The UK lender that spun the titans of finance

One thing to start: Citadel and ExodusPoint are among the big-name hedge funds to have been stung by the market fallout from war in the Middle East, which has sparked a surge in energy prices and a sharp bond sell-off.

In today’s newsletter:

MFS’s loan ‘merry-go-round’

New investments are supposed to go through standard due diligence. Some also face the scrutiny of intuition, more of a smell test.

When it came to both, some investors felt Market Financial Solutions didn’t pass.

Two small funds weighing an investment in MFS in 2019 hit a wall as the fledgling UK mortgage provider was unable to give even simple answers to questions about its business.

Then, one of the potential lenders spotted another red flag: a £200,000 watch.

MFS director Paresh Raja wore a Richard Mille timepiece that an executive at credit fund Cairn Capital believed was worth about half the value of the director’s north London home.

Such a high “watch-to-house ratio” suggested something was off, Asif Godall, then the co-chief investment officer at Cairn, thought. He passed up the opportunity.

But some of the biggest names on Wall Street leapt at it, the FT reports in a deep dive.

Groups including Barclays, Jefferies and Santander, as well as US private credit players Apollo, Castlelake Capital and TPG, collectively lent more than £2bn to companies Raja owned. Meanwhile, MFS grew to become a major player in the arcane world of bridge lending.

Then, last month, MFS suddenly collapsed. It faces allegations of fraud and double-pledging of collateral.

The failure has deepened fears over potentially lax underwriting standards, especially after the rapid collapses of First Brands Group and Tricolor amid fraud allegations in the US last year, which also left sophisticated lenders staring down large losses.

MFS was founded in 2006 with Pratibha Dewan, Raja’s wife, named as sole shareholder. The family business hardly grew until Raja officially took control in 2017, when its lending picked up drastically.

Raja created a complicated web of entities to house MFS’s bridging loans — short-term loans made to buyers to acquire a new property before they have sold their existing home — which MFS also used as collateral to its own lenders. MFS used the loans to refinance older bridging loans it had originated.

One prospective investor described the model as a “refinancing merry-go-round”.

Despite some lenders spotting issues and eschewing the investment opportunity, Raja had no trouble raising funds. MFS reported in 2024 that it had secured £1.3bn in “new institutional funding to support increased lending demand” on top of £1.1bn it had already received from lenders.

Barclays and other lenders first noticed financial irregularities with MFS last fall, with the bank eventually freezing all accounts tied to the firm in January, expediting its collapse.

On Tuesday, creditors alleged in a London court that they face a £1.3bn shortfall after discovering what they claim is a network of supposedly “genuine borrowers” from MFS that are actually tied to Raja. The creditors say as much as £238mn is unaccounted for.

Lawyers for Raja said: “These are not sham companies. They are part of a larger group which are beneficially held for MFS and its associated lenders.”

The financial engineering behind a mega sports deal

The private equity group that created a mash-up of stakes in European football and rugby leagues has found that its blending of the beautiful game with a simple form of American football is a tough sell.

Now, an exercise in sports engineering has transitioned to financial engineering.

Last year, European private equity group CVC rolled its minority stakes in some of Europe’s most prominent sports leagues into a new company called Global Sport Group.

But some in the sports industry see the vehicle as a sort of Trojan horse for some of CVC’s more troubled holdings, namely France’s Ligue de Football Professionnel and Premiership Rugby.

CVC has since been working to sell GSG to other buyers, but found lukewarm interest in a company that a person close to the Amsterdam-based private equity group called an acquisitions “mother ship” with a low cost of capital.

After struggling to find buyers of GSG’s equity at a high valuation, CVC found greater success in a highly structured transaction that may help save face, the FT reports.

It has sold a minuscule stake in GSG at a €7bn valuation after it spent months trying unsuccessfully to sell a large equity stake at a €9bn valuation.

How CVC got the deal over the line underscores the ever more complex private capital universe.

