Capital Markets in Asia Need Alternative Sources of Credit

Broader and deeper access to credit across Asian markets can provide a key building block in helping the region achieve its growth potential over the coming decades. While much is made of the expansion in credit in Asia over the past decade, in truth this growth has mostly come from traditional financing sources and been provided to traditional borrowers, such as banks lending to prime or “low-risk” borrowers. Continuing the evolution toward a more sophisticated and dynamic credit offering for a wider swath of corporates and consumers will be one of the keys to capturing economic growth and properly distributing its rewards.

The credit gap in Asia is most apparent for non-conforming borrowers, borrowers who do not meet the criteria for traditional financing due to credit quality or the nature of their underlying collateral. The gap is particularly acute in historically bank-dependent lending markets, particularly those that are seeing traditional lenders retrench under the burden of non-performing loans (NPLs) or from regulatory pressure.

Encouraging the growth and evolution of public credit markets provides one part of the answer. High-yield securitization and near-prime consumer lending markets remain significantly under-penetrated in Asia compared to Europe and North America. This is true even in more developed markets such as Japan and Australia, but more acute in developing Asia—with only China having seen meaningful growth in its public debt markets. Government policy has an important role to play in creating certainty around the enforcement process, ability to move capital on and offshore, and ideally standard processes across the region.

Alongside this evolution in public markets, there is a critical role for private “alternative” credit solutions across the region. The ability for non-bank lenders (hedge funds, private equity firms and other financial institutions) to provide flexible financing can boost access to growth capital for non-traditional borrowers or more complex structures. This is especially true in markets where the high-yield market is nascent. Alternative credit plays a key role in restructuring existing debt, acquiring NPLs and in supporting and helping evolve the regimes to enforce creditors’ rights. More broadly, there is a need for alternative credit providers to more systematically cover the gaps that resulted from bank retrenchment by either building lending enterprises or buying them from traditional lenders.

In North America and Europe, alternative credit has enhanced many efficiencies in capital markets, lowering the cost of borrowing in functioning markets and helping repair access to capital in disrupted markets. We saw this when traditional lenders pulled back in the wake of the global financial crisis. Many companies still had access to credit through this avenue and the industry played an important role in buying and proactively restructuring impaired credit from the banking system.

Progress has often been associated with a proactive focus on the functioning of credit markets by governments, and this can be seen in recent years in Asia. In India, for example, a focus on cleaning up the NPL problem in the state banking system led to recent regulatory and legislative changes to ease the historically cumbersome and time consuming bankruptcy process. The restructuring of impaired credit has been most publicly visible through the so-called “Dirty Dozen”—the 12 largest corporate debtors that were mandated by the government to restructure. More broadly, India has seen a step change in behavior and capital activity in a system that was previously mired in its troubled credit problem. The Indian approach is paying dividends both in dealing with the NPL problem and in promoting the development of more credit options for healthy borrowers.

Asia will be the economic growth engine of the world over the coming decades, and history has shown the role that a sophisticated credit market can play in accelerating that path. Markets and private alternative credit, along with governments driving regulatory change will be key players in this next evolution of the Asian market.

Written by Ilfryn Carstairs, Partner and Co-CIO of Värde Partners. Originally published in September 2018 by the Milken Institute’s The Power of Ideas.

Aditya Birla Capital and Värde Partners Form Strategic Partnership to Invest in Stressed and Distressed Assets in India

MUMBAI – Aditya Birla Capital Limited (ABCL) and Värde Partners (Värde), today announced an exclusive strategic partnership to pursue investments in stressed and distressed assets in India.

Operating through a joint platform, both parties will evaluate investments across sectors, focusing on the acquisition, restructuring and resolution of the substantial supply of non-performing assets in India as well as special situations financings. Given the current landscape and further prospects in asset reconstruction in India, ABCL and Värde believe there is an attractive pipeline for strong capital deployment opportunities over the next several years.

Ajay Srinivasan, Chief Executive of ABCL said, “The ARC business is a strong addition to the businesses we already have at ABCL. We see a large opportunity in the distressed space, especially in the mid-corporate segment. One of the things that we bring to the table as a Group, is that we understand how to run many businesses. We are looking at leveraging this skill set as we enter this new business. Thus, our decision to enter into a joint venture with Värde Partners, who bring restructuring expertise to augment our core strength. The expertise and experience of both ABCL and Värde, makes this a strong combination to capitalise on the opportunity that India presents.”

