A consortium of investors spearheaded by Sixth Street Partners, in collaboration with Davidson Kempner Capital Management, has disclosed plans to purchase Credit Suisse’s US mortgage servicing arm from UBS Group AG. The acquisition deal, encompassing UBS’s Select Portfolio Servicing, is anticipated to be finalized in the initial quarter of 2025. This move is set to slash UBS’s risk-weighted assets by an estimated $1.3 billion, marking a significant stride in the divestment of unwanted business units inherited from past acquisitions.
In a recent report for the second quarter, UBS unveiled the agreement to offload the business, withholding details regarding the buyer’s identity. This development follows UBS’s decision to liquidate a $2.2 billion real estate fund, a residual asset from Credit Suisse, prompted by escalating redemption requests. Noteworthy progress in streamlining Credit Suisse assets has bolstered UBS’s financial performance, surpassing market expectations for the second quarter.
UBS has indicated that the transaction is not expected to yield a substantial profit or loss, as stated in an announcement made on Wednesday. While Sixth Street, Davidson Kempner, and UBS have refrained from providing official comments on the deal, industry insiders foresee a strategic alignment in the upcoming acquisition.
Select Portfolio Servicing, a prominent player in servicing home loans for individuals with challenged credit histories, has been under UBS’s management within its non-core and legacy business division. Originating from the acquisition by Credit Suisse in 2005 of Fairbanks Capital, the business has maintained a prominent presence in navigating complex mortgage servicing landscapes. In the United States, specialized firms primarily dominate the mortgage servicing sector, in contrast to the European scenario where banks commonly oversee such operations.
Sixth Street, a powerhouse in the alternative asset management realm with a substantial asset pool totaling $75 billion, has been on a trajectory of rapid expansion amidst the burgeoning private credit market. Notably, the firm recently concluded the acquisition of property & casualty insurer Enstar Group Ltd. for $5.1 billion, marking a significant milestone as the second-largest private equity insurance deal of the year. Furthermore, Sixth Street’s active involvement in asset-based finance spans across a wide spectrum, with capital deployment ranging from $100 million to over $2.5 billion, notably in commercial and residential mortgage sectors. These strategic initiatives are spearheaded by Michael Dryden, a seasoned partner at Sixth Street since 2022, formerly associated with Credit Suisse, underscoring a strategic talent acquisition for the firm’s ongoing growth trajectory.
