Global investment firms Carlyle and KKR announced today that they have reached an agreement to buy a portfolio of prime student loans from Discover Financial Services valued at approximately $10.1bn.
The purchase will be made through one or more strategic partnerships, which will consist of funds and accounts managed by the respective credit businesses of Carlyle and KKR.
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The Credit Strategic Solutions (CSS) team of Carlyle, a division of its Global Credit business that focuses on asset-backed investments, oversaw the company’s investment in the portfolio.
In order to provide businesses, banks, asset managers, specialty finance companies, and other originators and owners of diversified pools of assets with customised asset-focused financing solutions, the highly skilled team aims to take advantage of the depth, breadth, sourcing, and structuring of the entire Carlyle investment platform.
The primary sources of KKR’s investment in the portfolio include various credit vehicles and accounts, as well as its asset-based finance strategy.
Since 2016, KKR has completed over 80 ABF investments across the globe by combining platform, structured, and portfolio acquisitions. The company manages ABF assets worth about $54bn and employs over 50 experts who are directly involved in the ABF initiative worldwide.
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By GlobalDataAkhil Bansal, head of Credit Strategic Solutions at Carlyle stated: “This acquisition highlights Carlyle’s proven expertise in private student loans and asset-backed finance, demonstrating our Global Credit business’s ability to provide scaled, tailored solutions to meet our clients’ dynamic needs. As the lending space evolves, we believe private markets are well-positioned to offer financial institutions increased flexibility amidst this transformation.”
RJ Madden, a managing director at KKR added: “We are pleased to leverage our scale, deep experience in ABF investing and capital markets capabilities to be a capital solutions provider of choice to financial institutions that are focusing on optimising their balance sheets. This transaction demonstrates the value that scaled private lenders can bring to key areas of the economy as the priorities of traditional lenders continue to evolve.”
“We’re very pleased to consummate this transaction with two outstanding strategic partners in Carlyle and KKR,” said Dan Capozzi, executive vice president and president of Consumer Banking at Discover.
“This agreement represents an important milestone in our journey to simplify our operations and business mix.”
The debt for the deal was prepared and arranged by TCG Capital Markets and KKR Capital Markets. The portfolio manager for the student loan portfolio will be Carlyle’s portfolio firm, Monogram LLC. Nelnet, Inc.’s subsidiary Firstmark Services will handle the portfolio’s loan servicing. KKR and Carlyle received legal advice from Sidley Austin LLP.
Additionally, Carlyle received legal advice from Paul Hastings LLP, and KKR received legal advice from Clifford Chance LLP. In connection with the transaction, Skadden, Arps, Slate, Meagher & Flom LLP provided legal guidance to Discover Financial Services, while Wells Fargo acted as the exclusive financial adviser.
The transaction is scheduled for completion by the end of 2024, subject to usual closing conditions.