Ilfryn Carstairs, Co-CIO of Värde Partners said, “We see India as a core market for Värde and a critical part of our long-term strategy in Asia. We are particularly excited to partner with an organisation with the quality reputation and established relationships of ABCL to address what we believe will be a very large, multi-year opportunity. Värde’s deep, global restructuring expertise developed over the firm’s 25-year history will be complemented by Aditya Birla’s strong team and experience in Indian credit and asset markets.”

On receipt of necessary approvals, both parties will jointly own and control the platform, which will leverage ABCL’s expertise in the financial services domain, the Aditya Birla Group’s wide operational experience across sectors and Värde’s established capabilities in global credit and value investing strategies. Värde currently manages about US$14 billion globally, and has invested nearly US$500 million in India in the past five years across corporate stressed, distressed, special situations and lending assets. With regional headquarters established in Singapore in 2008, Värde expects to open its fifth Asia office in Mumbai later this year, subject to regulatory approvals.

About Aditya Birla Capital Ltd.
Aditya Birla Capital Limited (ABCL) is the holding company of all the financial services businesses of the Aditya Birla Group. With a strong presence across the life insurance, asset management, private equity, corporate lending, structured finance, project finance, general insurance broking, wealth management, equity, currency and commodity broking, online personal finance management, housing finance, pension fund management and health insurance business, ABCL is committed to serving the end-to-end financial services needs of its retail and corporate customers. Anchored by more than 16,000 employees, ABCL has a nationwide reach and more than 2,00,000 agents / channel partners.

Aditya Birla Capital is a part of the Aditya Birla Group, a US$44.3 billion Indian multinational, in the league of Fortune 500. Anchored by an extraordinary force of over 120,000 employees, belonging to 42 nationalities, the Aditya Birla Group operates in 35 countries across the globe.

About Värde Partners
Värde Partners is an approximately US$14 billion global alternative investment firm that employs a credit-oriented, value-based approach to investing across a broad array of geographies, segments and asset types, including real estate, corporate credit, mortgages, specialty finance, transportation and infrastructure. Värde Partners sponsors and manages a family of private investment funds. Founded in 1993, Värde Partners has regional headquarters in Minneapolis (USA), London and Singapore.

Texas Real Estate Developers and Global Alternative Investment Firm Värde Partners Acquire Windsong Ranch in Prosper, Texas

PROSPER, TX AND MINNEAPOLIS, MN – Värde Partners and Texas-based real estate developers Craig Martin and David Blom today announced their joint acquisition of Windsong Ranch, a master planned community in Prosper, Texas, from an affiliate of the Terra Verde Group. Messrs. Martin and Blom, the original developers of Windsong Ranch, have teamed up with Värde to form a new real estate development company, Tellus Group, to continue leading the project. Tellus Group now seeks to build on the momentum established at Windsong Ranch including the completion of the community’s new Crystal Lagoon amenity attraction.

“In a dynamic real estate market with consistently strong job growth, Windsong has experienced strong demand and is now one of the most sought after residential locations in the greater Dallas metro area,” said Mr. Martin, president of Tellus Group. “Given our experience with the project going back several years, we are excited to partner with Värde to acquire it and see it through to completion. With the formation of Tellus Group, we are also now positioned to find similar high-quality projects to invest in.”

Windsong Ranch is a 2,030-acre, award-winning, master planned development located at 1001 Windsong Parkway South, just 2.5 miles west of the Dallas North Tollway on the north side of U.S. Highway 380. Approximately one-quarter of its planned homes are currently occupied or completed. Tellus Group will oversee the development of the remaining acreage through the completion of the project.

Setting a new standard in the Dallas market, Windsong Ranch will be the first development in North Texas to offer a Crystal Lagoon. Slated to open in spring 2019, the amenity will feature a five acre, man-made, crystal clear, turquoise blue fresh water lagoon creating a beach-like lifestyle complete with watersports and white sand beaches. In addition, Windsong Ranch offers 2 pools, a cafe, mountain biking trails, a disk golf course, tennis and basketball courts, multiple fishing lakes, a community garden, 600 acres of open green space interconnected by 30 miles of walking trails, an event lawn, dock and amphitheater.

“We’re excited to partner with two local experts with deep experience in the market as we expand our real estate portfolio to include a best-in-class master planned community in Texas,” said Brendan Bosman, a managing director at Värde Partners responsible for real estate investing in the U.S. “We have been investing in residential real estate developments for more than 10 years and look forward to sourcing more opportunities with Tellus Group in the future.”

