Bear Stearns Merchant Banking Acquires Stake in Cavalry Investments

November 18, 2003

Bear Stearns Merchant Banking, the private equity affiliate of Bear, Stearns & Co. Inc., has acquired a significant minority equity stake in debt-buying firm Cavalry Investments LLC, which acquires and then collects distressed consumer loan portfolios. Terms of the transaction were not disclosed.

Bear Stearns Merchant Banking has acquired a significant minority interest in Cavalry, said David E. King, senior managing director of the firm. Andrew Zaro, chairman and CEO, founded Cavalry in 1991. Cavalry, based in Hawthorne, New York, has tripled its portfolio of receivables under management in the past two years to $9 billion, from $3 billion in 2001. As part of its growth plan, Cavalry has acquired and integrated successfully two debt collection platforms with $2.2 billion of loan portfolios over the last 18 months.

“We have been very impressed with the depth and integrity of Cavalry’s management team and their achievements to date,” said David E. King, senior managing director of Bear Stearns Merchant Banking said. “Andrew has built a great team and a solid platform with skills across a broad range of asset classes. We are excited to be partners with Cavalry and look forward to growing the business together.”

“We are very pleased to announce our new partnership with Bear Stearns Merchant Banking, which will help us to achieve our goals for expansion and to realize opportunities for strategic acquisitions,” Zaro said.

With gross collections of over $80 million for the first nine months of 2003, Cavalry continues to maintain a strong track record of profitability, Zaro said. The firm now has more than 540 employees in four offices across the country servicing 2.5 million accounts. Cavalry purchases distressed consumer debt portfolios from major banks, credit card and consumer finance companies, as well as from firms in the automotive, public utility, telecom and healthcare sectors. In addition to Hawthorne, Cavalry has operations centers in Phoenix , Arizona; Tulsa, Oklahoma; and St. Paul, Minnesota.

About Cavalry Investments, LLC
With $9 billion of receivables under management, Cavalry Investments is one of the nation’s largest acquirers of non-performing consumer loans. The firm ranks in the top ten of the country’s largest debt buyers, according to Thompson Financial. Cavalry’s client roster includes some of the nation’s largest banks and consumer finance companies, as well as automotive companies, retailers, utilities, telecom and healthcare companies. The firm offers significant expertise, proven collection strategies and a proprietary credit scoring system that pinpoints “recoverable” loans, as well as a national legal network. Cavalry has offices in Hawthorne, New York, Phoenix, Arizona, Tulsa, Oklahoma and St. Paul, Minnesota.