The lending M&A markets were relatively quiet as the year closed.
The high-street banks continued to deleverage through the sale of non-core portfolios: Lloyds Banking Group were reported to have sold a £1.6bn portfolio of buy-to-let residential and commercial mortgages to Goldman Sachs andCarVal; National Australia Bank announced the sale of an additional £1.2bn of UK commercial real-estate loans to an affiliate of Cerberus Global Investors; and RBS Group announced the sale of a £4.8bn portfolio of Irish real-estate loans for a cash consideration of up to £1.1bn to an entity controlled by Cerberus. In addition, Virgin Money announced the sale of Church House Trust to Ocean Capital for £13m.
Elsewhere in the mortgage market, Arbuthnot Banking Group announced the acquisition of a £117.6m portfolio of residential mortgages from the administrators of Dunfermline Building Society for a cash consideration of £106.3m. Bluestone Group announced the completion of its acquisition of Basinghall Finance. In addition, secured loan broker Y3S Group announced the acquisition of 50% of Chaseblue Loans.
In the banking market, new digital banking challenger Atom Bank announced that it had secured £25m equity investment to launch in 2015 pending regulatory approval. In the consumer finance market, International Personal Finance Plc announced a recommended £23.8m takeover offer for MCB Finance Group Plc.
Strong equity capital markets activity continued in November with Virgin Money successfully listing on the LSE’s main market with a £1.25bn capitalisation and Mortgage Advice Bureau successfully listing on the LSE’s alternative investment market with a £80.8m capitalisation. In addition, Tesco Bank was the latest challenger bank rumoured to be evaluating a potential LSE listing and P2P Global Investments, the publicly quoted investor in consumer and SME loans originated by online and P2P platforms, announced that it was considering the issue of additional equity given its progress on delivering its investment strategy.
Within the mortgage administration market, Capita announced that it was the preferred bidder for the outsourcing of The Co-operative Bank’s mortgage servicing, which would result in Capita acquiring the staff and assets of Western Mortgage Services. In addition, the FCA approved the acquisition of Homeloan Management Limited (HML) by Computershare which had been announced in July 2014.
Elsewhere, Blue Motor Finance, the prime motor finance provider, confirmed that it had secured an equity investment from Cabot Square Capital alongside a new £200m long-term funding line. Arrow Global announced the purchase of selected assets from debt purchase and debt collection agency Tessera Credit Group LLP and in the bridging market, Capital Bridging Finance acquired Mayfair Bridging.
The lending M&A markets were very quiet in October with equity capital markets sentiment driving a lot of the activity. Whilst challenger banks Virgin Money and Aldermore Bank both announced the postponement of their planned IPOs given market conditions, National Australia Bank announced that, as part of its plan to exit UK banking (under its Clydesdale Bank and Yorkshire Bank brands), a public market solution was being examined alongside other strategic options. In addition, Mortgage Advice Bureau, the independent mortgage broker, announced its intention to float and Virgin Money has also recently announced fresh plans to move forward with its postponed IPO.
Within the debt purchase and collection markets, Hoist Finance announced the acquisition of a non-performing consumer loan portfolio from Santander UK. Link Financial Group announced the acquisition of legal advocacy service provider Kearns Legal Services and debt collection agency Tessera announced that it was in talks to divest most of its assets to one of its major clients. In addition, Cabot Credit Management acquired a leading Credit Union software platform in Ireland through the purchase of exclusive licenses from XRS.
The lending M&A markets in September were again active, driven in large part by private equity activity across a number of sub-sectors. In the debt purchase market, TowerBrook Capital Partners sold its portfolio company Capquest to Arrow Global for £158m; in the mortgage market, Blackstone Tactical Opportunities and TPG Special Situations Partners acquired Kensington Group for £180m from Investec; and, in the consumer finance market, NorthEdge Capital invested in pawnbroker Ramsdens Financial.
Private equity portfolio companies were also active in M&A with Enterprise Finance (backed by ISIS Equity Partners) acquiring bridging specialist West One Loans and Bluestone Group (backed by LDC) acquiring debt collection agency Empingham.
