Investor Group Led by Funds Managed by Affiliates of Apollo Global Management and Värde Partners to Acquire a Significant Position in OneMain Holdings from Fund Managed by an Affiliate of Fortress Investment Group

NEW YORK, NY & MINNEAPOLIS, MN – An investor group led by funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) (NYSE: APO) and Värde Partners, Inc. (“Värde”) today announced they have entered into a definitive agreement with a company primarily owned by funds managed by an affiliate of Fortress Investment Group LLC (“Fortress”) to acquire all of its remaining equity interest in OneMain Holdings, Inc. (“OneMain” or the “Company”) (NYSE: OMF) for $26.00 per share. Upon completion of the transaction, the Apollo and Värde led investor group will own approximately 40.5% of OneMain. The transaction, which is expected to close in the second quarter of 2018, is subject to regulatory approvals and other customary closing conditions.

“We are tremendously excited for our managed funds, together with Värde, to acquire a significant position in OneMain,” said Matthew Michelini, a Partner at Apollo. “As one of America’s premier consumer finance companies, we believe OneMain is exceptionally well-positioned for continued growth and innovation. We look forward to working with OneMain’s dedicated team of employees and leveraging Apollo’s resources and deep expertise in financial services as the Company embarks on the next chapter of its long history of success.”

“We are delighted to be making a strategic investment in OneMain,” said Aneek Mamik, North America Head of Specialty Finance at Värde Partners. “We look forward to collaborating with the highly experienced teams at OneMain and Apollo to grow and develop the business for the benefit of all stakeholders. The investment is a complementary extension of our deep expertise globally in specialty finance.”

“We appreciate all of the support and insight that Fortress has provided as a key partner and majority investor over the last seven years of our company’s journey,” said Jay Levine, President and CEO of OneMain Holdings, Inc. “With a clear path forward to achieve our long-term objectives, we are confident that the thought leadership and expertise represented by this new investor group will be instrumental as we build further shareholder value.”

Barclays is serving as lead financial advisor and Sidley Austin LLP is serving as legal counsel to the Apollo and Värde led investor group in connection with this transaction. Goldman Sachs is also providing advisory services to the investor group. Citi is serving as exclusive financial advisor to Fortress and Cravath Swaine & Moore LLP is serving as legal counsel to Fortress in connection with this transaction.

About Apollo Global Management
Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, Chicago, St. Louis, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai. Apollo had assets under management (AUM) of approximately $242 billion as of September 30, 2017 in private equity, credit 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.agm.com.

The investment in OneMain by the Apollo-managed funds is being made from Apollo Investment Fund VIII, L.P. and its parallel funds (collectively, “Apollo Fund VIII”). Including its commitment to OneMain, Apollo Fund VIII has committed approximately 88% of its available capital.

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 specialty finance, real estate, corporate credit, mortgages, energy and transportation. 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 270 people globally with regional headquarters in Minneapolis, London and Singapore.

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.

Värde Partners Founder on Leaving a Lasting Legacy

The past few years have seen a number of credit and hedge fund managers go through huge turbulent change as founders have exited firms without a solid plan for what should happen next. Millennium’s now rival ExodusPoint is a case in point of what can go wrong if a founder gets it wrong, but, at the same time, names like BlueCrest, once a stalwart of the credit world, have converted into family offices as some firms didn’t really see past their founder.

Värde Partners is not one of these firms, as Ilfryn Carstairs steps up to become co-CEO alongside George Hicks, it’s clear that Värde is built to long outlast its founders. Alt Credit sat down with Hicks who is the last founding partner still involved in day-to-day management of the firm (and already has a timeline for joining one of the other founding partners, Marcia Page, on the firm’s board), to discuss how the firm has created a distinct culture and approach that will remain the Värde way after he moves upstairs.

Timing is key

One thing that sets Värde apart is that it is already one of the older credit managers around. Many of the firms currently going through succession issues, particularly in credit, were born out of the aftermath of the financial crisis, with teams picking up the credits they had previously traded on the cheap.

