Cerberus leads U.S. investors gobbling up Europe's bank loans

Tue Jul 28, 2015 12:46pm EDT
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By Steve Slater

LONDON (Reuters) - Cerberus, the private equity firm named after the mythical three-headed dog guarding the gates of Hades, is leading a charge by U.S. investors who are snapping up European loans at knockdown prices.

New York-based Cerberus Capital Management [CBS.UL] has bought more than 27 billion euros ($30 billion) of European loans in the last 2-1/2 years, acting along with rivals such as Lone Star and Blackstone (BX.N: Quote) to snap up commercial and residential debt from banks desperate to shrink or governments running down so-called "bad banks".

The trend looks set to continue.

"There's certainly another five years to go. We believe there's 2 trillion euros of unwanted loans across Europe sitting on banks' balance sheets," said Richard Thompson, head of the portfolio advisory group at consultancy PwC.

U.S. banks went through a similar process of selling sub-prime loans after the 2008/09 financial crisis and many big funds there built up expertise that has left them well equipped to raise cash and snap up the European loans coming up for sale, bank industry sources said.

Thompson said scale can give them a vital edge, with data on how one loan portfolio performs helping subsequent bids. "Over time the big players build up a data advantage, a reputational advantage, a track record with the main vendors, so I think they will continue to dominate the market."

But the sale of loans to private equity firms has attracted criticism, including accusations customers haven't been told when loans are transferred and the private equity firms are too aggressive in chasing repayments.

UK law firm Berg said in a report this month it had seen cases where businesses whose debts had been sold to private equity had been put under "huge pressure".   Continued...