Warburg leads $250m equity investment in auto finance company

A group of private equity investors has committed to backing the launch of Sixth Gear Solutions, with an initial capitalisation of $1bn.

A Warburg Pincus-led group of private equity firms has committed $250 million (€162 million) in equity to back the launch of auto finance company Sixth Gear Solutions.

An additional $750 million in long-term debt facilities bring Sixth Gear’s market capitalisation to $1 billion.

A spokesman for Warburg Pincus declined to comment.

Sixth Gear, headquartered in New York, utilises proprietary technology to provide financing solutions to auto dealerships thought the United States. The company will utilise the financing commitments to fund its growth nationwide.

“We think this is the right time to capitalise on an attractive market opportunity, while other lenders are reducing their commitment to this marketplace,” Warburg managing director David Coulter said in a statement.

The Sixth Gear management team will be led by co-chief executives Michael Barrington and Norman Buchan. Barrington, the former president and chief executive of auto financing company AmeriCredit, was the source of the business concept leading to the company’s capitalisation. Buchan, who aided in developing the concept and raising capital, is the former president of Chase Auto Finance.

Warburg Pincus has more than $35 billion in assets under management and closed its 10th global fund on $15 billion in April.

In May, Warburg and Tenaska Capital Management agreed to sell four US power plants to London-based energy company International Power for $856 million. The previous month, the firm bought Safety Kleen, an industrial cleaning company, from CCMP Capital for £565 million (€715 million; $1.1 billion).