Financial News: Private debt specialist signs bumper €3bn deal for bad bank loans
Acquisition is the biggest deployment, by loan face value, so far from LCM’s first fund for external investors.
LCM Partners, a private debt fund manager, has acquired a €3bn portfolio of bank loans in one of the largest buys of unsecured consumer debt in Europe this year.
LCM purchased the debt in a secondary deal, from another fund manager whose name was not disclosed in the statement announcing the deal. The purchase price also was not disclosed, but such books of non-performing debt usually change hands for a fraction of the face value.
Many of the loans, comprising the debts of 400,000 consumers and small businesses across the UK, Germany, Italy and Spain, and originally lent out by more than 50 banks, have been “rescheduled” to increase the chances of repayment.
LCM, which is the fund management arm of debt servicing and outsourcing group Link Financial, drew on Link’s 600-strong network of debt managers across Europe to work out new terms with borrowers.
The debt specialist firm deployed capital from its €2bn Credit Opportunities Strategy, its first fund raised for external investors such as pension schemes. This was closed in October and has so far spent €1.3bn of its cash.
According to the European Banking Authority, 5.7% of bank loans in the EU are non-performing – a rate three times higher than in other jurisdictions. The region’s gathering economic recovery has been marred by pockets of continuing distress in its banking system, most notably in Spain and Italy, opening the door for funds investing in turnaround opportunities.
The loans in LCM’s most recent purchase date further back, however. Paul Burdell, the firm’s chief executive, described the €3bn loan portfolio as “seasoned”, with “an element of re-performing loans which gives this portfolio greater value than some of the ones coming out of Italy right now, for example”.
Burdell added there would be further deals announced soon, with a “strong pipeline of approximately €11 billion of receivables from across our European markets”.
LCM manages €19.5bn, a total the firm believes makes it one of Europe’s largest investors in private debt.