Ex-JPMorgan fund swoops on Money Shop owner

The Money Shop has more than 200 stores in the UK

By Mark Kleinman, City Editor

An investment fund that was previously part of JPMorgan, the giant American bank, is in talks to buy the Money Shop and other operations that collectively comprise one of Britain’s biggest short-term lenders.

Sky News has learnt that HPS Investment Partners, which was spun out of the Wall Street behemoth last year, is in advanced discussions with the American private equity firm Lone Star about a deal.

Negotiations between the two parties have been taking place for several months, according to City sources, and it was unclear how close they were to an agreement.

If a transaction does take place, it would hand control of some of the UK's most prominent payday lending and pawn-broking businesses to another US-based investor.

Money Shop is owned by Dollar UK, which is in turn part of DFC Global – a business with operations in countries including the US, Canada and Poland.

The company, which has been heavily loss-making amid a regulatory clampdown which has capped the charges that can be imposed on customers by short-term lenders, has been up for sale for almost a year.

HPS, which had roughly $34bn under management at the end of 2016, was originally part of Highbridge Capital Management.

Highbridge was at one stage the world's largest hedge fund by assets under management, and remains largely owned by JPMorgan.

A spokesman for HPS declined to comment on its talks about acquiring Dollar UK.

It was unclear whether the discussions about a deal also involve parts of DFC's other international operations outside North America.

In Britain, the Money Shop now trades from about 230 stores, while Dollar UK's other brands also include the pawnbrokers Suttons & Robertsons and Robert Biggar.

The price likely to be paid by HPS for Dollar UK could not be ascertained, although sources said that it was likely to be depressed by continuing uncertainty about the long-term prospects for the sector.

Scores of payday lenders have already vanished from the market following the introduction of a fee cap by the City watchdog.

Stuart Howard, who set about improving Dollar UK's reputation in the wake of a big customer compensation programme, left the company earlier this year.

The Financial Conduct Authority took on responsibility for regulating consumer credit from the Office of Fair Trading in 2014 and – prompted by ministers – has taken a much tougher approach to overseeing it.

Dollar UK has also had a bruising encounter with the FCA, which ordered the company in 2015 to refund £15.4m to 147,000 customers after ruling that it was lending more to borrowers than they could afford to repay.

Since then, it has tried to revamp its image by opening refurbished stores containing children's play areas and ATMs offering free cash withdrawals.

Accounts filed at Companies House for the year to June 2016 reveal that Dollar UK made a pre-tax loss of £159.7m, a rise on the previous year's loss of just over £100m.

DFC Global says it has more than 10 million customers and 6,000 staff at its operations around the world.

Spokeswomen for Lone Star and HPS declined to comment.

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