The bank deleveraging theme of 2013 continued with RBS reported to have sold a portfolio of distressed UK commercial real-estate assets to Varde Partners. Lloyds Banking Group also announced three separate non-core asset disposals: a £610m portfolio of non-performing Irish retail mortgages to an affiliate of Apollo Global Management for £257m; a £147m portfolio of UK corporate real-estate loans to an affiliate of Cerberus European Investments for £90m; and a further placing of shares in St. James’s Place plc raising gross proceeds of c. £680m. In addition, the Co-operative Bank announced the completion of its liability management exercise to raise in excess of £1.1bn of common equity tier 1 capital.
Elsewhere, Leasedirect Finance (LDF), the commercial finance provider to the professional practice market and other specialist sectors, was acquired by Cabot Square Capital from Investec Bank which continued to provide support through a £75m block discounting facility. MoneyPlus Group, the personal debt management advisory business, continued its acquisitive growth strategy with the acquisition of Debt Movers and also Richardson Mail Solicitors, strengthening its offering in the legal services market.
Following the announcement of a formal sales process, Albemarle & Bond Holdings plc announced that it was in preliminary discussions with a number of interested parties.
In a relatively quiet month for lending M&A, the bridging market was active with two announced transactions: Octopus Capital acquired Dragonfly Property Finance and Alternative Bridging Corporation acquired Cheval Commercial Finance.
The high street banks continued to deleverage. In addition to announcing the sale of Scottish Widows Investment Partnership for up to £660m, Lloyds announced the sale of a corporate real-estate portfolio, comprising European and Nordic loans, to an affiliate of Cerberus Institutional Partners for c. £860m. RBS also announced the sale of its remaining c. 20% economic interest in WorldPay, resulting in a gain on disposal of c. £160m.
Within consumer finance, Albemarle & Bond, the publicly listed pawnbroker, announced the commencement of a formal sales process for the company, while DFC Global Corp announced that it had completed two transactions: the acquisition of TGS Pawnbrokers for $5.1m and the disposal of Merchant Cash Express, which has now rebranded as Liberis. Elsewhere, Arrow Global and CarVal Investors acquired a portfolio of c. 250,000 student loans for £160m from the UK government.
The IPO market was active with two notable transactions. Arrow Global became the first UK debt purchase group to list on the London Stock Exchange, facilitating a partial exit for RBS Special Opportunities Fund. In addition, Tungsten Corporation listed on AIM raising gross proceeds of £225m, in part to finance the acquisition of FIBI Bank (UK) Plc which remains subject to regulatory approval and in part to fund its future invoice discounting activities.
The high-street banks continued to deleverage and refocus on core activities: RBS announced that it will accelerate the sale of Citizens, its US banking subsidiary, with an initial IPO planned for 2014; Lloyds Banking Group announced the sale of its Australian operations to Westpac Banking Corporation for c. £900m; and HSBC Bank divested a portfolio of non-performing personal debt to Idem Capital, Paragon’s debt purchase subsidiary, for £13.5m.
Elsewhere, the Co-operative Group announced a revised recapitalisation plan for the Co-operative Bank to raise £1.5bn of additional common equity tier 1 capital which will result in the group ceding control of the bank but retaining the largest single shareholding at 30%, subject to approval by key creditors. In the personal debt management sector, Debt Help & Advice acquired First Step Finance following the OFT’s removal of the latter’s consumer credit license.
The EU mandated branch disposals of both Lloyds Banking Group and RBS continued to attract attention with Lloyds launching a new challenger bank under the TSB brand with 631 branches and 4.6m customers. TSB is expected to float on the LSE in 2014. RBS also announced a £600m pre-IPO investment by an investor consortium in 314 branches under the Williams & Glyn’s brand. The consortium comprises Corsair Capital, Centerbridge Partners, RIT Capital Partners and the Church Commissioners for England. The £600m bond will be convertible into a maximum 49% stake in the bank at the IPO.