Värde was different, Greg McMillan, Marcia Page and Hicks were working at Cargill, where they started the merchant bank, which is now known as CarVal. They left to launch Värde Partners in 1993, without any big backers or balance sheet.

“At that point survival was our main goal, but we wanted to build a business that would last and we focused on the culture of the firm, rather than having a target for AUM growth,” says Hicks. “We caught the growth of alternatives just right as pensions and endowments started developing alternative allocations. The demand grew exponentially.”

Apart from the timing though, Cargill had given the founders a distinct outlook on the credit world. “Coming from Cargill we had a very international mindset, which became crucial to how we expanded the business.”

“From the get-go, we developed a broad-based platform to find motivated sellers of debt, wherever they are. We invested in multiple asset types across public and private debt, consumer-related debt and private equity.”

Hicks continues: “Over the years, we’ve grown those businesses internationally, and established some of those asset classes as their own business lines. For example, our Private Equity business, which now invests across a number of sub-sectors in the financial services industry, grew out of our early expertise in consumer finance.

What we’ve always tried to do is build credibility by doing what we do well. I would’ve said to you in 1993 that we’re a distressed debt hedge fund, but now I’d say we’re a global alternatives firm with a focus on credit.”

International growth: partner led, local talent

Värde is one of the most international credit funds you can find for its size, claiming not to have a single head office but instead having major hubs in the US, London and Singapore.

“Our early experience investing in Europe taught us that firms with a presence on the ground, with the necessary language skills and local market experience, had better access to deals.”

The firm soon set a pattern to how it would approach new geographies. “We believed that Europe would become more important as we grew, so in 2004 we moved a partner to establish an office in London. Marcia Page, one of the founding partners, followed soon after in 2005 to set up the publicly traded business in the region.”

There are some common pitfalls when entering a new country though, apart from the investment landscape itself, there are cultural differences, communication obstacles, managers need to get the balance of autonomy right between offices, and make sure the various teams are incentivised to maintain the culture of the firm.

“Crucially, we didn’t set a target for investing in Europe,” says Hicks. “We saw the move as part of the growth of our business and instead focused on having a partner-led business and consistency of culture, supported by hiring experienced people in the local market.

In 2007, we executed a similar strategy in Asia, where a partner went to build the office, again hiring local talent. It ensured that our culture carried over, and we maintained our focus on excellence and underwriting. Today Asia represents about 20% of our business, and we hope that someday it will be split evenly between Europe, the US and Asia. Co-CEO Ilfryn Carstairs is an Australian, based in Singapore, and I think that’s a real statement as to how our business grows.”

Hicks continues: “It’s an interesting challenge to have a headquarterless model. The senior partners travel regularly to regional hubs in Singapore, London, New York and Minneapolis. Travelling to different offices is important to maintaining our culture.”

The ultimate credit decisions are centralised with the global investment committee and the partners, however. Hicks elaborates: “With a centralised platform to assess relative value across business lines, we don’t say ‘here’s $500m for India, put it to work’. We have a vision of what kind of volume we think we can achieve, but the committee will always take decisions based on where it believes the best opportunities lie and where capital should be allocated.”

Managing a global workforce means managing a diverse set staff. “Scaling the business in the right way and dealing with people’s motivations is key; if someone is doing a good job, making good decisions, even if they’re not putting money to work they will be rewarded.”

But it’s ultimately up to the investment committee to make the decision about whether investment in a certain area is worth it. Värde has largely forgone acquisitions in this global expansion, but has nonetheless teamed up with local partners.

“Acquiring another investment manager would be challenging, as it’s difficult to blend cultures,” says Hicks. Instead, the firm has invested in joint ventures. “For example, we are pursuing the acquisition, reinsurance and management of life and retirement businesses with Agam Capital,” he says. “We also have a JV with Aditya Birla Capital Limited, part of one of India’s largest onshore conglomerates, to pursue investments in stressed and distressed assets in the country.”

