Transaction Capital enters distressed debt joint venture in Europe

The company said the European distressed debt market is attractive and large.

Transaction Capital, which funds the purchase of minibus taxis in South Africa, has entered into a joint venture agreement with Genki Group to invest in European non-performing loan portfolios and distressed debt, the company announced on Wednesday.

The joint venture will see Transaction Capital and Genki, a company owned by trusts of Transaction Capital directors – Jonathan Jawno, Michael Mendelowitz and Roberto Rossi – each allocate €20 million (R325 million) to the joint venture.

The joint venture has been concluded through Transaction Capital’s subsidiary, Transaction Capital Risk Services (TCRS).

In describing the rationale of the joint venture, Transaction Capital said the European distressed debt market is larger than the South African and Australian markets, within which TCRS currently operates.

Transaction Capital said it has established relationships with certain specialist credit managers in Europe and has identified an attractive segment of this market for entry by the joint venture.  “This segment comprises smaller, high-yield, off-market bespoke distressed corporate and consumer debt portfolios acquired and managed by these selected specialist credit managers,” the company said in a statement on Wednesday.

The joint venture’s investments will comprise direct co-investments, partnerships with specialist credit managers in selected portfolios and investments in specifically identified debt funds.

An initial investment by TCRS and Genki of approximately €3 million (R49 million) each is expected to occur within Western Europe before Transaction Capital’s March 2019 half-year end, the company said.

“In time, TCRS intends to progressively participate in more sizeable prospects with the ultimate intention to build a European distressed debt business of scale, with the potential to leverage off TCRS’s South African low-cost collection infrastructure and technology. This could be achieved without creating unnecessary business integration costs.”

The structure of the joint venture will see a subsidiary of TCRS, Transaction Capital Risk Services International, subscribe for 50 percent of the shares in a newly established joint venture company, Turicum Ventures. The remaining 50 percent shareholding will be held by Genki.