Lloyds was also in the news with the sale of an EU commercial real-estate loan portfolio to Cerberus for €312m and through the government’s sale of c.6% stake in Lloyds, reducing its holding to 32.7% and raising £3.2bn.
Elsewhere, Australian-based Pepper Group acquired Oakwood Global Finance, a UK loan servicing and asset management specialist. Renovo completed its acquisition of Ultimate Finance Group and Arrow Global, the debt purchase and collection group, announced its intention to float.
The debt purchase and collection sector continued to be active in what was otherwise a quiet month for M&A in the lending sector. Hoist Kredit AB acquired the Lewis Group with its portfolio of 690k accounts with a face value of £1.2bn, building on its entry into the UK market last year with the acquisition of Robinson Way.
The UK high-street banking sector continued to deleverage with Lloyds Banking Group announcing the sale of a portfolio of UK leveraged loans to a subsidiary of Goldman Sachs Group for c.£254m. Lloyds also announced the sale of its German life insurance business Heidelberger Leben for c.€300m. The EU-mandated process to divest certain RBS branches continued with one of the potential acquirers, W&G Investments plc, raising £15m through a listing on AIM in preparation for a transaction that could value the business at £1.5bn.
Elsewhere, Focus Insolvency Group acquired debt management company Focus Debt Management.
The banking market continued to dominate with Barclays announcing a rights issue of c. £5.8bn as part of a wider exercise to meet a c.£12.8bn capital shortfall as identified by the Prudential Regulatory Authority. In addition, there was continued speculation around the timing and nature of the UK Government’s disposal of its shareholdings in both Lloyds Banking Group and RBS.
Deleveraging of banks’ balance sheets continued with Commerzbank announcing the sale of its €5.0bn commercial real-estate loan portfolio in Great Britain to a consortium of Wells Fargo and Lone Star funds at a c. 3.5% discount to book value. Bank of Ireland announced that the European Commission had approved a revision in its restructuring plan with the divestiture of New Ireland Assurance Company being substituted by new measures including the exit from business and corporate banking in Great Britain. Finally, UK Asset Resolution announced the sale of Northern Rock (Asset Management) plc’s portfolio of unsecured personal loans for £400m. The sale is being completed as two independent transactions with OneSavings Bank acquiring the performing loans with the remainder acquired by Marlin Financial Group.
Elsewhere, the invoice discounting and factoring market was active with Renovo Group plc making a recommended £19.4m offer for Ultimate Finance Group plc and Metro Bank acquiring Guildford-based SME Invoice Finance.
A comprehensive plan was announced to recapitalise the Co-operative Bank with an additional £1.5bn of common equity tier 1 capital by 2014, to be met in part through the sale of the Co-operative Group’s general insurance business and selected non-core asset sales.
The debt purchase and collection market remained active, albeit for different reasons. 1st Credit continued the trend in the sector of successfully raising non-bank finance through the issue of £100m senior secured private placement notes while Winterhill Largo acquired Chase Solutions, Robinson Way’s field services division. However, Equidebt went into administration with the relevant parties working towards an orderly transfer of the debt purchase portfolio and the winding down of the remaining business.
Elsewhere, the equity release broker Key Retirement Solutions was subject to a secondary buy-out with Phoenix Equity Partners acquiring control from Cabot Square Capital for a gross consideration of £35m. Omni Capital expanded its finance offering by acquiring Logical Finance, a point-of-sale retail finance provider, and the PRA approved the previously announced merger of Nottingham and Shepshed Building Societies.
The debt purchase and collection market continued to be active with AnaCap’s sale of Cabot Credit Management to JC Flowers, which undertook the due diligence on the business in partnership with US quoted Encore Capital Group. Subsequently JC Flowers sold 50.1% of their stake in Cabot to Encore Capital which invested £128m to acquire the controlling interest with the transaction due to close in Q3 2013. In addition, Arrow Global has expanded its European footprint by acquiring Effico Portugal’s assets from BNP Paribas and Lowell Group acquired debt collection agency Interlaken Group, operating principally through its Fredrickson International and SRJ Debt Recovery businesses.
