The Royal Bank of Scotland held “extensive discussions” with the Office of Fair Trading before backing the £510m management buyout of Ocwen UK
Managers at the bank’s venture capital arm were reluctant to put up the cash without investigating the sub-prime lender’s links to City Mortgage Corporation. Concern was also voiced at the ability of Ocwen’s management team to turn the venture into a success in the wake of SPML’s management buyout
A source at Royal Bank Development Capital (RBDS) revealed: “We held extensive discussions with the OFT before we went ahead with this. We were fully aware of the allegations that had been made and these in the main relate to the previous company, not Ocwen. Extensive due diligence was carried out in relation to this project and discussions were held with the relevant authorities
Ocwen UK was formed in April 1998 when Ocwen Financial Corporation, a US-listed financial services and software business, acquired the assets of troubled City Mortgage Corporation (CMC), a subsidiary of Cityscape, the UK arm of American lender Cityscape Financial Corporation
A spokesman at the OFT confirmed talks with RBS had taken place and said: “The OFT evaluates any request for confidential guidance as it does for public cases. We have sent out an enquiry letter to request details of the MBO but are still waiting for a response from Ocwen
After seven and a half weeks of investigation and negotiation RBDC invested £76m of equity, a holding of 49%. Some £1m of further equity was provided by Patron Capital and the management team. Barclays Capital, Greenwich NatWest and Morgan Stanley are also providing Ocwen UK with debt facilities totalling £433m
Joseph Dlutowski, chief executive of Ocwen UK, said the result of the investigation reiterated their dedication to service
“We’ve worked hard to stop a lot of the practices that got CMC in to trouble. Just about all of that is behind us and we are looking to the future. Our goal is to build on our winning formula and continue to benefit disenfranchised borrowers. We want to move from strength to strength, continue to write good loans and put CMC further behind us
A rebranding exercise was already underway, he added, and unlike SPML, funding lines were secure. Dlutowski said: “We’ve got much better capitalisation than SPML and obviously Ocwen is a much larger organisation. We are an established company, have an established business plan and have secure access to financing. Two of our warehouse lines have just renewed their yearly contracts and our equity partner is now somebody that people know
Jonathon Sadler, general sales manager, said the MBO went ahead as Ocwen in the US had withdrawn its new lending facilities and were concentrating purely on servicing sub-prime debt
