This week we continue our conversation with Robert Radway, chairman and chief executive officer of NXT Capital. Started in 2010, NXT is a finance company that is focused on middle market corporate finance and commercial real estate along with having a very significant asset management platform. Prior to NXT Robert Radway was founder and president Merrill Lynch Capital. Second of two parts – View part one.

TLL: What’s the breakdown of new platforms versus add-ons?

Robert Radway: We’ll close 40-45 new platforms this year and about 60 portfolio events.

TLL: Do you do non-sponsored deals?

RR: Selectively. It’s a small amount of what we do but not our focus.

TLL: Do you do any second lien? How about other strategic lender relationships?

RR: We are not pursuing second lien or last out deals at this point in the cycle.  And we don’t have formal strategic lender partnerships because while they may make some sense on paper, in reality, they are difficult to execute on.

We’re in many situations where sponsors club us up with our competitors. That imposes a degree of credit discipline that’s helpful. Some traditional middle-market lenders have resorted to an originate-to- sell strategy, retaining little if any exposure to a deal post close.  These have taken on a profile similar to what you might see in a traditional broadly syndicated transaction. The underwriter pushes the edge of the envelope for the benefit of the borrower in terms of leverage, pricing and overall credit terms. It’s an approach that works in a bull market until the music stops and a few deals get hung. Hopefully that will happen soon. It will restore some discipline in the market.