UK Debt Buyer Gets $165 million Credit Facility for Portfolio Financing

London Scottish Bank announced late last week that it had secured a credit facility from a consortium of banks totaling £83.5 million ($165 million) that will be used principally to finance debt buying activity at Robinson Way, its accounts receivable management subsidiary.

Manchester, U.K.-based London Scottish Bank (LSB), formerly a subprime personal lender, announced earlier this year that it would discontinue lending operations to focus on its debt buying and collection agency business Robinson Way (“UK Bank to Stop Lending, Focus on Debt Purchasing and Collection,” Feb. 27).

LSB said in a press release that the credit facility was the “first major step in [our] plan to recapitalize the company and execute the group’s strategy to focus on the growth and development of Robinson Way.”

In 2007, Robinson Way reported profits of $27.6 million, a 57 percent increase from 2006, on revenues of $66 million, up 17 percent from revenues in 2006. Last year, the company bought $70 million in debt, up sharply from the $16 million it bought in 2006. Nearly 90 percent of the debt Robinson Way buys is either credit card portfolios or consumer loans from the top five British banks.

The credit facility was provided by a consortium of 10 lenders led by HSBC and The Royal Bank of Scotland. The facility has a term that runs through March 28, 2011.

But the facility comes with a major catch. If the group does not reach a capital minimum of $64.4 million required by U.K. bank regulators by October 31 of this year, RSB will be forced to sell either Robinson Way or the entire group by June 30, 2009.

RSB reported a $26 million capital shortfall at the end of 2007, prompting the sale of its lending business and the focus on Robinson Way’s ARM activity. The Manchester Evening News also reported that the group may sell its factoring unit which could bring in $10-15 million.