“The popularity of Windsong Ranch has been a big contributor to Prosper’s development,” said Mr. Blom, Partner at Tellus Group. “Our new partners share our vision of continuing that growth and success and investing in similar projects. We will be looking for other opportunities of this scale where we can apply the same quality standards and concepts in other parts of Texas and the country.”

Upon completion, Windsong Ranch will consist of 3,100 single-family homes and 150 acres of mixed-use development along U.S. Highway 380. Homes are from the upper $200,000s to over $1 million and range from villas to single-family homes on 61’- 86’ lots. Builders include: American Legend Homes, Belclaire Homes, Britton Homes, Chesmar Homes, Darling Homes, Drees Custom Homes, Grenadier Homes, Highland Homes, Huntington Homes, and MainVue Homes. Models are open daily for tours.

Windsong Ranch is 35 minutes from downtown Dallas, 30 minutes from DFW Airport and 40 minutes from Dallas Love Field. Major shopping conveniences are just outside the community’s entrance.

For more information on Windsong Ranch, please visit: http://www.windsongranchliving.com

About Tellus Group
Tellus Group, LLC, is a real estate investment firm focused on opportunistic commercial and residential and mixed-use land development real estate assets. Its principals have decades of combined experience in investments and development in the real estate marketplace. Tellus Group seeks to deliver risk-adjusted rates of return that build and sustain investor trust throughout the investment cycle. Tellus creates value by engineering and executing smart, disciplined, proactive management and capital strategies, while adhering to the core values it shares with its partners.

About Värde Partners
Värde Partners is a nearly $14 billion global alternative investment firm that employs a value-based approach to investing across a broad array of geographies, segments and asset types, including specialty finance, real estate, corporate credit, mortgages, energy, real assets and infrastructure. The firm sponsors and manages a family of private investment funds with a global investor base that includes foundations and endowments, pension plans, insurance companies, other institutional investors and private clients. Now in its third decade, Värde employs more than 300 people globally with regional headquarters in Minneapolis, London and Singapore.

Värde Partners, Barclays and Guber Banca Acquire Non-Performing Loan Portfolio Originated by 53 Italian Cooperative, Rural and Popolari Banks

MILAN – Värde Partners, Barclays investment bank and Guber Banca announced today the joint acquisition of a portfolio of non-performing loans originated by 53 cooperative banks, rural banks and popolari banks spread throughout Italy. The gross book value (GBV) of the portfolio is €1.397 billion.

Centrale Credit & Real Estate Solutions (CCRES), part of Cassa Centrale Banca Group, acted as advisor, coordinating the sale process.

The portfolio comprises more than 9,000 positions, with 39% of the portfolio secured and the remaining 61% unsecured. The loans were originated mainly in the North-East and in the North-West of Italy.

The portfolio was purchased by FUTURA SPV, a securitization vehicle pursuant to Law 130/1999; the vehicle has issued single-tranche notes, the majority of which has been underwritten by a company majority owned by Värde and financed by Barclays Bank plc, and a minority part of the notes will be held by Guber Banca.

Guber Banca will also act as servicer and sub-servicer of the portfolio.

Francesco Guarneri, CEO – Guber Banca commented: “In our 27-year history, we have built unique expertise in the valuation and management of non-performing loans. We have developed proprietary technologies and implemented highly structured processes based on historical curves differentiated by asset classes. In a very competitive market with short lead times, it is essential for due diligence on the NPL portfolios to integrate the traditional methodologies of analysis with new tools based on digital technologies. This is, in fact, the first acquisition of a NPL portfolio achieved with mainly digital due diligence.”

Francisco Milone, Partner – Head of European Real Estate at Värde Partners commented: “We are pleased to partner with Barclays and Guber on this transaction. We initially invested in Guber in 2017 knowing they would play a big role in our longer term strategy to invest in NPLs in Italy. Värde has deep expertise investing in stressed and distressed loans and with dedicated people and resources on the ground, we remain committed to growing our presence in Italy. Our strength lies in our ability to close complex transactions while the market in Italy is experiencing more volatility and uncertainty.”

Adeel Khan, Head of Global Credit and Co-Head of Markets at Barclays commented: “We are very excited to have worked with Guber and Varde on this transaction. We have been investing and expanding our Leveraged Credit Trading and Special Situations financing capabilities to be able to support our clients across products and geographies. This transaction is also a testament to our commitment to Italy.”

