Barclays, Santander, Wells Fargo, Jefferies and Apollo Global Management-owned Atlas SP Partners are among the lenders to MFS, which had borrowed more than 2 billion pounds ($2.69 billion)
International News via Reuters:
Barclays and Jefferies shares fell sharply on Friday after media reports they and other banks face potential losses related to the collapse of UK mortgage provider Market Financial Solutions Ltd, amid wider concerns about lending standards and the fast-growing market for private credit.
London-based MFS specialised in complex property-backed loans. It had applied for administration, a form of UK insolvency protection, after it ran into difficulties, according to previous media reports and court documents seen by Reuters. Creditors who successfully applied to have the company put into administration on Wednesday cited financial irregularities and mismanagement in court documents.
Barclays, Santander, Wells Fargo, Jefferies and Apollo Global Management-owned Atlas SP Partners are among the lenders to MFS, which had borrowed more than 2 billion pounds ($2.69 billion), Bloomberg reported on Thursday.
Creditors warned there may be a shortfall of 930 million pounds in collateral backing their loans, Bloomberg reported on Friday.
The banks declined to comment.
Atlas SP Partners, the structured credit arm of Apollo Global Management, said it has roughly 400 million pounds of exposure to the mortgage provider, or about 1% of its balance sheet. Atlas is one of the senior creditors to MFS, alongside other bank lenders.
“Following a breach of contractual terms by Market Financial Solutions, Atlas proactively put two warehouses into default last week and is pursuing all legal avenues to maximize recoveries,” a spokesperson for Atlas said in a statement to Reuters.
Shares of Apollo and other asset managers were down on Friday on broader investor concerns around stress in the private credit industry.
Investors are on the alert for any sign of deteriorating lending standards and cracks appearing in credit markets, with some of those fears centred on a boom in private credit, in which specialist funds lend directly to companies.
The collapse last year of U.S. auto parts supplier First Brands and subprime auto lender Tricolor heightened those concerns, although traditional banks were among the most exposed.
Shares in Jefferies fell nearly 8% in early U.S. trading, adding to Thursday’s 3.5% decline, as reports of the New York-based bank’s exposure to MFS rattled investors.
Jefferies disclosed last year that its Leucadia Asset Management division, through its credit fund Point Bonita, held about $715 million in receivables linked to First Brands, although it later said its exposure was limited.
Barclays shares were down 5% by 1500 GMT, underperforming the broader FTSE 100 index, which rose 0.5%. Santander shares dropped 3%.
‘REAL AND SERIOUS CONCERNS’
MFS, based in London’s Mayfair, described itself as a specialist provider of buy-to-let mortgage lending and bridging finance, with net assets of 15.9 million pounds and 149 employees as of December 31, 2024, according to its most recently filed accounts.
The company, founded by CEO Paresh Raja, said it had a loan book of 2.4 billion pounds at the end of 2024, the accounts show.
MFS did not respond to a request for comment.
MFS creditors Amber Bridging Limited and Zircon Bridging Limited had separately filed for an administration order against MFS, court documents dated February 24 and reviewed by Reuters show, citing “real and serious concerns about the mismanagement of the company” and entities in its wider MFS Group.
Amber Bridging and Zircon Bridging, cited as creditors of MFS in the court documents, said there were irregularities in payments due to their accounts and applied for independent administrators to be appointed.
The Times reported Barclays has a 600 million pound ($809.70 million) exposure to MFS. Bloomberg said Barclays was among the banks that arranged the loans for MFS.
Analysts from Citi said that the figure may warrant some caution, given banks typically sell on some or all of their exposure when arranging such loans.
“Arranging a loan is very different to retaining that risk on B/S (balance sheet),” Citi said.
“Also not clear if/how much could already be provisioned against (if anything).”
($1 = 0.7428 pounds)
Reporting by Samuel Indyk, Lawrence White and Sam Tobin; Additional reporting by Jesus Aguado, Lananh Nguyen and Saeed Azhar, Writing by Tommy Reggiori Wilkes; Editing by Amanda Cooper, Jane Merriman and Lisa Shumaker
