Westpac may hit the brakes on sale of car loans business

Westpac has dramatically changed the nature of the sale, from $11bn of loans as part of its existing business to the opportunity to land any new business. Picture: NCA NewsWire / Christian Gilles

Westpac may be having second thoughts about a sale of its car loans business after some of the buyers circling the portfolio lost interest.

As reported by DataRoom on Monday, the contest has taken a different direction in the past fortnight after more than 30 parties initially signed non-disclosure agreements to examine the portfolio.

Westpac has dramatically changed the nature of the sale, from $11bn of loans as part of its existing business to the opportunity to land any new business.

It will retain the loans that are now in place.

This leaves suitors vying for about $2bn of loans, with the floor plan financing still on offer — rather than the $11bn initially thought to be up for grabs.

Some think the change in direction may have come because buyers were only prepared to pay about 80c in the dollar for the loans on offer.

Other challenges for prospective suitors are that they would have to find a new management team to run the business and install a new IT system for the business.

The business writes about $5bn worth of loans a year, so any potential buyer would need to have funding backers.

The understanding has been that Westpac has been prepared to offer synthetic loans to interested buyers.

Outfits including Allied Credit, Plenti and Taurus Motor Finance are believed to be interested in the new offering.

Other buyout funds understood to be circling are Cerberus, TPG Capital with Liberty Financial and Bain Capital.

Westpac has been looking to stage an exit from the auto loans business after tougher rules surrounding interest rates charged on auto loans and other strict measures were introduced by the regulator.