Blackstone, TPG join forces to bid for ANZ's $6.4-bn auto loans

Global private equity giants Blackstone Group and TPG Capital are jointly bidding to buy ANZ bank's A$8.3-blllion ($6.4 billion) worth auto loans sold by its Esanda dealer finance division, The Australian reported citing sources.

The sales process of the Esanda offering, which will be run by Esanda adviser Deutsche Bank, is expected to commence by 29 June, according to the sources.

ANZ's asset sale is part of its strategy to divest non-core assets to improve the bank's financials to comply with new regulatory requirements.

The Esanda loans comprise floor-plan vehicle leases including loans initiated through dealer networks and sold directly to customers through call centers and online.

The Esanda loan portfolio is reported to be valued at A$8.3 billion based on its gross assets for 2016, and is expected to generate a pre-tax profit of A$170 million to A$190 million. It comprises about half of the total assets under ANZ's Esanda arm.

Initial reports of a possible sale or part-sale of the business surfaced earlier in January.

It is believed that the US private equity firms are reportedly in a strong bidding position, as one of the major contenders for the assets, Japanese financial services provider Orix Corp, is believed to be out of the race due to a corruption scandal involving the firm's top Australian management. 

Orix Australia operates one of Australia's largest fleet leasing and management services.

In March, Blackstone and TPG missed out in the bid for US giant GE Capital's consumer lending business in Australia and New Zealand.

The auction was won by an investor consortium comprising US investors Kohlberg Kravis Roberts & Co (KKR & Co) and Varde Partners and Deutsche Bank for A$8.2 billion, in one of the biggest deals in the Asia-Pacific region so far this year.

This was despite the Goldman Sachs-advised TPG and Blackstone consortium supposedly offering about $80m more for the consumer finance loan portfolio, the paper said.

According to analysts, GE's consumer lending was more yielding while car financing is often a low-risk low-margin business.

Esanda's dealer floor-plan ­financing division, which enables car dealers to borrow against retail inventory, will be sold, along with some of the leasing and hire purchase car financing that comes from dealer floor plans.

ANZ will continue to provide asset finance under the ANZ brand and the sale does not include the ANZ commercial broker, commercial asset finance or direct to consumer asset finance businesses.

Although detailed information and sale documents are yet to be released, it is expected that major bidders would include Australian lenders Macquarie Group, Bank of Queensland, US giants Ally Bank, KKR & Co, Spain's Banco Santander and Japanese lenders Mizuho, Mitsubishi as well as Shinsei bank, backed by New York private equity firm ­JCFlowers.

It is expected that Australian competition watchdog ACCC, which scrutised an earlier Westpac purchase of Lloyd's asset finance business and its corporate loan portfolio in 2013, will play a role in the Esanda sale.