Cabot Square makes profit on PHL

Private equity and principal finance house, Cabot Square Capital has sold the business and mortgage portfolio of Platform Home Loans Limited (PHL) to Britannia Building Society Group for GBP600 million, including assumption of debt. Cabot Square achieved a rate of return in excess of 200 per cent per annum.

The funds advised by Cabot Square acquired PHL in August 1999 from First Union Corporation for an undisclosed sum. Since the acquisition, the amount of loans and mortgages serviced by PHL has increased by 60 per cent and its customer base has doubled. In addition, under the funds’ ownership PHL has securitised GBP480 million of loans in the capital markets.

PHL received two investment rounds from Cabot Square the original commitment in September 1999 and a development capital investment in December 1999. The senior management of PHL will remain with the company and drive its growth plans under Britannia’s ownership.

PHL is a specialist mortgage lender, providing mortgages for individuals that fall outside normal high street lenders criteria. The company is one of the leading lenders in its market with GBP540 million of mortgages on its books, serving over 10,600 customers nationwide.

James Clark from Cabot Square remarked that part of the company’s strategy is to reposition its portfolio companies for sale to larger institutions. He stated that it was a logical step forward for the development of the company and that the time was right for the sale.

“These companies are more competitive and become better companies when they become part of a larger institution,” he added.

“The transaction reinforces Cabot Square’s investment strategy of acting as a catalyst for the development of strong cash flow generative businesses in the consumer and commercial credit sector, and demonstrates our ability to create value in a business by providing the capital to fund growth as well as the financial management expertise to deliver it.”

Cabot Square currently has approximately $300 million invested in assets with over $1.5 billion in enterprise value. Since 1996, it has advised on 19 private equity and principal finance transactions.