Patron Capital - Financial Services Winners

Patron Capital is a Western European private equity real estate fund based in London. The company owns Optimum Credit, one of the leading second-charge mortgage lenders in the UK.

In July 2017, Optimum Credit, backed by Patron Capital, successfully completed the first public securitisation of second-charge mortgages by a UK mortgage lender since 2004.

This unique transaction firmly established Optimum Credit as a market leader in the second-charge mortgage space, opening new funding opportunities for this asset class.

Having identified an opportunity for growth, Patron Capital backed Optimum Credit’s experienced senior management team, helping them set up the business in 2014

Business Context behind the Initiative

Optimum Credit's business plan is based on a wholesale funding model. Thanks to their securitisation transaction model, they're able to provide competitive costs of funds and beat chief competitors with deposit-based retail funding models.

The primary customers for securitisation transactions were institutional investors with limited knowledge of this asset class due to the absence of comparable transactions since 2004. So significant effort had to be deployed in educating investors about second-charge mortgages, and considerable emphasis was placed on distinguishing the underwriting practices from the pre-credit crisis years.

Further, Optimum Credit’s team used its extensive knowledge of the performance asset class through the last 15-20 years to project future performance of the loan portfolio.

Optimum Credit also focuses on digital technologies and digital media to provide exceptional service, disrupting the generally conservative, paper-based industry in the process.

This distinctive feature of its proposition allows them to use sophisticated software to determine bespoke prices for each customer.

The Outstanding Initiative Achieved

After completing their first public securitisation of second-charge mortgages by a UK mortgage lender in 2017, Sam Marshall, CEO of Optimum Credit said:

"This is a significant milestone in the development of Optimum Credit. The completion of the first, second line public securitisation since 2004 is a testament to both the quality of the management team and the business we have built since originating our first loan back in June 2014. This securitisation allows us to continue the development of our business as we seek to increase our prime second lien origination and also add new product lines."

Sparking great interest, the new approach proved to be highly successful with investors demonstrating an appetite for home loans and long-term funding from capital markets.

Optimum Credit's approach helped the company advance funds totalling more than £100 million in a period of two years while gaining more than 20% market share.

The market has also experienced growth since recent changes in regulation, and Optimum Credit believes that there is still plenty of scope for further expansion in the coming years.

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