The banking sector remained one of the most active segments of the market with the high-street banks continuing to execute their non-core disposal strategies: Barclays announced the sale of its Italian retail banking network to CheBanca! (reducing risk weighted assets by c. £0.8bn) and the sale of Barclays Risk Analytics and Index Solutions to Bloomberg L.P. for c. £520m; The Royal Bank of Scotland Group (RBS) announced that its subsidiaries Ulster Bank Ireland and Ulster Bank had agreed to dispose of a portfolio of Irish real estate loans to a subsidiary of Cairn Homes and an affiliate of Lone Star Funds for a cash consideration of c. £360m.
Additionally within the banking sector, RBS announced its intention to pursue a dual track process to dispose of Williams & Glyn by launching a trade sale process in H1 2016 while continuing to prepare for an IPO. National Australia Bank confirmed it was proceeding with the demerger and proposed IPO to institutional investors of CYBG, comprising its Clydesdale and Yorkshire Bank brands. Tungsten Corporation announced that it had reached agreement for the sale of Tungsten Bank for c. £30m, and Secure Trust Bank announced the sale of Everyday Loans Holdings to Non-Standard Finance for a consideration of £107m in cash and £20m in ordinary shares.
Elsewhere, ESF Capital announced it had taken a 73.4% stake in ThinCats, a secured SME lending P2P platform, and following the month-end, Grainger announced that it had exchanged contracts with Turbo Group Holdings, an entity owned by Patron Capital Partners and Electra Private Equity, to sell its Equity Release Division for a gross consideration of c. £325m.
There was significant activity within the UK mortgage market: UK Asset Resolution Limited confirmed that it had agreed to sell a £13bn asset portfolio to affiliates of Cerberus Capital Management LP, comprising performing and non-performing residential mortgages and unsecured loans from the legacy book of Northern Rock. The transaction was priced at a c.£280m premium to book value and Cerberus also agreed to sell £3.3bn of the assets to TSB Bank plc. In addition, GE announced that it had signed an agreement to sell a c. £3.8bn portfolio of first lien mortgages from its UK Home Lending business to a consortium of funds managed by Blackstone, TPG Special Situations Partners, and CarVal Investors.
Funding Circle became the first P2P platform to list a fund on the London Stock Exchange: Funding Circle SME Income Fund raised £150m via IPO to invest in small business lending in the UK and the US originated through Funding Circle. Venture Capital Partners has led the first round of investment in P2P secured lending platform Sensible Lender, raising £7m initially and a further £10.8m in further tranches over the next 6 months. Elsewhere in the venture market, Salary Finance secured $6.1m investment from Brightbridge Venturesto support its growth – the company offers loans to employees with repayments collected through payroll.
Within the asset finance broking markets, McMillan ShakespeareLimited announced the acquisition of Anglo Scottish Asset Finance for an initial cash consideration of £7.7m and a potential 3 year earn-out payment capped at £7.0m, and LDF announced the acquisition of First Independent Finance.
In the banking markets, Atom announced that BBVA had agreed to invest £45m for a 29.5% stake in the bank to support its development ahead of launch. Another recently authorised bank, OakNorth Bank, announced that it had secured £66m equity investment in return for a 39.76% stake in the bank from Indiabulls, India’s largest non-bank SME lender. Further, subject to regulatory approvals, Mr. Sameer Gehlaut, Chairman of Indiabulls, will be investing in his personal capacity up to a 10% stake in OakNorth Bank at the same valuation.
Following the month end, Non-Standard Finance plc announced the acquisition of Everyday Loans Holdings Limited from Secure Trust Bank plc for a consideration of £107m in cash and £20m in ordinary shares.
In a very quiet month for lending M&A, most of the activity was driven by equity capital market transactions. National Australia Bank Limited (NAB) confirmed its intention to demerge and IPO CYBG Plc, the newly created holding company for Clydesdale Bank plc, in February 2016. c.75% of CYBG plc will be demerged to NAB shareholders with the balance to be sold to institutional shareholders via IPO.
City of London Group plc, the investment company focused on providing finance to the SME sector, successfully moved its LSE listing from the Main Market to AIM, raising £5.0m in gross proceeds in the process to support future growth. Arrow Global Group plc announced a placing of 11m shares at £2.50 per share, comprising shares held largely by directors, employees and former employees following the expiry of a 2 year lock-up post-IPO.