The deal mostly involves debt and taps Wall Street’s newest gold mine: insurance. KKR, using its wholly owned life insurer Global Atlantic, and bond giant Pimco, together have lent about €3bn to GSG and allowed CVC to pay a large dividend to its investors.

The deal helps to mask a disappointing valuation and return money to investors without finding a buyer of the company’s equity at an agreeable price. Only about ​​€200mn of equity, or 6 per cent of GSG, is actually changing hands, while CVC and its investors will retain 95 per cent of the sports roll-up.

Simpson snoozes and a deal in Europe blows up

Lawyers are, by virtue of their profession and perhaps their nature, sticklers for the rules. They charge ever-rising fees for the service of ensuring clients dot their i’s, cross their t’s and stay out of trouble.

But the failure to follow a basic rule is proving to be an embarrassing mistake for one of the world’s biggest law firms, Simpson Thacher & Bartlett.

The firm missed — by just a single day — the deadline to file an appeal on behalf of one of its clients, the US catering company Aramark. 

As a result Aramark has lost out on the opportunity to challenge the UK competition regulator’s decision to block its acquisition of fellow caterer Entier. The Aramark deal was the first in more than a year to be rejected by the regulator, which ordered that the caterer had to unwind the purchase.

Aramark had four weeks to appeal against the decision. However, Simpson Thacher said it filed a day late because of its “misinterpretation of the rules”.

Simpson Thacher’s equity partners were paid an average of $7.7mn in 2024, according to its most recent set of financial results, while some of its most junior lawyers earn a base salary of $225,000 a year.

At that pay scale attorneys are doing far more than simply following court rules, though DD wonders if this is the type of mistake law firm heads and companies are thinking about when they tease replacing lawyers with AI tools.

Job moves

• Bank of America has named Gary Kirkham as an executive vice-chair, Jason Rowe as co‑head of global technology investment banking and Mahir Zaimoglu as head of TMT M&A investment banking. Kirkham rejoins the bank from Centerview, Rowe joins from Goldman Sachs and Zaimoglu was most recently group CFO for Banking Circle.

• Blackstone has named veteran Rashmi Madan global head of portfolio solutions and hired Simona Maellare as head of Emea for private wealth. Maellare most recently worked at UBS.

• Michael Marsh, a former partner at Goldman Sachs in London, is set to join Arctos-owned credit firm Hayfin Capital as head of investments.

• Uğur Şahin and Özlem Türeci, co-founders of vaccine maker BioNTech, are stepping down as chief executive and chief medical officer, respectively, to launch a venture focused on next-generation messenger RNA technology.

• Darktrace has appointed Ed Jennings, who previously led US cloud-based work management platform Quickbase, as chief executive — the company’s third permanent CEO in the past 18 months.

Smart reads

Chasing wealth Standard Chartered is hiring dozens of bankers to land wealthy Chinese clients who want to store their money in Singapore, the FT reports. Military threats to Gulf wealth hubs such as Dubai might only increase the appeal of banking in the city-state.

Dating advice While many relationships apps have lagged as people tire of looking for love online, Hinge has more than doubled its users in the past five years. When it comes to online dating, “you do need to put in a little bit of effort”, the company’s chief executive tells the FT.

Anti-war Donald Trump has less domestic support for his attacks on Iran than US presidents have had entering most other wars, The New York Times reports. Unlike previous leaders, Trump didn’t spend much time rallying the public ahead of his crusade.

News round-up

Short sellers target Wizz Air as Iran war wipes out profit (FT)

Bill Ackman’s Pershing Square files for US IPO (FT)

Odey’s ex-CEO labelled him a ‘sex pest’, court told (FT)

Mira Murati’s Thinking Machines strikes multibillion chip deal with Nvidia (FT)

Microsoft backs Anthropic in legal fight with the Pentagon (FT)

Amazon holds engineering meeting following AI-related outages (FT)

Yann LeCun’s AI start-up raises more than $1bn in Europe’s largest seed round (FT)

ExxonMobil joins corporate migration to Texas amid investor activism battle (FT)