Santander and private equity firms consider floating US car finance business


cars2_lrgSantander and three private equity firms are reportedly planning to float the Spanish banking group’s US-based car finance business, which could be valued at up to $9bn.

The IPO of Santander Consumer USA could take place in the coming month, said the FT, citing people familiar with the matter.

Santander holds a 65 per cent stake in the business, while founder Tom Dundon owns 11 per cent.

Private equity firms Centerbridge Partners, KKR and Warburg Pincus own the remaining 24 per cent interest, which they acquired for $1bn.

The IPO is expected to value the company at $7bn to $9bn, which means the three buyout firms could make a return of more than two times on their initial investment.

The report noted that the relationship with Santander has given the company a source of relatively cheap funding. Santander Consumer USA also has credit lines from JPMorgan Chase, Deutsche Bank and Bank of America.

These banks along with KKR could act as underwriters of the IPO, said the sources.

It also said that auto loans did well during the financial crisis and US borrowers prioritised making their car payments over remaining current on their mortgages, which was pointed out by one of the sources.

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