By David French
NEW YORK (Reuters) - Private equity firm Blackstone Group has hired investment banks to study a possible sale or an initial public offering (IPO) of sub-prime auto lender Exeter Finance, sources familiar with the matter said on Wednesday.
Irving, Texas-based Exeter Finance is expected to be valued north of $1 billion by Blackstone in a transaction, according to the sources, who spoke on condition of anonymity as the matter was not public.
A representative for Blackstone declined to comment. Exeter did not immediately respond to a request for comment.
Specialty lenders such as Exeter, which focus on providing debt to consumers with imperfect credit histories, have grown significantly in the decade since the financial crisis as traditional banks have pulled back from the practice.
Lending into the sub-prime auto sector has raised some concerns though: Loans more than 60-days delinquent hit a 21-year high in February of 5.74 percent, according to Fitch Ratings. The rate has since fallen by 1.3 percentage points, the latest June data showed.
Blackstone is likely to favor a sale of Exeter to a bank or another specialty lender, as opposed to a private equity firm, according to two of the sources, with one source noting that Blackstone had reached out to three potential buyers.
Strategic buyers can often justify paying a higher price than buyout firms for deals since they can extract cost savings from the combined business.
Should Blackstone not reach a sale agreement, it would look to list Exeter next year on the stock market, one of the sources added. If Blackstone is unable to achieve an appropriate valuation through either a sale or listing, it could retain the business.
Blackstone acquired Exeter in 2011 from private equity firm Navigation Capital Partners (NCP). Blackstone said at the time it was investing up to $277 million, and that NCP and management would retain a minority interest in the company.
(Reporting by David French; Editing by David Gregorio)
This story has not been edited by Firstpost staff and is generated by auto-feed.
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Updated Date: Aug 23, 2018 00:06:26 IST