Bank looks to PE to shore up balance sheet

Warburg Pincus, KKR and Centerbridge Partners have injected $1bn into Santander Consumer USA, a car financing subsidiary of Grupo Santander.

The $1 billion investment by Warburg Pincus, Kohlberg Kravis Roberts and Centerbridge Partners gives the trio a 25 percent stake in Santander Consumer USA, the firms said in a statement.

Parent bank Grupo Santander will hold a 65 percent stake following the deal, while Dundon DFS, a company established by Santander Consumer USA chief executive Thomas Dundon, which injected $150 million as part of the deal, will hold 10 percent.

The deal values Santander Consumer USA at $4 billion. Grupo Santander has booked a $1 billion capital gain following the sale, it said, which it will use to reinforce its balance sheet.

Santander bought the car financing business in 2006 from UK bank HBOS. The sale comes at a time when many banks are looking to offload non-core assets in a bid to cut costs and strengthen their balance sheets. It has been one of the bank’s best-performing subsidiaries, according to analysts, delivering profits last year of $455 million.

For Warburg Pincus, the deal represents the latest in a slew of transactions in the financial services sector. KKR has also been active in Europe buying assets offloaded by financial institutions and corporations. “There are not enough buyers to take in all those assets,” Nat Zilka, co-head of KKR's special situations group, told Private Equity International in a prior interview. “We’re deploying capital at attractive rates of return.”

Deutsche Bank and Barclays Capital advised the three buyout firms on the deal.