Elsewhere, the IPO market for banking remained strong with Aldermore Bank (backed by AnaCap Financial Partners) and Virgin Money announcing their intention to list on the LSE and RBS Group announcing the IPO of Citizens Financial Group in the US. In addition, Lloyds Banking Group took advantage of robust equity capital markets with a further placement of shares in TSB Banking Group, raising gross proceeds of £161m and reducing its holding to c.50%.
The lending M&A market was relatively subdued in August.
In the debt purchase market, Lowell Group announced that the Ontario Teachers’ Pension Plan had acquired a significant minority interest in the group. Each of the current investors in the group, including TDR Capital, remain as shareholders with each selling a proportionate amount of their current holding.
Provident Financial Group announced the acquisition of Duncton Group (trading as Moneybarn), the largest non-standard vehicle finance group in the UK, for £120m. Moneybarn will broaden the group’s product offering with vehicle finance now sitting alongside Vanquis Bank and the home credit collection offerings.
Elsewhere, RBS Group confirmed that it was exploring options for its Coutts International business, Barclays Bank announced the sale of its Spanish retail, corporate and private banking operations to CaixaBank for €800m and Fairpoint Group announced the acquisition of Debt Line Topco, a provider of debt management plans, for £3m.
The SME finance market witnessed two private equity-backed transactions with additional capital to extend the provision of credit to the SME market. Cabot Square Capital announced a £25m investment into Henry Howard Finance and STAR Capital Partners announced an investment in excess of £100m into Kennet Equipment Leasing.
In the debt purchase market, National Australia Bank (NAB) disposed of a £625m portfolio of largely non-performing UK commercial real estate loans to an affiliate of Cerberus Global Investors.
Elsewhere, Homeloan Management Limited (HML), the mortgage administration company, was acquired by Computershare Limited for an initial consideration of £47.5m from Skipton Building Society, and in the consumer finance market, Homebuy completed a £10m MBO backed by Intrinsic Equity and Seneca Partners.
The banking IPO market was particularly active in June through the successful flotations on the London Stock Exchange of both TSB Bank and OneSavings Bank. Lloyds Banking Group sold 35% of TSB Bank, raising gross proceeds of £455m. OneSavings Bank offered c. 32.5% of its shares in the IPO, raising c. £41.5m of gross proceeds for the company and c. £93m of gross proceeds for OSB Holdco, the major shareholder controlled by J.C. Flowers & Co.
In addition, Secure Trust Bank raised £50m of gross proceeds through a new issuance of shares while at the same time Arbuthnot Banking Group raised £25m of gross proceeds through the partial sale of its existing shareholding in Secure Trust Bank, resulting in a residual 53.3% shareholding.
Elsewhere, Lloyds Banking Group continued to divest non-core assets, announcing the sale of a portfolio of UK commercial real estate loans for £352m to affiliates of Cerberus Global Investors and Arrow Global Group announced the acquisition of three debt portfolios from Portuguese banks with a face value of c. €1bn for €78m. Fairpoint Group continued the diversification of its debt management business through the acquisition of legal services provider Foster and Partners, which followed its recent transaction with Simpson Millar LLP.
Banking continued to be one of the most active segments of the market. OneSavings Bank plc and TSB Banking Group plc both confirmed their intention to proceed with an initial public offering of shares on the LSE while RBS continued to make progress for the divestiture of Citizens Financial Group in the US and Williams & Glyn in the UK.
Shawbrook Bank has just announced the acquisition of Centric Commercial Finance from Cabot Square Capital. Alchemy acquired Hampshire Trust plc, Tungsten Corporation plc received regulatory approval to acquire FIBI Bank (UK) plc and the Co-operative Bank plc successfully raised a further £400m ordinary share capital to strengthen its capital base.
Elsewhere Capita plc acquired Stirling Park LLP, a Scottish based debt collection and sheriff officer agency, and P2P Global Investments plc listed on the LSE, raising c. £200m for the investment manager, Marshall Wace LLP, to invest in corporate loans originated through online platforms.
