TRLPC: Sankaty sops up JPM loan portfolio, targets asset-shedding banks

NEW YORK, July 29 Tue Jul 29, 2014 3:55pm EDT

NEW YORK, July 29 (Reuters) - Sankaty Advisors swooped in to buy $1.3 billion of loans and other securities from J.P. Morgan in its biggest portfolio takeover yet, and sees opportunity to soak up more from European banks shedding assets to meet regulatory requirements.

J.P. Morgan's global special opportunities group unloaded mezzanine loans from companies in North America and Europe, as well as loans and related special situations investments in Australia and across Asia. The sale was part of a broader effort to get rid of non-core holdings, including its physical commodities business, sources familiar with the transaction said.

Banks generally are under regulatory pressure to curb risky investments, and need to hold more capital against such assets to buffer potential losses.

With interest rates holding near historic lows for an extended period, in a policy move engineered by the Federal Reserve to stoke the economy, investors have been reaching for extra yield offered by riskier assets. This has led regulators to take steps to bolster lending standards, to avert the type of financial markets crisis that triggered the Great Recession.

"There are a lot of European banks we're in active conversations with that have all sorts of loans, nonperforming or otherwise, they're looking to sell as they continue delevering to meet regulatory requirements," Sankaty managing director Jeff Robinson told Thomson Reuters LPC.

"European banks in general remain significantly more levered than the U.S. banks," he said.

Sankaty said the J.P. Morgan portfolio purchase topped its other sizable acquisitions of a A$371 million ($335.74 million) portfolio from Lloyds Banking Group in August 2013 and a 500 million pound ($793 million) portfolio from Lloyds in March 2012.

"This is significantly bigger in terms of dollar value, but also in terms of the number of assets and diversity of the portfolio, versus the other ones we've done," Robinson said.

The J.P. Morgan portfolio consisted of loans from more than 30 different companies with broad geographic exposure: with 40 percent from Europe, 13 percent from North America, 30 percent from Asia and 17 percent from Australia and New Zealand, he said.

Sankaty, Bain Capital's independently managed credit arm, declined to disclose other specific loan details. J.P. Morgan declined to comment beyond Monday's joint statement of the sale.

Sankaty expects to continue buying single loans, as well as batches, on the heels of the J.P. Morgan and other recent portfolio purchases from banks including Irish Bank Resolution Capital and Pacific Western Bank division CapitalSource.

The loans go into Sankaty long duration opportunistic credit funds, said Robinson. "We are looking to partner and support companies over the long term."

The J.P. Morgan transaction is expected to close by the end of this year. J.P. Morgan, in the joint statement with Sankaty, said the portfolio is not expected to have a material impact on J.P. Morgan Chase's earnings.

Chris Nicholas, head of J.P. Morgan's Global Special Opportunities Group, in the release cited Sankaty's "successful track record of acquiring global investment portfolios and acting as partners to borrowers." (Editing By Jon Methven)

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