Private equity giant KKR & Co. has purchased a portfolio of prime auto loans from Georgia-based Synovus Financial Corp., as US regional lenders continue to sell assets to shore up capital.
Synovus Bank — whose parent company is Synovus Financial — sold the $373 million portfolio to private credit funds and accounts managed by KKR, according to a statement seen by Bloomberg. The deal was signed in late July, said Dan Pietrzak, global head of private credit at KKR, in an interview.
“We’ve liked auto lending for some time, as it is a secured asset class,” Pietrzak said. “Plus, consumer performance has been strong, especially in the higher FICO score segment.”
The trade comes as regional banks sell bundles of consumer debt on their books to improve liquidity following the crisis at regional lenders earlier this year, starting with Silicon Valley Bank’s collapse in March. That’s created an opportunity for private credit firms to snap up those portfolios at discounted prices.
“What we have seen in the regional bank space in 2023 has caused some banks to think more seriously about the idea of partnering with us on certain asset portfolios,” Pietrzak said, adding that he expects asset sales to continue in the medium term. “This definitely widens the opportunity set for our asset based finance business.”
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Blackstone Inc. is among a number of private investment firms looking to buy assets and loans originated by US regional banks, while Ares Management Corp. recently purchased a $3.5 billion portfolio from California-based PacWest Bancorp, backed by consumer loans, mortgages and timeshare receivables.
Other banks have followed PacWest’s lead. Truist Financial Corp. unloaded a $5 billion student loan portfolio that it described as “non-core” in late June, while Western Alliance Bancorp sold roughly $3.5 billion in loans tied to commercial real estate, residential and commercial and industrial lending, as well as mortgage servicing rights and a slug of securities that were primarily collateralized loan obligations.
As for KKR, this isn’t the first time the firm has bought assets from a bank. In 2021, the alternative asset manager acquired a nearly $800 million portfolio of aviation loans from CIT Group Inc., a division of First Citizens Bank.
KKR has about $42 billion of asset-based finance investments under management, according to the statement.
Synovus Bank provides commercial and consumer banking services, with branches in Georgia, Alabama, South Carolina, Florida and Tennessee, according to its website.
--With assistance from Ellen Schneider.