Debt-specialist global alternative assets manager Cerberus Capital Management is to buy $1 billion worth of car loans from Westpac to establish a new non-bank finance company.
Announcing the deal on 29 June, Westpac did not disclose the purchase price but said the deal would add around 6 basis points to its common equity tier 1 (CET1) ratio. Six basis points would be worth $200 million to $250 million to the bank.
Cerberus-owned Angle Finance will acquire and operate the Westpac car loans business. Westpac car loans are originated through more than 250 auto dealer groups and through strategic alliance agreements with three major vehicle manufacturers.
In the deal, Westpac will transfer:
- auto dealer and introducer agreements together with wholesale dealer loans of around $1 billion;
- strategic alliance agreements with vehicle manufacturers and;
- novated lease origination capability and related agreements.
Westpac will progressively cease new retail auto loans origination from these three channels but will retain existing auto loans of around $10 billion which will be run down in the normal course of business. Westpac Group customers will, however, still be able to use the bank’s consumer and business lending products to finance motor vehicle purchases.
Westpac Group chief executive, specialist businesses and group strategy, Jason Yetton said: “This sale brings certainty to our customers, new opportunities for our people and continues the progress we are making on becoming a simpler bank. Angle Auto Finance is committed to the auto finance industry and will provide the capability and strategic focus to grow and improve the business.”
Completion of the deal is subject to regulatory approvals but is expected by the end of the year.
Cerberus received legal advice on the acquisition from law firm Allens.
Cerberus manages around $US55 billion ($72.5 billion) across credit, private equity and real estate strategies.