The Local, Local Operator

Europe continues to be a large, fragmented and disparate banking environment marked by a range of banks across countries with various regulatory and legislative frameworks. In such an environment, being ‘local, local’ means not only domestic knowledge and access, but infrastructures and people that underpin our strategy in each market.

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  • Consumer
  • SME
  • Mortgage
  • Real Estate
  • Master Servicing / Securitisation / Credit Bureau

Arrow Italy

  • Consumer
  • SME
  • Mortgage
  • Real Estate
  • Master Servicing / Securitisation / Credit Bureau

Arrow Portugal

  • Consumer
  • SME
  • Mortgage
  • Real Estate
  • Master Servicing / Securitisation / Credit Bureau

Arrow UK

  • Consumer
  • SME
  • Mortgage
  • Real Estate
  • Master Servicing / Securitisation / Credit Bureau

Arrow Ireland

  • Consumer
  • SME
  • Mortgage
  • Real Estate
  • Master Servicing / Securitisation / Credit Bureau

Arrow Netherlands

  • Consumer
  • SME
  • Mortgage
  • Real Estate
  • Master Servicing / Securitisation / Credit Bureau
Arrow’s Italian master servicer, Zenith, is rated as “Strong”. Arrow’s Dutch platform, Vesting, is rated RPS2, RSS2, ABPS2, ABSS2.

Going Local

Europe continues to be a large, fragmented and disparate banking environment marked by a range of banks across countries with various regulatory and legislative frameworks. In such an environment, being ‘local local’ means not only domestic knowledge and access, but infrastructures and people that underpin our strategy in each market.

Arrow’s local servicing infrastructures provides:

  • forensic understanding of the assets;
  • use of enabling technologies and data records;
  • understanding of local laws; and
  • working knowledge of, and access to, stakeholders.

This infrastructure allows Arrow to originate and execute high quality transactions across various pockets of hidden value within the European performing, stressed and distressed spectrum.

Developing a robust infrastructure was a response to the challenges we faced in our early years of investing in NPL portfolios to find the right local origination, asset management and servicing partners to support us in a consistent, aligned and performance-driven way.

Platforms we worked with in certain deals were suddenly not available for the next deal. This was often for a range of reasons, from the quality of the staff they were willing to allocated to us, alignment with other investors, acquisition by Arrow competitors, or a lack of the specialist capabilities needed for different deals.

Our solution was to acquire platforms in the key markets where we were looking to deploy significant capital. Crucially, we looked to identify platforms that had both servicing and investment origination capabilities, deep local relationships and valuable in-country market knowledge.

Since 2014, we have acquired 14 platforms in five countries and disposed of others where we didn’t see significant opportunities (e.g. Belgium). These specialist platforms have included Capquest, Drydens, Bergen and Mars in the UK, Whitestar Asset Solutions and Norfin in Portugal, Vesting Finance in the Netherlands, Mars Capital in Ireland and Zenith Service, WhiteStar Asset Solutions and Europa Investimenti in Italy.

As part of the Fund, we have also established in-country origination and asset management entities which we own to drive entrepreneurial aggregation of small tickets where the Arrow-owned platform isn’t best placed to support origination, although Arrow platforms still provide valuable servicing support. The asset classes these vehicles invest in include insolvency claims, litigation finance, residential real estate for rental and bridge lending.

Today, these platforms are fundamental to our business, and our now proven ability to generate consistent attractive returns and off-market investment volume across the assets we invest in.

Origination

Our platforms are unique in spotting business opportunities in their markets. Given the tight local connections at a senior level with Originators, Arrangers and other parties playing in these markets, we can source deals that a newcomer to the market would never see. Originators are familiar with, and trust, our execution capabilities and they often come to us when they need a swift, seamless closing. Furthermore, when an investor, for an asset we service, wants to exit portfolio tails, we become their natural buyers as it is uneconomical to move late-stage portfolios to third-party servicers and lose the knowledge garnered over the years of managing the portfolios. Not to mention avoiding on boarding costs, replacing lawyers and changing lender of record or legal title owner. Finally, our platforms allow us to play competitively at a granular level because we are able to source and close small deals that are uneconomical for large investors. Instead we can look at these opportunities as a way to dilute fixed costs and better make use of installed local capacity.

Underwriting

Our underwriting advantage comes from deep knowledge of local intricacies, such as regulation, law courts, tax environment, preferred structures, debtor behaviour, and local ways of doing business. This knowledge, coupled with vast experience in managing portfolios locally and understanding the potential cost of debt collection, is crucial to support adequate underwriting.

Complex asset servicing

Proprietary servicing and workout platforms that can service our portfolios give us a unique position in the market as we do not need to competitively scramble to find the right local partner to support the execution of a deal.

These local platforms are a huge differentiator for Arrow versus our competition. Crucially, this is a proven strategy over the 15 years we have been investing. Today, our platforms are perfectly aligned with our investment needs and entirely capable of expanding into new business segments in response to market dynamics and opportunities. The perfect symbiosis between Arrow’s investment program and its platforms is a fundamental competitive advantage for us. We are proud of what we have built, and our teams’ record of collaboration, having closed together a vast number of transactions in recent years.

Joao

João Bugalho
Arrow Global Portugal and WhiteStar CEO