Lloyds Banking Group continued to divest non-core assets, announcing the sale of its international private banking business to Union Bancaire Privee for c. £100m, comprising the business in Geneva, Zurich, Monaco, Gibraltar and Montevideo with the sale of the Miami office divested separately to Banco Sabadell for c. £8m. Lloyds also announced the sale of a portfolio of US residential mortgage backed securities to a number of institutions for a cash consideration of £3.3bn and raised gross proceeds of c. £450m from a further placing of shares in St James’s Place, leaving it with a c. 21% shareholding in the company.
In addition, Sainsbury’s confirmed that it was in advanced negotiations with Lloyds to take full ownership of Sainsbury’s Bank. RBS continues to work towards a full separation and IPO of its branch-based business, under the Williams & Glyn brand, that is mandated for disposal by the EC while also continuing discussions with potential investors in the business.
Elsewhere, Pamplona Capital Management acquired an equity stake in and provided a £100m funding line to short-term property finance business Bridgebank Capital, and the management team at invoice finance business Positive Cash Flow Finance acquired a majority stake having secured a £22m funding line from RBS, facilitating a partial exit for Infinity Asset Management.
The debt purchase and collection market remained active with BCW Group’s Norwegian private-equity backed parent company Gothia Financial Group being sold to arvato AG, subject to regulatory approval. Santander UK announced that it had reached agreement in principle to sell c. £1bn of customer store card loans to SAV Credit, and CarVal Investors and Arrow Global acquired a portfolio of securitised student loan assets from Nationwide.
Lloyds Banking Group announced that the Co-operative Group had withdrawn from Project Verde, the EC mandated disposal of 632 branches, and that the IPO option would now be pursued to create a new standalone bank with the branches rebranded as TSB Bank. The IPO is expected to be subject to regulatory and EC approval.
More broadly, the high-street banks continued to dispose of non-core overseas operations with Lloyds Banking Group announcing the sale of its Spanish retail banking operations to Banco Sabadell and HSBC announcing the sale of its stake in South Korean life insurance business, Hana HSBC Life, to its joint venture partner Hana Financial Group Inc.
Elsewhere, ClearDebt Group completed its delisting from AIM.
The debt collection market continued to be active with Creditlink Account Recovery Solutions (CARS) being acquired by US-based Jefferson Capital International and Sigma Financial Group acquiring CCSG.
In the debt management sector, Harrington Brooks announced it had acquired books of business from both Carrington Dean and the Nostrum Group, representing the first bolt-on acquisitions completed under RJD’s ownership. The publicly quoted Cleardebt Group plc announced it was intending to delist from AIM.
Elsewhere, strong equity capital markets enabled Lloyds Banking Group to sell down a c. 20% shareholding in St. James’s Place, and RBS to sell down a c. 17% shareholding in Direct Line Group.
M&A activity continued to be at a low level during February. Concord Finance Inc., trading as Speedy Cash, acquired Wage Day Advance, a private payday loan provider to expand its UK presence. Capita plc acquired iQor UK, the outsourced debt collection services provider to the public and private sectors, for £40.5m from its US parent.
PHD Equity Partners backed the management buy-out of the residual loan book of Davenham Group plc, which went into administration in November 2011. The business is looking to raise a new fund to begin lending to SMEs in the north of England.
It was a very quiet start to the year with few announced transactions. In the banking sector, Shawbrook Bank announced the acquisition of Money 2 Improve, a provider of home improvement finance facilities and Secure Trust Bank announced the acquisition of Debt Managers, a debt collection business. Zinc Group also announced an acquisition in the debt collection sector, JB Debt Recovery.
Elsewhere, the FSA approved the acquisition of Century Building Society by Scottish Building Society, announced in August 2012, and Paragon announced that it was no longer in discussions with National Counties Building Society over the acquisition of Hampshire Trust, its wholly owned banking subsidiary.