Debt purchaser, Arrow Global has announced that it has agreed terms for two acquisitions which strengthen the Group’s investment and asset management capabilities and reinforce its growing presence in Italy.
The first acquisition is for Europa Investimenti S.p.A., a leading originator and manager of Italian distressed debt investments, for an equity value of €62 million. While the core Europa business is not regulated, due to Europa owning a 74% stake in an Italian real estate fund management company, Vegagest SGR S.p.A., the transaction is subject to a regulatory change of control approval by the Bank of Italy and is expected to complete in mid-2018.
The second is for 100% of Parr Credit S.r.l., a leading Rome-based servicer of Italian non- performing loans (“NPLs”) for an equity value of €20 million. There are no regulatory approvals required for the transaction and the acquisition will complete today.
The acquisitions will be funded in cash from existing Group resources and are expected to be broadly earnings neutral in 2018 and marginally accretive in 2019.
Arrow Global’s group chief executive Lee Rochford said “Both (acquisitions) build on the successful 2017 acquisition of Zenith and give us valuable Italian primary and special servicing capabilities that support our growth ambitions.
“Europa augments our capital-light asset management capabilities, with clear opportunities to offer this across our existing client base. The group has completed a number of co-investments with Stefano Bennati and the Europa team, and we have been impressed with their expertise and ability to generate investment volume for the group and its partners.”
“Having looked at a number of acquisition opportunities in Italy, we have been very impressed with Parr’s long-standing customer relationships, deep collections expertise and proven migration capabilities. We see clear opportunities to offer Parr services across our existing client base.These acquisitions deepen our commitment to Italy, Europe’s largest NPL market. With our leading positions in the UK, Portugal, the Netherlands and our recent entry into Ireland we continue to see the benefits of geographic diversification. There remain opportunities for growth across the European marketplace.”
“We are excited by these opportunities and we look forward to welcoming the Europa and Parr teams into the group.”
The announcement was included as part of its latest preliminary results for the year to December 31, which show its turnover rose 19.7% to £347.2m and its post-tax profits climbed 24.1% to 56.6m.
Highlights from the report also include:
- Revenue growth of 35.2%, driven by a 19.7% increase in core collections and a 53.5% increase in Asset Management income
- Assets under management increased from €41.3 billion to €53.4 billion
- Announcement of a co-investment partnership with a tier one institutional investor, marking a further incremental step in our strategy to offer specialist discretionary asset management services for clients
- The outlook for Non-Performing Loan (NPL) supply across Arrow’s markets remains highly attractive, driven by the European Central Bank (ECB) guidance on accelerated provisioning for NPLs, and IFRS 9
- Overall collections performance remained strong at 103% of original underwriting forecasts, underlining the quality of our data, analytics and consistent track record of outperformance
- Record portfolio acquisitions of £223.9 million, with over £50.0m committed for Q1, demonstrates the depth of our origination network and reflects the pan-European nature of our flow, with 63.3% ex-UK
- 84-month ERC increased to £1,516.9m (FY 2016: £1,339.1m)
- 53.5% increase in capital-light Asset Management revenues to £71.1m (FY 2016: £46.3m)
- Successfully raised €400 million senior secured floating rate notes due 2025, at a coupon of E+2.875%, reducing the Group’s weighted average cost of debt to 3.9% (FY 2016: 4.9%) and increasing average debt facility maturity to 6.1 years (FY 2016: 5.8 years)
- Secured net debt to adjusted EBITDA reduced to 3.9x, within guided range
- 24.1% increase in underlying profit after tax to £56.6m (FY 2016: £45.6m)
- 51.7% increase in statutory profit after tax to £39.9m (FY 2016: £26.3 m)
- 24.1% increase in underlying basic earnings per share (EPS) to 32.4p (FY 2016: 26.1p)
- 51.0% increase in basic earnings per share to 22.8p (FY 2016: 15.1p)
Commenting on the results, Lee Rochford, Group Chief Executive Officer of Arrow Global, said: “2017 was a transformational year for Arrow Global. Our strong underwriting performance and specialised asset management capabilities meant that we have again delivered strong returns to shareholders. The shape of our earnings is also continuing to evolve, with higher quality, capital light revenues from our asset management operations growing by over 50%.”
“With the acquisition of Mars Capital in the UK and Ireland, we added another country to our geographic portfolio. The strategic partnership with a tier-one institutional investor, and the two Italian acquisitions we have announced today, also mark an important step in our European expansion strategy and progress towards building a track record of running discretionary assets for fund clients. There has been strong demand for this offering from our clients, and we are focused on fulfilling their operational needs.”