Australian non-bank lender Pepper Group is circling up to $18 billion worth of debt and financing businesses in Australia and Europe with its global investment banking and hedge fund partners.
The Sydney-based debt manager has more than $13bn worth of loans under management. It joins global hedge funds such as Apollo and Centrebridge in chasing the billions of dollars of distressed debt pouring on to the market in Spain, Ireland and Italy for as little as 25c in the dollar.
It was examining distressed debt acquisitions with its partners worth up to 5bn ($7.1bn) in the European continent, Pepper said, after embarking on deals previously with global hedge funds such as CarVal, Singapore's Varde Partners and Goldman Sachs, where they typically took the lion's share and Pepper was the asset manager.
"We are looking at a range of portfolios -- the one we are looking at right now would be E500m," said managing director Patrick Tuttle, adding that of the E5bn of debt on its radar some might not sell if they were not appropriately priced.
Pepper was the only Australian group looking at such opportunities at a time when numerous European lenders had stopped providing residential mortgages, Tuttle said.
"Europe will go on for the next two to four years at least because the problems are far from over and there are assets just being held on banks' balance sheets because they are not being properly marked to market," Tuttle said. "At some point they will be sold."
Plans by Pepper to expand in Europe come as reports suggest it is rivalling Westpac, Macquarie and ANZ to buy the lending business and $2bn Australian loan portfolio from British bank Lloyds in partnership with Bank of America.
Pepper is also rivalling Resimac for the $2.1bn worth of loans held by RHG, formerly known as RAMS Home Loans.
And this month it secured control of about E1.5bn of mortgages through the purchase of the $4.4bn British-based third-party loan manager Oakwood Global Finance in a deal with Goldman Sachs.
Among Oakwood's assets under management was pound stg. 1.5bn ($2.5bn) worth of residential mortgages written by investment bank Citigroup, which had stopped lending to British home buyers, Tuttle said.
Founded in 2001 as a non-bank lender and debt manager, Pepper began wading into the European debt sector about three years ago.
The company expanded in a major way during 2011 through the purchase of the $5bn Australia and New Zealand residential mortgage portfolio from GE Capital Australia. The following year, it bought GE Capital's Irish business, which has E3bn under management.
In Australia, few opportunities to buy distressed debt still existed, Tuttle said. "The amount of distressed opportunities out of Australia is all but exhausted in my mind."
The loans being secured by Pepper were residential mortgages but also credit card and other personal debt.
In Spain, there were opportunities to buy debt for as little as 25c in the dollar, while in Britain and Italy the discounts were more like 10 per cent to face value.