The high-street banks continued their programme of non-core disposals. The Royal Bank of Scotland Group plc announced the sale of its remaining shares in Citizens Financial Group Inc., a 20.9% stake realising net cash proceeds of $2.6 billion. HSBC Holdings plc announced that its subsidiary HSBC Bank Bermuda Limited had agreed to sell Bermuda Trust Company Ltd and its private banking investment management operations in Bermuda to The Bank of N.T. Butterfield & Son Limited.
Elsewhere, GLI Finance Limited announced that it had agreed to partner Verus360 Limited, a start-up business of Bibby Financial Services delivering an online revolving finance facility for SME businesses. GLI will supportVerus360 with a £5 million loan facility which has conversion rights, which are expected to provide the potential for a stake of c. 14% in the business in the longer term.
The SME alternative finance market was active with GLI Finance Limited announcing the launch of GLI Alternative Finance plc, raising gross proceeds of £52.7m to invest in SME loan assets originated principally through P2P platforms. Similarly, Funding Circle announced its intention to launch a new SME Income Fund by raising £150m via IPO and VPC Specialty Lending Investments PLC raised gross proceeds of £183m.
Elsewhere, just after the month end, Paragon Bank PLC announced the acquisition of Five Arrows Leasing Group Limited for £117m from Rothschild & Co. Private & Commercial Finance Group plc (PCF) announced that its parent Somers Limited had transferred its stake to its wholly owned subsidiary Bermuda Commercial Bank Limited (BCB), resulting in BCB now controlling 75.5% of PCF’s share capital.
The high-street banks continued to dispose of non-core assets with Barclays Bank PLC announcing the sale of its UK Secured Lending business to a group led by Goldman Sachs and including Elderbridge (part of the Target Group) and Pollen Street Capital, reducing risk weighted assets by £1.2bn. In addition, The Royal Bank of Scotland Group plc announced an agreement with China Construction Bank Corporation, Hong Kong Branch, for the sale of a portfolio of corporate loan commitments related to its banking business in China, booked offshore, for c. £498m.
There were also a number of share placements in the banking markets: funds advised by AnaCap Financial Partners sold down their holdings in Aldermore Group plc to c. 40.1% and WL Ross & Co placed shares in Virgin Money Holdings (UK) plc, resulting in a c. 12.0% residual interest. In addition, UK Financial Investments Limited announced a further sale in the government’s shareholding in Lloyds Banking Group plc, which now retains just under 12%. The government also announced its intention to fully exit its shareholding in the coming months and as part of that at least £2bn of shares will be offered to retail investors.
In what was a quiet August month for M&A in the lending sector, one of the most significant transactions announced was the acquisition of Lowell Group by a company backed by Permira funds from TDR Capital, with Ontario Teachers’ Pension Plan retaining its shareholding. Permira has announced its intention to merge Lowell Group with existing portfolio company GFKL, a leading German receivables management company, to create a leading pan-European credit management business.
In the P2P market, MarketInvoice, the leading P2P lender for short-term finance, announced it had raised $10m from existing shareholders Northzone and the family office of Paul Forster in order to extend its product range and enable retail investors to lend on the platform. Separately, GLI Finance Limited announced that it had increased its ordinary equity stake in Platform Black Limited, the P2P invoice trading and supply chain finance business, to 44%.
In the banking markets, non-core disposals continued with Barclays Bank PLC agreeing to sell a number of its businesses in Portugal, estimating that the transaction will result in a pro forma decrease in risk weighted assets of approximately £1.7bn on completion, along with a loss after tax of approximately £200m. HSBC Holdings plc has also entered into an agreement to sell its entire business in Brazil, comprising HSBC Bank Brasil S.A - Banco Multiplo and HSBC Servicos e Participacoes Ltda, to Banco Bradesco SA for an all cash consideration of US$5.2bn. The Royal Bank of Scotland Group plc announced the sale of its Luxembourg-domiciled independent management company and funds governance business to BlackFin Capital Partners.
Elsewhere, Livingbridge announced an investment in national mortgage broker Contractor Mortgages Made Easy Ltd to support its ongoing growth. At the same time Contractor Mortgages Made Easy Ltd is making an acquisition of Contractor Financials Ltd. Prodigy Finance Ltd, a lender to international postgraduate students attending leading business schools, announced that it had secured $12.5m equity investment in a fundraising led by Balderton Capital together with loan capital from Credit Suisse that resulted in over $100m capital being raised.
There was significant activity in the publicly quoted markets in July with Non-Standard Finance plc announcing its first acquisition, the Home Credit division of S&U plc which trades as Loansathome4u, for £82.5m. 1pm plc announced the acquisition of MH Holdings (UK) Limited, the only trading company of which is Academy Leasing, for up to £12m. Bentley Park (UK) Limited increased its cash offer to secure the recommendation of the Board of Inspired Capital plc, valuing the company at £47.1m, and subsequently announced that the offer had become unconditional in all respects.
