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Lone Star snatches CIT subprime mortgage unit for $5.9bn

The corporate debt and real estate specialist has acquired CIT Group’s troubled Home Lending business, Lone Star’s third mortgage-related deal since October.

US private equity firm Lone Star Funds has agreed to acquire commercial lender CIT Group’s subprime mortgage unit for $5.9 billion (€3.74 billion).

Lone Star, which specialises in corporate debt and real estate investments, will pay $1.5 billion in cash for CIT’s Home Lending business while also assuming $4.4 billion in outstanding debt and related liabilities.

Lone Star declined to comment.

Beyond CIT’s mortgage debt, Lone Star has also acquired the New York based-commercial lender’s collection services. CIT’s subprime unit employs roughly 300 people and has offices in Marlton, New Jersey and Oklahoma City, Oklahoma.

The CIT deal represents the third housing-related pickup for Lone Star since the subprime mortgage meltdown chilled credit markets last August. In October, the Texas-based firm purchased residential mortgage company Accredited Home Lenders for $311 million after prolonged legal negotiations over a final deal price.

Early last month, Lone Star paid an undisclosed sum for unspecified assets from Bear Stearns’ residential mortgage unit.  

Lone Star’s fifth and latest fund closed four years ago on $5 billion. It is currently raising its sixth global opportunities fund, targeting $6 billion, as well as its first dedicated real estate fund, according to documents from the Oregon Investment Council.  The OIC has committed $300 million to the general fund and $100 million to the real estate fund.