Carlyle and KKR win auction for Discover Financial’s $10 billion student loan book, FT reports

(Reuters) – Carlyle and KKR & Co have won an auction for a $10 billion student loan book owned by Discover Financial, the Financial Times reported on Wednesday, citing people familiar with the matter.

According to the report, the joint offering outperformed a competing bid from Sixth Street, BlackRock and the Canada Pension Plan Investment Board, with the loan book being sold above par.

KKR, Carlyle and Discover Financial did not immediately respond to Reuters’ requests for comment.

The report adds that the auction attracted some of the biggest names in private lending, including Ares, Blackstone and Oaktree.

Last November, Discover Financial announced that it was exploring the sale of its student loan portfolio. In the event of a potential sale, servicing of those loans would be transferred to a third party.

Earlier this year, Warren Buffett-backed U.S. consumer bank Capital One announced that it would acquire Discover Financial in an all-stock transaction for $35.3 billion.

The deal comes at a time when U.S. regulators under President Biden’s administration are tightening their scrutiny of bank mergers and the debate over the risks and benefits of bank mergers is intensifying after JPMorgan and New York Community Bank were allowed to buy up the assets of failed banks last year.

(Reporting by Nathan Gomes in Bengaluru, additional reporting by Pritam Biswas; Editing by Alan Barona)