Asia, India and China

Nowhere has Värde’s international approach been more evident than in India. While a number of managers had begun piling into the country following reforms to the bankruptcy code, Värde has been one of the most committed, even KKR halted its plans for a fund following.

“When we first went to Asia, we mainly looked at Japan, Australia and New Zealand, where we understood the legal systems and business culture. We have since expanded into other countries, and our main focus today is India and Indonesia.

In India, the firm has an office in Mumbai and the JV with Aditya Birla Capital. “We largely began investing in India four years ago, as it fit our investment thesis,” says Hicks. “The country’s banks were sitting on around $200bn of bad debt and, when the government reformed its legal system to address the issue, it created incentives to sell assets.”

While the country’s recent reforms haven’t been all plain sailing, it’s on the right path. Hicks says: “India has taken steps to address the institutionalisation of distress in the country and adopted a new bankruptcy law. Certain cases have gone all the way through; the laws have been effective and we’ve seen precedents develop.”

Meanwhile, the timing hasn’t yet been quite right for the other great Asian economy, China.

Hicks says: “We currently have one person focusing on the Chinese liquid space, but, at present, we don’t see the same resolve in China to sell assets, and we’re not yet quite as comfortable with the legal system.”

But Hicks certainly isn’t ruling the country out for investment. “Mainland China has been on our radar for a long time – that would be the next pivot in Asia and we will invest there in the future,” he says.

“China is an example of one of the places where we want to be doing the work to understand the market now, so that we can be prepared to invest when there is a change that creates those motivated sellers.”

Timing the global cycle

This goes backs to Värde’s view on timing. To paraphrase a popular drinking phrase: there is always a cycle somewhere in the world.

“Our 25 years in the industry has led us to see that there is not one cycle; there are big cycles, and then there are multiple smaller cycles stemming from that,” says Hicks. “Across our global platform we can analyse individual cycles around the world. We’re looking for places with a lot of leverage and in an industry that is undergoing structural changes. For example, today we’re very active in India, which has a very different credit cycle to the US.”

That doesn’t mean the US opportunity has completely dried up in the 12 years since the crisis, Hicks still sees some mispricing and more granular opportunities, it is very active in the PG&E bankruptcy and has a team looking at energy, shipping, telcos and healthcare, but the next big cycle is yet to come.

“There is going to be another recession at some point and when the big cycle ultimately comes, defaults will go up over 10%,” he warns. “The way you deal with a bigger cycle is good downside protection, and being ready to take advantage. Frankly, when the cycles come, that’s an opportunity, the key is to be ready for it, so we’re doing the due diligence now.”

And it’s not just the credit analysis that needs to be ready. “You have to have the right amount of capital to capitalise on the opportunity set,” Hicks adds, suggesting that the firm would raise a bigger fund to capitalise on the scale of another US cycle.

“At the moment we’re still focused on some of the structural plays and systemic areas of distress. We are still active in Southern Europe, and India also fits into that.”

Leaving a legacy

“Transition and succession is a process, not an event, and something I’ve been in the middle of for about 10 years now,” says Hicks.

Originally three founding partners ran the place equally, then McMillan retired in 2008 and remains ‘a friend of the firm’, while Marcia was elevated to executive chair in 2016. Ilfryn now joins Hicks for the next two years as co-CEO, then Hicks will move to be chair too and Carstairs is set to become the sole CEO. “There are 16 partners that are a big part of our story, so it’s an evolution.” says Hicks.

In contrast, there are a lot of firms in the industry that get to that $10-15bn size and fall by the wayside because the firm can’t outlive the founder, Hicks highlights: “What we’ve done is create a firm that we believe can continue to grow, and Ilfryn emerged as the natural successor.”

There are lot of investment firms that haven’t been through an economic cycle. Some firms, including fairly large ones, have stumbled during the good times, so when a cycle does come we will see some wash out of credit managers.

Originally published by Alt Credit Fund Intelligence.

Värde Partners Closes Third and Largest CRE CLO

MINNEAPOLIS – Värde Partners, today announced the closing of a commercial real estate collateralized loan obligation (CRE CLO). This is the firm’s third and largest CRE CLO, and seventh securitization of commercial real estate collateral.