In the banking markets, non-core disposals continued with Lloyds Banking Group announcing the sale of a portfolio of Irish commercial loans to a consortium comprising affiliates of Goldman Sachs and CarVal, and the Bank of Ireland for a cash consideration of c. £827m. The gross assets within the portfolio were c. £2.6bn and this disposal results in Lloyds having minimal residual exposure to commercial assets in Ireland. The Royal Bank of Scotland Group plc announced two separate loan portfolio disposals: one to an entity funded by Deutsche Bank and affiliates of Apollo Global Management for c. £400m (gross assets c.£1.1bn) and one to an affiliate of Cerberus Capital Management for c. £225m (gross assets c. £549m). RBS also announced a further sale of shares in Citizens Financial Group Inc. which could yield up to $2.9bn and reduce its holding to 20.9%. Separately, UK Financial Investments Limited began the process of disposing of HM Treasury’s holding in RBS through a placing of c. 5.4% of the company for c. £2.1bn.
Elsewhere, Paratus AMC acquired a majority stake in P2P loan platform Funding Empire and Omni Equity Partners acquired a minority stake in Brightstar, the specialist lending distributor.
Strong activity within the P2P market continued with GLI Finance confirming the launch of a new investment fund, GLI Alternative Finance. The new fund will invest in SME finance assets originated principally through the 19 lending platforms in which GLI Finance is the principal external equity investor. P2P Global Investments also confirmed its intention to raise in excess of £250m of new equity capital in July, having raised gross proceeds of £21.5m in June, citing new lending opportunities above its anticipated planned deployment of capital.
Within the banking markets, Hampden & Co raised £50m in capital and secured PRA approval to launch the first new private bank in more than 30 years. George Osborne announced the government’s intention to begin selling its stake in The Royal Bank of Scotland Group over the coming months. UK Financial Investments Limited continued to sell down its shareholding in Lloyds Banking Group, holding under 17% by the end of the month. In addition, the government also announced its intention to begin privatising the Green Investment Bank. Finally, Banco de Sabadell announced that its offer for TSB Banking Group was unconditional in all respects, following regulatory approval from the PRA.
Elsewhere, consolidation continued within the debt purchase and collection markets with Cabot Credit Management acquiring Hillesden Securities Limited (trading as dlc) and Hoist Finance AB acquiring Compello Holdings Limited from funds managed by Cabot Square Capital. Bentley Park (UK) Limited, a company ultimately owned by the family interests of Mr Joe Lewis, launched a cash takeover offer for SME lender InspiredCapital valuing the company at £43.8m. Capita announced the acquisition of Vertex Mortgage Services for £35m and GE Capital announced that it had reached agreement with Sumitomo Mitsui Banking Corporation Europe over the sale of GE’s European Sponsor Finance business and that it had signed a memorandum of understanding over the sale of its European fleet businesses to Arval.
Banking continued to be the most active constituent of the lending M&A markets in May. Banco de Sabadell announced its offer for TSB Banking Group plchad become unconditional as to acceptances but the offer timetable was extended while PRA approval remained outstanding. National Australia Bank announced its intention to demerge c. 70-80% of its UK banking business (including Clydesdale and Yorkshire Banks) to its shareholders while selling the remaining c. 20-30% via an IPO on the London Stock Exchange by the end of the calendar year.
The continuing strength of equity capital markets has enabled further disposals of shareholdings. UK Financial Investments Limited continued to sell down its shareholding in Lloyds Banking Group, holding just under 19% of the issued share capital by the end of the month. UKFI also announced its intention to extend the period until the end of 2015 during which the orderly sell-down could continue, while HM Treasury also confirmed plans for a retail share offer in the next 12 months. In addition, J.C.Flowers & Co. announced that it had sold down c. 6.5% of the share capital of OneSavings Bank plc and distributed a further c. 1.3% of the share capital to certain investors in its funds.
The Royal Bank of Scotland Group plc announced that it had agreed to dispose of a further portfolio of loans, with a gross asset value of £1.4bn, to an entity affiliated with Cerberus Capital Management. RBS will receive c. £205m of cash consideration for the disposal which represents the final material transaction for RBS Capital Resolution in Northern Ireland.
Tungsten Corporation plc announced that it had raised gross proceeds of £17.5m, equivalent to c. 17.5% of the enlarged share capital, through a placing which is partly conditional on shareholder approval. The proceeds will be used to fund the company’s growth strategy. The company also announced that it was also actively exploring strategic options for Tungsten Bank.
