DEALTALK-Blackstone UK bank seeks lasting gain from lending
* Blackstone helps funding start-up bank
* Goal is to build up depositor-funded mortgage lender
* Cambridge Place’s Martin “Marty” Finegold driving force
* Seeking a million clients in five years’ time
LONDON, Jan 29 – Blackstone’s <BX.N> foray into UK banking seeks to profit from a sector in distress, just like one of private equity’s most lucrative deals ever: Ripplewood’s multi-billion dollar buy-out of Japan’s Shinsei.
And with no legacies from the past, and fewer political pitfalls, the Home and Savings Bank — which Blackstone dealmaker David Blitzer is helping to build up — may yet be a less cumbersome project than Shinsei.
Ex-Goldman Sachs <GS.N> trader Martin Finegold, the driving force behind the 500 million pound start-up, is looking for further investors, promising them a “traditional” bank with a million clients in five years’ time.
“As an investment, it clearly stacks up. a fresh loan book at this point in the cycle is likely to be seen as a high quality loan book because it’s not plagued by legacy lending,” said Alex White, a partner at accountancy firm BDO.
Britain is rife with bank start-ups after the European Union forced Royal Bank of Scotland <RBS.L> and Lloyds <LLOY.L> to drastically cut their business as a sanction for receiving billions of pounds of state-aid during the crisis.
The bank is expected to be up and running this year, sources close to the deal say, after Blackstone, Finegold’s fund manager Cambridge Place and the wealthy Pears family have applied for a license from the Financial Services Authority.
Blackstone, Cambridge Place, Finegold and Blitzer all declined to comment.
Ripplewood founder Tim Collins and co-investor Christopher Flowers have set a high benchmark for Blackstone with their turn-around of Japan’s ailing Long Term Credit Bank, which they rebranded Shinsei — or “rebirth”.
The pair reportedly netted $1 billion each after they floated Shinsei in an initial public offering in 2004, only four years after they bought it.
So lucrative was the payday that David Rubenstein, the co-founder of rival Carlyle Group [CYL.UL], hailed it as probably the most successful deal in private equity’s history.
But it wasn’t without hard work.
Ripplewood had to battle political resistance in Japan — solved partly thanks to the help of lobbying from Paul Volcker, the former U.S. Federal Reserve governor.
Collins extracted his money from the bank over time, while Flowers continues to own around a third of Shinsei, currently merging with Aozora Bank <8304.T>, after the two banks were battered by heavy losses in 2009.
So it may be just as well that Finegold’s bank is starting from a more modest basis. Blackstone is putting in 200 million pounds, the Pears family 50 million and Cambridge Place a small amount, sources have told Reuters.
Ultimately, many of the upstarts are driven by bankers like Finegold — once a trader of structured finance products that are struggling in the wake of the credit crunch — seeking to fill a gap in plain-vanilla banking.
Finegold was the founder of the Kensington Group, a subprime lender, in London in the mid 1990s. In 2002, he founded Cambridge Place Investment Management, which had to close a listed fund because of exposure to toxic assets.
But despite such apparent setbacks, people who have worked with Finegold — who goes by the name of “Marty” — speak highly of him and say he knows the world of credit well.
“When he was at Goldman I would say that he was one of the smartest guys,” one of them said.
He has also attracted experienced leadership, lining up former Abbey National head Peter Birch as chairman and the former boss of Tesco Personal Finance Stuart Sinclair as chief executive, according to an insider.
Building up a high-street bank may take 10 years in normal markets. but with the banking industry still in the after-shock of the credit crisis, deal insiders hope the investment will pay off twice as quickly as that.
(Additional reporting by Sinead Cruise, Alex Chambers and Steve Slater; Editing by Sharon Lindores)
DEALTALK-Blackstone UK bank seeks lasting gain from lending
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