For an operator acquiring non-performing loans and unlikely-to-pay exposures, the ability to value a portfolio must be matched by the capital to complete the purchase. Funding needs to be available when an auction closes, while reflecting the timing of future recoveries.

This was the challenge facing a specialist distressed-debt operator that engaged CGPH. The business had the analytical and servicing capabilities to expand. Its next step was to build a funding structure that could support a higher volume of acquisitions.

NPLs and UTPs: the assets behind the financing need

Non-performing loans (NPLs) are loans for which repayment is materially overdue or considered unlikely. The European Central Bank identifies two criteria: material exposures more than 90 days past due, or a lender’s assessment that the borrower is unlikely to repay in full without realising collateral.

Unlikely to pay (UTP) describes an assessment that a borrower is unlikely to meet its credit obligations in full without recourse to measures such as realising collateral. This assessment can arise before payment arrears. It sits within the broader framework for identifying non-performing exposures.

For buyers of these portfolios, financing must connect two different timelines: the purchase price due at closing and the recoveries expected over time. Capital availability, collection assumptions and drawdown procedures therefore need to work together.

The challenge: matching capital to acquisition deadlines

The operator combined portfolio analysis, proprietary pricing tools and an established loan-servicing infrastructure. Its funding arrangements, however, involved approval processes and conditions that were difficult to align with time-sensitive auctions.

The commercial objective was clear: give the business a financing framework that matched how it acquired and managed portfolios, enabling it to act on opportunities its team had already assessed.

CGPH’s approach: three connected workstreams

Build the financing case around recovery performance. CGPH reviewed the operator’s track record, historical collection curves and recovery metrics. This provided the basis for structuring an alternative funding framework around the economics of the portfolios.
Structure funding around portfolio purchases. CGPH helped structure dedicated funding arrangements and connected the operator with institutional capital partners. The financing approach linked acquisition needs with projected cash recoveries.
Align drawdowns with the auction calendar. Drawdown procedures were calibrated to the operator’s acquisition deadlines, supporting the availability of capital at closing.

The outcome: acquisition value doubled within six months

Within six months, the operator had doubled the aggregate nominal value of the portfolios it acquired and completed larger portfolio purchases. More dependable access to funding also strengthened its position when negotiating acquisitions.

The result was a stronger platform for growth: the operator could connect its analytical and servicing capabilities with a funding structure designed around its acquisition process.

What this means for portfolio buyers

Portfolio financing starts with an understanding of how an operator selects assets, prices recoveries and manages collections. Bringing those elements into the financing discussion helps connect the investment case with the capital and execution timetable required to deliver it.

For businesses preparing their next portfolio acquisition, CGPH’s corporate loan solutions provide a starting point for discussing a financing structure aligned with their operating model.

Sources: European Central Bank — What are non-performing loans?; ECB glossary.