pocket for related expenses including $8.5 million to one of the firm’s funds to compensate it for lost interest and $35 million for investigations into how the irregularities had occurred. HFM Compliance featured the firm in a September 2018 article on the pros and cons of self-reporting.

Zwirn attended the University of Pennsylvania Wharton School of Business, where he earned a BS in economics; the University of Pennsylvania Moore School of Electrical Engineering, where he earned a bachelor of applied science (BAS) in computer science; and Harvard Business School, where he earned an MBA.

J. Cameron MacDonald, president and CEO of The Westaim Corporation (TSXV: WED), based in Toronto, serves as Arena’s Chairman. He previously was chairman of the Goodwood Advisory Committee, president and CEO of Goodwood Inc., and director, member of the Research and Executive Committee, and shareholder of Connor Clark Private Trust. MacDonald earned a BA in economics from Wilfrid Laurier University and is a CFA Charterholder.

Lawrence Cutler is Arena’s chief operating officer, based in New York. He was previously COO at D.B. Zwirn & Co., was a principal and chief compliance officer of Pequot Capital Management, and was president and chief compliance officer of Pequot Financial Services. Earlier, he was executive director, chief compliance officer and risk control officer for UBS Global Asset Management and vice president and director of compliance for INVESCO Institutional Group. He was also senior securities compliance examiner at the Northeast regional office of the Securities and Exchange Commission. Cutler received a BS in marketing and finance from Long Island University.

Timeline

February 10, 2021
Arena Investors and Diamond Creek Capital Announce a $100M Joint Venture.

Patents

Further Resources

Title
Author
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Date

News

Title
Author
Date
Publisher
Description
October 4, 2021
The Economic Times
Last week, a consortium of lenders led by UCO Bank sought central bank directions on pursuing recovery of dues from the Srei Group after loans worth about Rs 30,000 crore to the Kolkata-based financier officially qualified to be moved to the list of non-performing assets (NPA) this quarter.
Arena Investors
May 28, 2021
www.prnewswire.com:443
/PRNewswire/ -- Arena Investors, LP ("Arena"), a New York-based global investment firm, through an affiliated entity, has recapitalized dck worldwide, LLC and...
Arena Investors
February 10, 2021
www.prnewswire.com:443
/PRNewswire/ -- Arena Investors, LP ("Arena"), a $2.2 billion institutional asset manager, and Diamond Creek Capital, a specialty lending firm focused on the...

References

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