Sub prime lender confirms takeover bid
The sub prime home loans market has become fiercely competitive over recent years; as a result the company, which started it all is looking to sell after a string of profit warnings.
The Kensington Group has seen its share value drop by more than 60% from a high of £12 (one year ago), to £5.60 after market close on Tuesday. The group has announced that a takeover is its most viable option, and is set to announce a deal with Morgan Stanley over the next few days. The group voiced its intentions to sell a few months ago in response to initial profit warnings, which roused interest from 3 of their primary competitors. However, since the announcement the lender has issued two further warnings, which has doused any potential interest from competitors to buy the group.
Kensington’s second profit warning ushered the resignation of its long-term chairman with a new chairwoman taking his place. An integral part of the group’s strategy has seen the sale of entire loan portfolios causing future profits to reduce considerably. During the month of April, the group agreed the sale of 2 billion pounds worth of home loans to another lender.
Many analysts have speculated that Kensington’s troubles can be rooted to the collapse of the US sub prime market, which saw the fall of their biggest lender (New Century Financial). The group denies such claims stating that its average customer arrears had decreased, however statistics suggest that at least 10% of its customers can still be classed as bad debtors.