The IPO market for new challenger banks continued to receive significant attention with Lloyds Bank the first to announce a definitive timetable, intending to float a minimum 25% of TSB Bank Plc by the end of June. Following its recent announcement about an IPO, OneSavings Bank Plc announced that J.C. Flowers & Co had received regulatory approval to convert its preference shareholding, taking its voting control to c. 98%. RBS announced that the timetable to divest Williams & Glyn had been extended by the EC with an IPO due before the end of 2016 and full exit by the end of 2017.
The consumer credit market saw two transactions: Lone Star acquired US based DFC Global Corp., trading in the UK under the Money Shop brand and online as PaydayUK and Payday Express. PrometheanInvestments acquired 128 branches of Albemarle & Bond, the listed pawnbroker that went into administration in March, leaving behind a further 59 branches.
Elsewhere Investec Asset Finance acquired Mann Island Finance, the motor finance broker, and Capita announced the acquisition of Crown Mortgage Management, the mortgage administration service provider.
After a strong start to the year, March was a quieter month for lending M&A. The key transaction announced was RCapital’s acquisition of Shopacheck Financial Services, the home collection credit business, from Cattles’ subsidiary Welcome Financial Services. Shopacheck will be merged with RCapital’s existing portfolio business Morses Club to create the largest independent home collected credit business in the UK with revenue of c. £80m.
Lloyds Banking Group continued to deleverage with the sale of a portfolio of European commercial real estate loans to an affiliate of Marathon Asset Management for €280m. The Co-operative Bank announced that it was looking to raise an additional £400m of common equity tier 1 capital through the issue of new ordinary shares. Nationwide announced the successful capital raising of £1bn through the issue of reset perpetual contingent convertible tier 1 capital securities.
Strong equity capital markets enabled SOF Investments to sell down its remaining 23.9% stake in debt purchaser Arrow Global and UKFI sold down a further 7.8% in Lloyds Banking Group, raising £4.2bn, leaving a residual shareholding of c. 24.9%. OneSavings Bank also announced that it was considering an application to list on the London Stock Exchange.
Elsewhere, US-based Carrington Holding Company entered the UK mortgage broking market through the acquisition of Clear Financial Solutions in Scotland. Albemarle & Bond, the listed pawnbroker, appointed administrators following the lending banks’ decision not to support the company’s restructuring plans.
The debt purchase market remained highly active with Cabot Credit Management acquiring Marlin for £295m and Portfolio Recovery Associates (PRA) acquiring Aktiv Kapital AS, a Norwegian-based group operating across Europe and Canada, for $1.3bn. Cabot’s US parent Encore Capital also acquired Grove Capital Management, a UK debt buyer specialising in insolvency portfolios. This marked the second deal in the month whereby a US debt purchaser acquired a platform in the Individual Voluntary Agreement (IVA) servicing space, following PRA’s acquisition of Pamplona Capital Management’s IVA business. Capquest also announced the acquisition of the business operations and loan portfolio of motor finance firm British Credit Trust.
ISIS Equity Partners announced a minority investment in Enterprise Finance, the specialist secured lending distributor, in a deal that valued the business at £28m. Scottish Equity Partners completed an £8m investment in Car Loan 4U, the leading online car finance specialist.
Elsewhere, S&U acquired the home credit business of Ambassador Financial Services with gross assets of £0.5m and Investec announced that it was exploring a potential sale of Kensington Mortgages, its UK intermediary specialist mortgage business.
The challenger banks were active in raising new capital with Metro Bank raising £387.5m to support the bank’s expansion at a 30% premium to the prior capital raise in June 2012. In addition, Aldermore raised £40m from Toscafund and Lansdowne Partners to enable continued support for the SME sector.
In the peer-to-peer lending market, Zopa secured a £15m investment from Arrowgrass Capital to support its expansion. In the equity release market, Stonehaven was acquired by MGM Advantage Group subject to regulatory approval and Grainger plc sold an equity release portfolio for £87.6m to Clifden Holdings.
Elsewhere, LDC has acquired a significant stake (subject to regulatory approval) in Bluestone Group, which specialises in loan origination, consumer loan purchasing and debt servicing. Albemarle & Bond announced it had terminated its formal sale process, highlighting there may be limited value attributable to the ordinary shares.