| NEW YORK, July 29
NEW YORK, July 29 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
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
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
"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
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)