Newcastle (NCT) Closes $3B HSBC Finance Portfolio Acquisition

April 2, 2013 7:19 AM EDT
Newcastle Investment Corp. (NYSE: NCT) has acquired from HSBC Finance Corporation (“HSBC”) a 30% equity interest in a consumer loan portfolio with an unpaid principal balance (“UPB”) of $4.2 billion as of December 31, 2012. Newcastle invested alongside Springleaf Finance, Inc. (“Springleaf”), a Fortress affiliate who will also be responsible for servicing the loans, and Blackstone Tactical Opportunities Advisors L.L.C.

The total purchase price for the portfolio is approximately $3.0 billion, inclusive of closing costs, fees and adjustments related to estimated net cash flows received by HSBC between December 31, 2012 and March 31, 2013. The investment is financed using $2.2 billion of asset backed notes and the balance of the purchase price is funded with approximately $800 million of equity. Newcastle’s initial equity investment is approximately $250 million.

The portfolio consists of over 400,000 loans originated through subsidiaries of HSBC, of which approximately 70% are personal unsecured loans and 30% are personal homeowner loans. The average loan balance of the portfolio is about $9,500, the average seasoning is 93 months and the expected average life of the loans is 3 years.

After a servicing transition period, Springleaf will be the servicer of the loans and will provide all servicing for the portfolio. Newcastle will not own any of the servicing rights and will not have any servicing duties, liabilities or obligations associated with the servicing of the portfolio.

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