Sector developments and company hires

Structured products dealer acquired
Santander Holdings USA is set to acquire independent broker-dealer Amherst Pierpont Securities - through the acquisition of its parent holding company Pierpont Capital Holdings - for a total consideration of approximately US$600m. Well known for its fixed-income and structured product franchise, Amherst Pierpont will become part of the Santander Corporate & Investment Banking global business line.

Amherst Pierpont was designated a primary dealer of US Treasuries by the New York Fed in 2019 and is currently one of only three non-banks to hold that designation. The firm has approximately 230 employees serving more than 1,300 active institutional clients from its headquarters in New York and offices in Chicago, San Francisco, Austin, other US locations and Hong Kong.

Completion of the acquisition significantly enhances Santander CIB’s infrastructure and capabilities in market making of US fixed income capital markets, provides a platform for self-clearing of fixed income securities for the group globally, grows its institutional client footprint, and expands its structuring and advisory capabilities for asset originators in the real estate and specialty finance markets. The acquisition of Amherst Pierpont is expected to be around 1% accretive to group earnings per share and generate a return on invested capital of around 11% by year three (post-synergies), with a -9bp impact on group capital at closing.

The transaction is expected to close by end-1Q22, subject to regulatory approvals and customary closing conditions.

In other news…

BTL lender spun off
Fortress Investment Group is set to sell UK specialist mortgage lender and servicer Foundation Home Loans to Athene Holding, a financial services company focused on retirement savings solutions. Foundation Home Loans - the trading brand of Paratus AMC - is well known in the European mortgage lending, servicing and securitisation markets. As GMAC-RFC, the company grew to be the tenth largest UK originator of residential mortgages, a leading issuer of UK RMBS and a central contributor to the formation of the specialist loan market.

Funds managed by affiliates of Fortress acquired GMAC-RFC from GMAC in October 2010, as the company and its loan portfolio faced substantial challenges in the aftermath of the financial crisis. Management appointed by Fortress rebranded the company and set about transforming it into a focused and highly effective mortgage servicer.

With this strong focus on customer outcomes and providing solutions to borrowers in distress, the company saw dramatic improvements in loan performance and a substantial decline in arrears levels in a £4bn book of legacy mortgage loans. Under Fortress stewardship, the company returned to profitability in 2011 and in 2015 relaunched mortgage lending under the Foundation Home Loans brand, which has established itself as a top-three specialist buy-to-let mortgage lender and a growing provider of specialist mortgages to residential borrowers.

Since relaunching lending, Foundation Home Loans has originated over £2.5bn of mortgage loans, including over £500m in the first half of this year. The company has also developed a strong presence in the capital markets under Fortress, with cumulative RMBS issuance in excess of £3bn through 10 transactions since 2017, including the successful securitisation of legacy mortgage portfolios acquired from third parties.

During nearly 11 years under FIG ownership, the company’s headcount more than doubled to nearly 300 staff. The company has maintained its headquarters in Bracknell in Berkshire, where it was founded.

CIB strategic alliance agreed
Jefferies Financial Group and SMBC Group have entered into a strategic alliance to collaborate on future corporate and investment banking business opportunities. In particular, the two firms will coordinate efforts in the US leveraged finance business to expand and scale existing offerings.

SMBC will also provide financing to Jefferies Finance (JFIN), the leveraged finance underwriting affiliate of Jefferies, to expand its leveraged finance origination and underwriting efforts, as well as financing to Jefferies Group. SMBC’s financing to JFIN is in the form of a US$1.65bn revolving credit facility and a US$250m subordinated loan to support JFIN’s lending capabilities, while the financing to Jefferies is in the form of a US$350m revolving credit facility.

Further, SMBC Group intends to solidify its relationship with Jefferies by acquiring in the open market up to 4.9% of the firm’s publicly traded shares of common stock of Jefferies Financial, reflecting an approximately US$386m equity investment (based on the closing stock price as of 13 July 2021), subject to receipt of Hart Scott Rodino clearance.

French NPL partnership inked
Debitos and French data management company Transformation Factory have begun partnering on non-performing loan portfolio transactions. The aim is to construct a comprehensive solution for French banks and credit institutions by producing a holistic service, from data gathering to execution to pricing and portfolio selection. 

This partnership will provide Debitos’ 1,300 registered investors with access to French institutions and open the French NPL market to overseas investors, thereby connecting suppliers and purchasers. The NPL stock in France is projected to be over €130bn, the highest in Europe.

As part of the partnership, Transformation Factory has launched a new deal advisory and quantitative analysis practice, which will recruit sellers, negotiate deals and execute transactions. The firm expects to add additional strategic personnel, particularly a senior banker now based in London, who will join the firm in the coming months.