The asset pool consists of 24 floating-rate mortgages secured by 47 properties and has an aggregate unpaid principal balance of $627.5 million. Värde offered $514.6 million of bonds rated AAA through BBB-. The assets include office, multifamily, retail, hospitality, and mixed use properties across 12 states with an average principal balance of approximately $26.1 million.

Brian Schmidt, Partner and Head of Värde’s Mortgage Business, said: “This third commercial real estate CLO demonstrates the continued growth and strength of our mortgage origination platform. The deal will support the ongoing expansion of our mortgage business and deepen our long term financing relationships with investors. We have a long track record of investing in US mortgages, investing flexible capital across a range of geographies, asset classes and capital structures.”

Värde has originated or acquired more than $2.5 billion in commercial real estate loans since 2014, with its origination activity primarily focused on floating rate mortgage loans on light transitional, value-add and event-driven commercial and multifamily opportunities across the U.S. Värde closed its first CRE CLO in February 2018 with an aggregate principal balance of
$368.1 million backed by 25 mortgages and 28 assets and its second CRE CLO in November 2018 with an aggregate principal balance of $457.8 million backed by 25 mortgages and 27
properties.

About Värde Partners:
Värde Partners is a $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
mortgages, corporate credit, real estate, specialty finance, 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 Appoints Co-CEO

MINNEAPOLIS and SINGAPORE – Värde Partners, a leading global alternative investment firm, today announced that Ilfryn Carstairs will join George Hicks, Co-Founder and Chief Executive Officer, as Co-CEO, effective January 1, 2020. George co-founded Värde Partners 25 years ago and intends to transition to an Executive Chair role in 2022. Ilfryn will retain his role as Global CIO.

“Transition is a process and involves the entirety of the firm. The roles Ilfryn and I play are just part of that process whereby a new generation of leaders succeed the founders,” said George. “Ilfryn joined us 12 years into this journey and has grown as both an investor and a leader. His skills in both pursuits will enable Värde to continue delivering for our investors and will help to ensure that we maintain our strong culture long into the future.”

Ilfryn is a Partner and Co-Chief Investment Officer overseeing the global investment strategy for Värde. He co-chairs the firm’s Investment Committee. Based in Singapore since 2017, he joined the firm in 2006 in London and played a key role in building Värde’s team and business in Europe and in Asia. Prior to being named Co-Chief Investment Officer in 2017, he served as Co-Head of Corporate and Traded Credit, managing Värde’s liquid investing activities globally.

Originally from Australia, Ilfryn received a B.C. with First Class Honours from the University of Queensland, Australia, and an M.B.A. from INSEAD, France.

George co-founded the firm in 1993 with Marcia Page, currently Executive Chair, and Greg McMillan (retired 2008) in the early days of the alternative investing industry. The firm has since invested more than $60 billion and has grown into a successful enterprise investing in a diverse set of strategies around the world.

About Värde Partners
Värde Partners is a $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 corporate and traded credit, real estate, mortgages, financial services, 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 Acquires Prime Office Building in Porto

LONDON – Värde Partners, a leading global alternative investment firm, today announced the acquisition of Burgo Tower, a grade A office building located in Porto, Portugal. The multi-tenant office building was acquired, and will be managed through, a Portuguese asset management platform owned by Värde Partners.

“During recent years, Porto has attracted the attention of several international companies and executives which are driving growing demand for office space in the city. This transaction is in line with our strategy of acquiring office assets in areas of Portugal with a supply-demand imbalance against the backdrop of positive macroeconomic indicators,” said Hugo Moreira, Värde Partners Managing Director responsible for real estate investments in Portugal. “The Burgo Tower, conveniently located on Avenida Boavista in the central business district, offers tenants high quality building infrastructure professionally managed by our team in Portugal led by Ricardo Valente.”

Built in 2007, the Burgo Tower was designed by renowned architect Eduardo Souto de Moura and has a gross lettable area of over 16,000 square meters.

