Financial News

  • 21 January 2014, 14:38

Payday Loan Crusade Alarms Callcredit Bidders

A looming crackdown on the payday lending sector could scupper hopes of a 400m-plus payday for the owners of Callcredit, a leading credit checking agency.

Sky News understands that a number of bidders for Yorkshire-based Callcredit have expressed concern that the profit the company generates from so-called alternative finance providers could be substantially eroded by political hostility toward the sector.

The Archbishop of Canterbury, Justin Welby, and politicians including George Osborne, the Chancellor, and Ed Miliband, the Labour leader, have called for tough restrictions on payday lenders' business practices in recent months.

An influential committee of MPs waded into the debate last month, calling for restrictions on the way companies such as QuickQuid and Wonga advertise their products.

The exact proportion of Callcredit's earnings derived from the sector is not disclosed by the company although a person close to the auction suggested that it could be in the region of 10%.

The private equity groups Charterhouse, Permira and Chicago-based GTCR are among those preparing to submit final offers for Callcredit ahead of a deadline on February 6.

Bertelsmann, the German media conglomerate, is also expected to bid, and has appointed bankers at JP Morgan and Gleacher Shacklock to advise it, insiders said on Monday.

The arm of Bertelsmann interested in Callcredit is likely to be Arvato, a provider of business process outsourcing services.

The interest of the German conglomerate, which owns the RTL broadcasting group, the publisher Gruner & Jahr, and a stake in Penguin Random House, may not lead to a formal offer in February, insiders said.

Vitruvian Partners, a buyout firm, is hoping to attract a price of more than 400m for Callcredit, which it has owned since 2009.

Callcredit, which has been dubbed a "mini-Experian" because of its resemblance to the FTSE-100 credit referencing giant, employs around 800 people at sites across the UK.

It competes with Experian and Equifax in the credit referencing market, which is worth billions of pounds a year.

Last week, Callcredit announced the launch of a real-time credit reporting system, with major short-term lenders including Wonga, Quick Quid, Mr Lender and ThinkFinance all signing up to provide information.

Previously part of Skipton Building Society, Callcredit has seen sales and profits grow rapidly since the business last changed hands, with the business buoyed by growing demand for greater volumes of consumer credit data.

A source close to Callcredit said it was "not aware" of concerns among bidders, and insisted that customers from the alternative finance sector were from a much broader group of companies than payday lenders.

Callcredit declined to comment.