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It’s a new dawn

The much-mooted sale of NewDay (or at least its portfolio) has finally been announced!

Cinven and CVC have been invested in the business, formerly known as SAV Credit, since 2015, and talk started to emerge in 2021 that the sponsors were looking for a realisation, potentially via IPO. 2022 did not provide the ideal backdrop, and the flotation windows since then were limited, but the realisation process was ramped back up late in 2024.

An IPO was contemplated, as was a full Kensington — separate sale of the originator and the portfolio. The originator, as it turned out, stayed with Cinven and CVC, but the portfolio was sold to KKR’s asset-based finance team, which also established a forward-flow arrangement for new receivables. KKR will also take a stake in the originator unit.

This is probably the biggest sale of credit card receivables ever seen in Europe. As of H1 2025, NewDay had £5.2bn in receivables, of which £3.3bn was interest-bearing.

KKR has been doing laps of honour for Project Danube, the PayPal Europe forward flow, since it won the process in 2023. Here’s a case study on the deal from January this year! The NewDay purchase is expected to close later this month, but we suspect it will soon be getting pride of place in the KKR pitchbooks.

Pretty much all of the NewDay portfolio is already securitised in public or private format, across several different vehicles. The biggest portion is the direct-to-consumer origination in the NewDay Funding master trust, followed by the better-quality and lower-yield store cards backing NewDay Partnership Funding, which also issues public ABS bonds. There are private facilities as well, notably separate funding for the Argos store card portfolio acquired earlier this year.

What KKR is buying is basically the residuals and other NewDay exposures to these funding vehicles, as well as an agreement to keep buying NewDay’s origination into them for a “multi-year” period, which is essential to preserve the value of the NewDay opco.

You can read the deal as indicative of broader market trends. UK equity markets have been as disappointing as the US has been buoyant, precluding a stock market exit for the full NewDay business (at least, at a valuation the sponsors liked). After PE ownership for so many years (before Cinven and CVC it was Värde; before that it was Palamon Capital Partners, Electra Private Equity and Morgan Stanley Alternative Investment Partners) it’s hard to imagine what levers any new sponsor could pull to generate outsize returns. But asset-based finance fundraising has been booming, especially for the top firms, and the size and market position of NewDay makes it a must-look.

You could also take the view that, in a business like NewDay, capital structure and funding sources are at the core of the business in a way that they aren’t for the production of widgets. NewDay’s commanding position in UK non-prime credit cards can only exist because it has superbly efficient funding for these assets, with high advance rates, an enormous and supportive banking group, and a strong following for its term ABS deals.

It’s hard to imagine putting together a funding package for the NewDay portfolios that was more attractive than the funding already in place, and that implies that it would be difficult for continuity NewDay to find a more attractive forward-flow partner than KKR as the new owner of the well-known NewDay funding vehicles.

NewDay’s experienced funding team is staying with the NewDay operating company, though each basis point they shave off will presumably accrue to KKR’s benefit.

It’s a big job keeping two master trusts and several private facilities ticking over, managing a banking group that includes more or less every securitisation shop on the Street, and doing up to four public transactions a year, so they’ll definitely still be busy!

The committed forward-flow element might have limited the audience for the portfolio sale. Hedge funds or principal finance desks that want to make a quick turn buying portfolios, cashing out most of the portfolio price, and keeping the optionality of selling the junior notes later on would find it difficult to make this work; the portfolios are already efficiently securitised, and the risk retention is held through the junior notes (originator VFNs), so flipping them would be complex, quite apart from the required forward-flow commitment.

But at the same time, NewDay has a commanding position in its market segment and deals of this size rarely come along; any big firm with long-term money and a keen appetite more or less has to look, and it’s no surprise to find Pimco as the underbidder.

One other wrinkle is NewDay’s activities in the high-yield market. Lots of specialty finance firms raise some kind of opco debt, which is effectively subordinated to their warehouse and securitisation funding. Only a couple in the UK and Europe — NewDay and Together — are big enough to do this through an institutional HY bond.

In 2017 NewDay issued a £425m HY bond (described as “senior secured”, though it was effectively secured mostly on the residual cashflows from the securitisation). This had been chipped away (with an exchange offer and extension in 2022) to a £113.9m stub, which will be repaid as part of the KKR transaction.

That leaves KKR with appreciably less leverage on its residuals than Cinven and CVC had through the HY bond. Perhaps this suits a particular pocket of the KKR ABF complex, but it’s also possible that KKR is using another product to reach its return targets, levering the NewDay exposures through fund financing lines for example (though whatever it does, this needs to be full recourse, as the junior exposures constitute the risk retentions).

Continuity NewDay is now too small to support a liquid HY bond, so if it’s getting leverage, it too needs to look elsewhere. Working out how big it is exactly is pretty tricky, though. At the end of H1 2025, most of NewDay’s revenue was interest income of £483m, with fees and commission of £40m. Servicing costs were £67m, marketing and partner payments accounted for £19m with “change costs” of £21m.

This all has to be unpicked — though the existing NewDay Funding doc has a 4% servicing fee baked in. Back of an envelope, that should be north of £200m a year on the whole book, so the £100m per half more than covers the £67m servicing cost.

