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Peer2Peer Finance News | September 16, 2019

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P2P lenders mull bids for Countrywide’s mortgage arm

P2P lenders mull bids for Countrywide’s mortgage arm
Marc Shoffman

PEER-TO-PEER lenders are among the firms encircling the mortgage brokerage arm of troubled estate agency group Countrywide.

Britain’s biggest estate agent has issued four profit warnings in eight months and seen its share price plummet by two thirds since the start of the year, hammered by a downturn in the property market and growing competition from new online rivals.

While the agency side is struggling, the financial services division – incorporating 600 mortgage consultants offering home loans, remortgages and insurance services – has proved more resilient.

Countrywide’s estate agency and lettings business saw its core earnings plunge by 45 per cent to £26.4m in its 2017 annual results, while its mortgage brokerage arm posted a comparatively smaller 13 per cent decline to £19.7m. The value of total mortgages arranged grew by £2bn to £17.7bn last year.

Read more: Navigating through the P2P property maze

Lee Birkett, founder of bridging and buy-to-let P2P lender JustUs, told Peer2Peer Finance News he was considering making an offer for the mortgage brokerage arm of Countrywide.

“There have been no formal discussions, but I have made it public that I am interested in regulated mortgage contracts for P2P,” he said. “The financial services side of Countrywide is a fantastic business. It is the biggest distributor in the UK and this wonderful asset is keeping the group together.

“Countrywide is a business that if broken up and transformed would be very valuable.”

Chan Garcha, executive consultant for buy-to-let platform LandlordInvest, also expressed an interest in Countrywide’s mortgage brokerage arm, although he said that a potential acquisition would need to be further down the line.

“The value would lie in the investment properties, where Countrywide has provided mortgages for investment clients,” he told Peer2Peer Finance News. “That same individual or company may want some bridging finance in the future or second charge finance, that level of data is quite valuable and would be to any P2P platform.”

He added that LandlordInvest was focused on scaling its existing model but said there was no reason why in 12 months that “if we felt it was the right thing to do and it ticked the boxes we could look to acquire an element of the business.”

Countrywide issued a fresh cash call in late June in an attempt to halve its £192m debt pile, which could bring new bidders into play.

There has been speculation that US alternative asset manager Oaktree Capital, which is Countrywide’s largest shareholder with a 30 per cent stake, could use this opportunity to increase its holding and take control of the business.

Oaktree, which declined to comment on a possible Countrywide acquisition, is no stranger to boardroom tussles. It is also a major shareholder in Ranger Direct Lending and played a key role in pushing for the alternative finance fund to be wound down following poor performance.

Countrywide’s share price fell below 50p in late June from a 2014 high of 694p and has made little recovery since.

Read more: FCA home finance proposals are a “vindication” for P2P property space

Neil Wilson, chief analyst at online trading platform, said Countrywide’s low market value made it an attractive takeover target.

“A potential tie up with a technology firm is another option although the problem with the hybrid thing is it already tried this and didn’t really work,” he said. “You could see it merge with Foxtons for instance to cut costs. A break-up ultimately may be the only way out to salvage those bits of it that are doing ok.”

However, Russell Quirk, founder of online agent Emoov, which has also expressed interest in acquiring Countrywide’s mortgage arm, said a break-up of the business was unlikely as it is linked to all other parts of the operation.

“There is a logic that Countrywide has a slick financial services operation, but it is predicated around estate agent activity so if you severed it that would be an issue,” he said.

Countrywide declined to comment.

This article featured in the August edition of Peer2Peer Finance News, which is now available to read online.