Värde invests in real estate assets, loans and operating companies globally and has a strong presence in Europe, particularly in Iberia.

ING Bank provided the debt financing for the transaction.

Pretium to Acquire Deephaven Mortgage from Värde Partners

NEW YORK – Pretium and Värde Partners announced that they have entered into a definitive agreement for Pretium to acquire Deephaven Mortgage LLC from Värde Partners.

Founded in 2012, Deephaven is a leader in the Non-Qualified Mortgage industry. The company partnered with Värde in 2014 to fund its growth and expansion and, over the past 5 years, has invested in over $4 billion of Non-QM loans to become one of the leading issuers of Non-QM securitizations.

Pretium is an alternative investment management firm focused on residential real estate, mortgage credit and corporate credit with more than $10 billion in assets under management. Pretium is the largest private single-family rental owner and operator in the U.S., with over 32,000 homes across 15 high-growth markets. As the single-family rental industry has evolved into a distinct, institutionalized real estate asset class, Pretium has built an in-house real estate platform, Progress Residential, which manages Pretium’s single-family rental homes and has over 800 employees. In addition to Pretium’s single-family rental platform, Pretium has invested in its mortgage credit strategy, which has acquired over 31,000 loans with a collective unpaid principal balance of $5.7 billion, and separately owns over 1,700 rental homes.

Donald Mullen, Founder and Chief Executive Officer of Pretium, said, “We are excited to be acquiring one of the most established leaders in the Non-QM market and we expect the business to benefit from working closely with Pretium’s existing single-family rental and mortgage credit businesses. Deephaven is a synergistic, natural extension of Pretium’s existing strategies in single-family rentals and mortgage credit, within our residential credit ecosystem.”

Värde is a leading investor in commercial and residential mortgages including new originations and secondary investments in commercial and residential loans and portfolios, securities, and servicing platforms.

Brian Schmidt, Partner and Head of Mortgages and North America Real Estate at Värde, said, “Värde has deep experience in the U.S. mortgage market, having invested across a range of mortgage assets and platforms over the past 20+ years. Following a strong partnership with Deephaven, we are pleased to see Deephaven joining the Pretium family of companies. Our Financial Services team played an integral role in the value creation and sale process, where Pretium distinguished itself as the optimal partner to support Deephaven’s continued growth and success.”

Matt Nichols, Founder and CEO of Deephaven, added, “Deephaven was founded to serve the millions of credit worthy borrowers, who would otherwise have been excluded from the mortgage market. We are grateful for Värde’s partnership in helping us build and establish a leadership position in the Non-QM market. We are excited to join Pretium, continuing a tradition of partnering with organizations that share our vision for the mortgage market and commitment to responsible lending. We look forward to our partnership and the opportunity it will afford us to continue our leadership position in the high-growth Non-QM market.”

Terms of the transaction were not disclosed. The transaction is subject to customary closing conditions and regulatory approvals, and is expected to close in the second half of 2019.

Wells Fargo Securities served as financial advisor to Deephaven and Värde. Mayer Brown LLP served as legal counsel to Deephaven and Värde. Nomura Securities International, Inc. served as financial advisor to Pretium. Sidley Austin LLP served as legal counsel to Pretium.

About Pretium
Pretium is a specialized alternative investment management firm focused on residential real estate, mortgage finance and corporate credit. Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy, the residential housing sector, and mortgage finance markets. Pretium has built an integrated analytical and operational ecosystem within the U.S. residential housing, mortgage, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. For more information, please visit www.pretium.com.

About Värde Partners
Värde Partners is a $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 corporate credit, financial services, real estate, 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. For more information about Värde Partners, visit: www.varde.com.

About Deephaven
Deephaven is a full service, multi-channel, long-term credit provider in the Non-QM space, providing access to financing to millions of underserved clients throughout the U.S. Deephaven was founded in 2012 to help rebuild the non-government mortgage market. For more information, please visit www.deephavenmortgage.com.