Mortgage experts assemble

If you missed 9fin’s UK mortgage funding webinar on Tuesday, featuring some of the biggest brains in mortgages and securitisation (and me as well), fear not, there is a replay at hand! Find it here.

We did the session in association with DealCatalyst – for much more mortgage chat live, come along to the UK Mortgage Finance Conference on 29 September at the Landmark in London.

Changing of the guard

We’ve reported (behind paywall) on a couple of interesting people moves over the past couple of weeks.

First up was the departure of Bayview’s head of European ABS Bhavini Luhar, who’s heading to Rothesay after gardening/travelling. Rothesay is on the march, as we’ve extensively discussed here, buying some multi-billion portfolios such as HSBC’s Project Tampa. It’s a particular kind of capital which suits long-dated and high duration assets, like the French mortgages in Tampa, but there are definitely some interesting trades to be done.

Bayview in Europe has kept its activities fairly quiet, so it’s hard to get a sense of the firm’s activities — the main disclosed private deal is a forward flow with Funding Circle, though it’s also done a few of the Italian NPL deals, such as taking the NPL portion of Barclays’ Project Peninsula alongside SPF Investment Management.

We also note with interest that Davidson Kempner’s Otaso Osayimwese is leaving the firm, after a handover period. He was known, among other things, for disdaining the hurly-burly of Barcelona’s convention centre and conducting Global ABS meetings exclusively by the pool — superb hedge fund behaviour.

DK used to be among the best bidders for performing portfolios in Northern Europe, splitting, for example, UK Asset Resolution’s Project Jupiter (the final slug of Northern Rock and B&B mortgages) with Pimco, and combining various 1.0 portfolios into the Stratton Hawksmoor transaction in 2022.

But it has been selling down some of these positions more recently, and focusing more on other niches. According to a white paper published in April, ‘Europe: Opportunity in Fragmentation’, it expects more non-performing credit sales and SRT transactions and less competition for complex bespoke financings.

I have my doubts about the reduction in competition, but it cites an interesting bundle of Greek trades — two NPL sales from Attica Bank alongside an SRT deal, which put the bank in a position to merge with Pancreta Bank and scale to become the fifth-largest player in Greece.

Waiting for Good Dough

Barclays has had a principal finance business running in Europe for a while, but it’s been a little under the radar. Citi and JP Morgan have their well established public shelves, named after their address and founder, respectively; Barclays takes the address-based approach as well, holding its purchases in a series of Churchill Funding SPVs.

The first public securitisation to result from all of this activity is Beckett Mortgages 2025-1, an Irish RMBS backed by mortgages from Núa Money, a newish originator which has been funded by Barclays since it started lending in July 2024.

We like the name — even if you know your Irish playwrights, you might not have known that Samuel’s middle name was… Barclay. Very good.

Núa launched against a difficult backdrop. Deposit-takers have been dominating the Irish mortgage market, to the point where Finance Ireland, the country’s largest non-bank lender, stopped writing mortgages earlier this year. M&G, which funded the Finance Ireland forward flow, also sold residual notes in the Finance Ireland RMBS deals shortly after, with a bank winning the bidding.

It’s not just the big Irish banks — Bankinter-owned Avant Money and BAWAG-backed MoCo are also fuelling competition, making life tough for the specialist lenders. This is further compounded by the relatively restrictive lending rules in the Irish market. There are still plenty of loans hanging around from a more exuberant era, but essentially new lending has to be high quality. Remortgages are capped at 3.5x LTI, LTV for first time buyers and remortgages like is 90%, BTL it is 70%.

Nonetheless, Núa has found ways to lend more profitably. In this book, for example, nearly a quarter of the portfolio is loans to borrowers whose primary citizenship is not Irish. There’s a large portion of first-time buyers (although this is typical of Ireland as a whole) and a fairly large cohort of self-employed. Put it together with some slick digital execution and it adds up to a portfolio paying 4.6%, a better yield than most of the market, according to figures from the Central Bank of Ireland.

The fundamental problem for Finance Ireland is that its mortgage lending was securitisation-funded, and it couldn’t write enough loans with high enough yields to support securitisation takeouts.

Barclays with Núa, unlike M&G with Finance Ireland, doesn’t have to take out its forward flows into securitisations, whether public or private. It has a bank in Ireland, it has euro-denominated deposit cash, it is a giant investment bank that can access competitively priced euros in a number of formats — and indeed it has plenty of private forward flows of UK SME loans, credit card receivables, personal loans and more which haven’t yet appeared.

The portfolio is, as discussed above, surprisingly yieldy for the ultra-competitive Irish market, but still, the fact that Barclays sees a profitable exit means we must be cooking again.

You could also infer that from some of the deal features. Most principal deals see the residual notes marketed separately in private before filling in the capital structure in public; marketing the whole structures suggests high confidence in the execution conditions. The big slug of prefunding (€70m) makes for a larger, more liquid deal, but also suggests high confidence in this particular window.

Excess Spread is our weekly newsletter, covering trends, deals and more in structured credit and ABS — subscribe to this newsletter here.