Freshfields Bruckhaus Deringer LLP has acted as legal advisor for Värde Partners, Barclays Bank Plc and Guber Banca; Banca IMI has advised CCRES.

About Guber Banca
Guber Banca, founded in 1991 by Francesco Guarneri and Gianluigi Bertini, is one of the leading operators in the Credit Management industry in Italy, with approximately 7.5 billion euro in loans under management (as of 31 December 2017). In April of last year, the founders were joined by Värde Partners with a 33.3% stake. Guber is active throughout Italy with more than 180 employees and cooperators, and it has a presence all over the country thanks to a network of more than 280 external lawyers. Guber, which specializes in the management and recovery of portfolios of non-performing loans, both unsecured and mortgage-backed, is also active in the macro areas dedicated to the direct purchase of loans and to due diligence & advisory services, including in the real estate sector.

About Barclays
Barclays is a transatlantic consumer and wholesale bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US. With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 80,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide. For further information about Barclays, please visit our website www.home.barclays

About Värde Partners
Värde Partners is a $13 billion global alternative investment firm that employs a value-based approach to investing across a broad array of geographies, segments and asset types, including real estate, corporate credit, mortgages, specialty finance, real assets and infrastructure. The firm sponsors and manages a family of private investment funds with a global investor base that includes foundations and endowments, pension plans, insurance companies, other institutional investors and private clients. Founded in 1993, Värde employs more than 300 people globally with regional headquarters in Minneapolis, London and Singapore. Since opening an office in Milan in 2014, Värde has led the acquisition of more than $1 billion in Italian distressed claims and subsequently completed multiple major restructurings both in court and out of court. In 2017, Värde acquired a stake in Guber, which recently obtained a banking license to diversify its funding sources and facilitate future growth, particularly with respect to the NPL portfolio market.

Värde Partners Hires Shannon Gallagher as Head of EMEA Business Development and Investor Relations

LONDON – Värde Partners, the global alternative investment firm, announced today the hire of Shannon Gallagher as Head of EMEA Business Development and Investor Relations.

Based in Värde’s London office, Shannon will lead the team responsible for developing and cultivating relationships with Värde’s investors across Europe, the Middle East and Africa.

“We are pleased to welcome Shannon to Värde. Not only will she be a valuable resource to Värde’s investors, her experience and relationships in the region will provide meaningful insight as we continue to engage with and meet the needs of our investors,” said Jon Fox, Partner and Global Head of Business Development and Investor Relations.

Shannon has over 15 years of experience working with institutional investors to achieve their investment objectives. Prior to joining Värde, Shannon led the EMEA client development team at Magnetar Capital and, prior to that, she was a Principal at Park Hill Group in London providing alternative asset advisory and fundraising services to global alternative asset managers. She began her investment career at FORT Investment Management.

Shannon received a Bachelor of Arts in Economics from the University of Virginia and is a CFA Charterholder.

“Värde has a rich 25-year history of providing value to investors and it is a privilege to join the firm at such an exciting time,” said Shannon. “I am thrilled to join a highly talented team and I look forward to further strengthening and expanding Värde’s trusted investor partnerships in the EMEA region.”

Investor Group Led by Funds Affiliated with Apollo Global Management and Värde Partners Announce the Closing of the Previously Announced Transaction to Acquire a Significant Position in OneMain Holdings

NEW YORK and MINNEAPOLIS – An investor group led by funds managed by affiliates of Apollo Global Management, LLC (“Apollo”) (NYSE:APO) and Värde Partners, Inc. (“Värde”) completed the previously announced acquisition of an approximately 40.5% equity interest in OneMain Holdings, Inc. (“OneMain”) (NYSE:OMF) from investment funds managed by an affiliate of Fortress Investment Group LLC for $26.00 per share.

About Apollo
Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, Bethesda, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai. Apollo had assets under management of approximately $247 billion as of March 31, 2018 in credit, private equity, and real assets funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. For more information about Apollo, please visit www.apollo.com.

About OneMain Holdings, Inc.
OneMain Holdings, Inc. (NYSE: OMF) is America’s premier consumer finance company, offering responsible and transparent personal loan products for over 100 years. The company provides personalized, best-in-class service at their 1,600+ branches and online. OneMain has more than 10,000 team members, located throughout 44 states, who are dedicated to serving and supporting the communities where they live and work. For additional information, please visit OneMainFinancial.com.