This comes as banks shed debt to improve liquidity
Kohlberg Kravis Roberts & Co. (KKR), a global investment firm, has purchased Bank of Montreal’s (BMO) recreational vehicle loans portfolio worth $7.2 billion, as reported in an article by Bloomberg.
Last October, Bloomberg reported that BMO was beginning to explore the sale of the portfolio. The bank provided seller financing to those who were planning to purchase through its move to buy $6.4 billion of bonds backed by the RV loans that KKR had purchased.
KKR bought the RV loans portfolio along with Kennedy Lewis Investment Management and other investors, while BMO will continue to be the servicer of the loans and will still originate RV debt.
Moving to shed debt for liquidation improvements
The trade comes as financial institutions sell consumer debt on their books in order to improve liquidity, following the crisis experienced by regional lenders earlier in the year, beginning with the collapse of Silicon Valley Bank in March.
The collapse created an opportunity for private credit firms to take the portfolios and increase their presence in asset-based finance.
“Banks are looking for ways to transform and optimize their balance sheets, including by selling loans,” said Dan Pietrzak, KKR’s global head of private credit.
“This trend allows firms like ours to step in and partner with banks in these type of sales,” he added.
KKR has been one of the private credit shops that has taken advantage of the bank pullback and made moves in asset-based finance this year. The alternative asset manager has nearly $47 billion in asset-based finance investment under management and has also acquired a portfolio of prime auto loans from Synovus Financial Corp. in August.
Aside from BMO, other banks have been shedding assets. Ares Management Corp. has purchased a $3.5 billion portfolio from PacWest Bancorp which was backed by consumer loans, mortgages, and timeshare receivables. Truist Financial Corp. unloaded a $5 billion student loan portfolio, while Western Alliance Bancorp has sold nearly $3.5 billion in loans.
“We are seeing regional banks increasingly moving away from providing the same level of capital to many specialty finance firms,” said Pietrzak.
“The private credit market is able to step in and fill that void,” he added.
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