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Newcastle Investment Buys Stake in HSBC Loan Portfolio

By Eric Volkman - Apr 2, 2013 at 7:55PM

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The mortgage REIT takes 30% of a consumer loan book operated by a unit of the British bank.

Newcastle Investment (DS 9.52%) 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.

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