Davenham reborn following MBO

DAVENHAM, the Manchester lender that collapsed into administration in 2011, is to be resurrected.

A fund led by Warrington corporate finance firm Dow Schofield Watts has backed a management buyout of Davenham’s loan book from administrators at Duff and Phelps.

The plan is to use it as the basis of a new lending business, called Davenham Portfolio Management, targeting small and medium-sized firms.

Stock market-listed Davenham had a significant exposure to the property sector and got into trouble when values plummetted following the 2008 financial crisis. It went into administration in October 2011 leaving a syndicate of banks led by Royal Bank of Scotland facing a loss of nearly £50m.

Since then a small team has been managing the loans, recouping payments for the firm’s creditors who have now agreed to sell the book for an undisclosed sum.

Dow Schofield Watts has raised £5m in the PHD Equity Partners Debt fund from a number of high net worth individuals and the firm’s own directors.

James Dow of Dow Schofield Watts, said: “Due to the current banking environment, the Davenham team were unable to secure the required debt facilities through traditional sources.

“We always recognise opportunity – this is a good management team, coupled with a cash generative, strong asset-backed business and we structured a high yielding debt instrument which allowed the management team to retain all the equity. This is clearly a good investment for the fund.”

Liverpool-based law firm O’Connors advised the fund and Reuben Berg of Manchester law firm Berg introduced Dow Schofield Watts to Davenham.