AnaCap Financial Partners has agreed to acquire a £122 million (€140 million; $195 million) portfolio of consumer-related debt from Bank of America’s MBNA unit, highlighting the opportunity for firms with fresh capital as financial institutions work to divest non-core assets.
It’s unclear how much the firm will pay for the portfolio. AnaCap declined to comment.
AnaCap will make the investment from its first AnaCap Credit Opportunities Fund. The firm is currently raising its second Credit Opportunities Fund, targeting £250 million with a hard-cap of £350 million. The firm had collected at least £64.6 million by August, according to filings with the US Securities and Exchange Commission, and received a $110 million commitment from the New Jersey Division of Investment this month.
The firm will work with Moorgate Loan Servicing to collect the debt, according to market sources. Moorgate has a 20 year track record of collections and has worked with more than 1 million borrowers to service debt. AnaCap also owns a debt collection platform through its portfolio companies Apex Credit Management and Cabot Financial, which the firm merged earlier this year.
They're not in any hurry to recover money; they are in a position to recover as much money sensibly over the life of the fund as is possible.
Recent interviews with limited partners and other industry sources revealed the delicacy with which a private equity firm needs to approach consumer debt collections.
To even get involved in a deal for a consumer credit-related portfolio, a firm has to prove to the selling financial institution that it will not alienate the bank’s customers by being too heavy-handed in their collection strategies, the sources said.
“The bank doesn’t want to lose them as a client, so they’re sensitive to who they sell [the portfolios] to,” a person with knowledge of the firm and its strategy told Private Equity International in a prior interview. “Not many can do this and do it in a way where you’re buying small portfolios and the banks trust you to not [drive] their clients away from other products.”
Private equity firms like AnaCap are well-positioned to service consumer debt sensitively because of the long investment time frame: after buying a portfolio, firms have several years to try and collect the debt.
AnaCap (or the collections company the firm is using) tries to understand each borrower’s situation, sources said. “It’s in their interest to work intelligently with debtors to maximise recovery,” the source said. “They’re not in any hurry to recover money; they are in a position to recover as much money sensibly over the life of the fund as is possible.”
AnaCap also runs private equity funds that focus on financial services. The firm’s second Financial Partners fund closed in 2009 on €575 million. In June, the firm completed the acquisition of retail and commercial bank Banco Popolare Ceska Republika from Italian parent Banco Popolare after 18 months of negotiations.
Opportunities are rife for firms in the financial services sector as banks around the world sell down assets to get into compliance with regulations and shore up ailing balance sheets. European institutions especially may be pressured to sell even greater levels of assets as regulations over bank capitalisation requirements may be stricter than initially envisioned, with calls for a required 9 percent Tier 1 capital level.