Boston-based Sankaty Advisors, the credit arm of Bain Capital, is buying a $1.3 billion credit portfolio of loans from JPMorgan’s Global Special Opportunities Group. The portfolio is made up of mezzanine loans in North America and Europe, as well as loans and related special situations investments in Australia and Asia.
This is the largest loan portfolio that Sankaty has picked up from a bank to date, and its first with a US bank. Previous deals have been acquisitions from European banks, including the Irish Bank Resolution Capital (IRBC), Lloyds Banking Group and Capital Source.
Whilst the pressure on European banks has come from a need to aggressively deleverage, US counterparts have been largely driven by a desire to offload non-core assets. Investment groups like Sankaty have profited from both trends.
Jeff Robinson, a managing director who worked on this deal, said the group was in talks with other banks about similar deals, but could not share details at present. “We’re in active dialogues with many banks. Many of them actually seek out our counsel when it comes to credit investing and capital raising.”
As for the deal with JPMorgan, Robinson said he was very excited about it because of its geographic scale, as the portfolio has a diversified exposure to all the major continents. It’s comprised of mostly corporate loans, with about 40 percent in Europe, 13 percent in North America, 30 percent in Asia and 17 percent in Australia and New Zealand.
Sankaty will be purchasing the entirety of the assets from this particular group at JPMorgan and Robinson said that, as part of the agreement, Sankaty planned to make offers to bring on some of the people from that team at the bank to Sankaty, but added it was too early to tell whether or how this might occur.
The firm closed its Sankaty Credit Opportunities V fund in mid-2012 at $3.5 billion and its Middle Market Opportunities Fund in late 2013 at $1.4 billion. Sankaty is now investing those funds and the capital for the JPMorgan deal is coming from both vehicles. Robinson said the funds usually have a four-year investment period, so the credit fund is about half of the way invested, and the middle market fund is a quarter of the way there.
The credit fund focuses on distressed and stressed opportunities in single company names, whereas the middle market fund offers lending to assist buyouts. Sankaty is targeting returns in the mid-teens for both funds.