Global investment firms Carlyle (NASDAQ: CG) and KKR (NYSE: KKR) announced today that strategic partnerships comprising funds and accounts managed by their respective credit businesses have agreed to acquire a prime student loan portfolio from Discover Financial Services (NYSE: DFS) valued at approximately $10.1 billion.
“This acquisition highlights Carlyle’s proven expertise in private student loans and asset-backed finance, demonstrating our Global Credit business’s ability to provide scaled, tailored solutions to meet our clients’ dynamic needs,” said Akhil Bansal, Head of Credit Strategic Solutions at Carlyle. “As the lending space evolves, we believe private markets are well-positioned to offer financial institutions increased flexibility amidst this transformation.”
“We are pleased to leverage our scale, deep experience in ABF investing and capital markets capabilities to be a capital solutions provider of choice to financial institutions that are focusing on optimizing their balance sheets,” said RJ Madden, a Managing Director at KKR. “This transaction demonstrates the value that scaled private lenders can bring to key areas of the economy as the priorities of traditional lenders continue to evolve.”
Dan Capozzi, Executive Vice President and President of Consumer Banking at Discover, stated, “We’re very pleased to consummate this transaction with two outstanding strategic partners in Carlyle and KKR. This agreement represents an important milestone in our journey to simplify our operations and business mix.”
Carlyle’s investment was led by its Credit Strategic Solutions team within its Global Credit business. The team focuses on asset-backed investments leveraging the entire Carlyle investment platform.
KKR’s investment comes primarily from its asset-based finance strategy and other credit vehicles. Since 2016, KKR has made over 80 ABF investments globally through various methods including portfolio acquisitions and structured investments. The firm manages approximately $54 billion in ABF assets with a dedicated team of over 50 professionals.
The transaction is expected to close by the end of 2024 subject to customary closing conditions.
KKR Capital Markets and TCG Capital Markets structured and arranged the debt for the transaction. Monogram LLC will serve as portfolio manager for the student loan portfolio while Firstmark Services will service the loans. Sidley Austin LLP served as legal advisor for both KKR and Carlyle; Paul Hastings LLP also advised Carlyle while Clifford Chance LLP advised KKR. Wells Fargo acted as exclusive financial advisor with Skadden, Arps, Slate, Meagher & Flom LLP serving as legal counsel for Discover Financial Services.