Newcastle Investment (NYSE: NCT ) is delving into the consumer loan business, with a bit of real estate financing on the side. The mortgage REIT has bought a 30% equity interest in a consumer-loan portfolio from HSBC unit HSBC Finance. The price for the stake is roughly $3 billion, which includes closing costs, fees, and other outlays.
The loan portfolio consists of more than 400,000 loans. Around 70% are personal unsecured loans, while 30% fall into the personal-homeowner category. On average, the balance of these debts is $9,500 and their expected average life is three years.
Newcastle is funding the purchase by using $2.2 billion in asset-backed notes and $800 million in equity.