In what was a very quiet month for lending M&A, the most significant announcement was made by GE to create a focused infrastructure and technology company through the sale of most GE Capital assets over the next 24 months. Under the plan, GE will retain certain GE Capital businesses, principally its vertical financing businesses - GE Capital Aviation Services, Energy Financial Services, and Healthcare Equipment Finance. The assets planned for disposition include most of Commercial Lending and Leasing and all Consumer platforms (including all U.S. banking assets).
Elsewhere, equity capital markets remained strong, enabling another investment trust investing in alternative loans to list on the London Stock Exchange: Ranger Direct Lending raised £135m on its IPO. UK Financial Investments also continued to sell down its shareholding in Lloyds Banking Group, reaching 20.95% by the end of the month.
Orange Money Limited (the SME-focused e-lending business trading as Ezbob), which acquired Wonga’s small business lending brand Everline earlier in the year, announced that it had raised £30m of convertible debt from Oaktree Capital Management to refinance existing debt and accelerate growth.
Activity remained high within the lending M&A markets especially within the banking sector where Banco de Sabadell launched a recommended £1.7bn cash offer for TSB Banking Group. The challenger banks continued to secure public market listings with Aldermore Group floating at a market capitalisation of £651m, raising gross proceeds of £75m for the company and Shawbrook Group floating at £725m, raising gross proceeds of £90m for the company.
UK Financial Investments continued its programme of selling down its shareholding in Lloyds Banking Group, reaching 21.99% by the end of the month. UKFI also confirmed that UK Asset Resolution will seek expressions of interest for Granite, Northern Rock’s securitisation vehicle, and the mortgage servicing capabilities of the business. Permanent TSB Group Holdings announced the sale of Capital Home Loans, including its loan servicing platform together with £2bn of loan assets, to an affiliate of Cerberus Capital.
Elsewhere, STAR Capital Partners continued its consolidation of the SME asset finance market with the acquisition of Ignition Credit and Palatine Private Equity acquired John Charcol Associates from Towergate. OneSavings Bank announced the purchase of a £251m portfolio of UK second charge mortgages. RBS continued its programme of non-core disposals by announcing the sale of its internationally managed private banking and wealth management business to Union Bancaire Privee, comprising c. CHF32bn of assets under management. In addition, RBS announced a further offering of its shares in Citizens Financial Group which reduces its residual shareholding to up to 45.6% and raises gross proceeds of $3.2bn.
Strong equity capital markets activity continued in February with Non-Standard Finance Plc raising c. £100m through an IPO on the LSE in order to acquire one or more non-standard consumer finance businesses. Aldermore Group plc revived its plans to list on the LSE by announcing its intention to raise c. £75m of new equity with AnaCap Financial Partners and certain other shareholders also selling a portion of their shares. UK Financial Investments raised a further £500m from the sale of shares in Lloyds Banking Group, taking its residual holding to 23.9%.
Private equity remained active with AnaCap Financial Partners completing the sale of Syscap, the UK’s leading independent provider of short-term business loans, IT leasing and asset finance, to Wesleyan Assurance Society. ECI Partners invested in Tusker, the leading salary sacrifice car scheme provider offering vehicle leasing and fleet management services.
Elsewhere, Legal & General Group announced their entry into the lifetime mortgage market by acquiring New Life Home Finance for £5m. Borro Group, the luxury asset pawnbroker, announced a new £13m funding round led by strategic investments from Israel’s OurCrowd and Berlin’s Rocket Internet to fund expansion of its online lending platform.
Private equity continued to be highly active in the lending M&A markets. Blackstone Tactical Opportunities and TPG Special Situations Partners announced that they had agreed to acquire Acenden Mortgage Servicing Solutions from the administrators of Lehman Brothers. Cinven announced that it had reached an agreement to acquire Premium Credit for an enterprise value of £462m.
Eversholt Investment Group S.C.S., a consortium comprising 3i Infrastructure plc, Morgan Stanley Infrastructure Partners and STAR Capital Partners announced it had agreed to sell 100% of Eversholt Rail Group to a company jointly owned by Cheung Kong Infrastructure Holdings Limited and Cheung Kong (Holdings) Limited.
Elsewhere, in the mortgage administration market, Specialist Mortgage Services, a subsidiary of HML, acquired Topaz Finance from The Royal Bank of Scotland Group. In the debt management market, Spencer Hayes has been sold out of administration through a pre-pack deal to Angel Advance Limited.