Arrow Global consortium in £160m student loans swoop
TECHNOLOGY-based debt management group Arrow Global and consortium partner Car Val Investors, have acquired 250,000 student loans from the Government for £160m.
Manchester-based Arrow Global, which floated in October with a market value of nearly £360m, has formed Erudio Student Loans with Car Val Investors, which was selected to buy the loans after a competitive bidding process.
The package of loans acquired is the last remaining publicly-owned portfolio of mortgage-style student loans. It is the first time the Government has completed such a sale to the private sector since 1999.
Arrow Global, which will be the master servicer for the entire portfolio, has invested £11m in acquiring the student loans and has a commitment to invest up to a further £22m in assets arising from the transaction by January 2016.
Combined with the other student loan deals Arrow Global has done, the Group will master service more than £1bn of student loan assets by face value once all relevant contracts and migrations mature which is expected in 2014.
Tom Drury, chief executive of Arrow Global said: “We are delighted to have been named by the Government as the successful bidder in this student loans sale.
“This is an important step for Arrow Global towards delivering this year’s financial goals and positioning the business for growth in future years. We are committed to the Treating Customers Fairly principles and look forward to working with our partners to deliver an effective and seamless service to borrowers.”
Arrow Global said it would continue to develop and seek additional student loan opportunities. The Government said the loans sold were taken out by students who began courses between 1990 and 1998.
In a statement the Department for Business said: “Erudio Student Loans was selected as the successful bidder through a competitive process. Its offer was judged to represent the best value for money for the taxpayer and the price paid exceeds the estimated value to the government of retaining the loans.
“The private sector is thought best placed to collect the outstanding debt, allowing the Student Loans Company (SLC) to concentrate on administering newer loans.”
Universities and science minister David Willetts said: “The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by £160m. The private sector is well placed to maximise returns from the book which has a deteriorating value.
“The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans. Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans.”
Of the loans sold, approximately 46% are earning below the repayment threshold; 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms. Arrow Global’s partner, CarVal Investors, is an investment fund manager and is one of the largest purchasers of consumer loans in the UK market.
