Deal in Focus: Horizon Capital reaps 3.2x on Platinum exit

Horizon Capital, which owned a 45% stake in Platinum, reaped a 3.2x money multiple on the divestment to investors including the European Infrastructure Investment Company, while fellow private equity investor East Capital sold its 23.7% stake in the bank, reaping a 28.5% IRR. The GPs had acquired stakes in the bank via newco PT Platinum, based in Cyprus.

Platinum started out as a mortgage lending bank, when it was hit hard by the financial crisis in 2008, leading to the Horizon Capital reconsidering its holding strategy and re-focusing the bank's operations. Horizon Capital founding partner and CEO Natalie Jaresko said: "Devaluation due to macroeconomic problems in Ukraine at the time coupled with banking regulations from the National Bank made it impossible to lend in any other currency than the local one. We had to re-think the strategy and discontinued mortgages. As a result, we focused on the consumer loan part while re-branding to Platinum Bank." As part of the fresh strategy, Platinum acquired bank Home Credit Bank Ukraine in 2011, in an add-on acquisition that enable the bank to acquire a much broader client base and deepen its newly found focus on consumer loans.

During Horizon's holding period, Platinum raised additional equity twice, once through a private placement and once through a consortium of financial investors. Fellow GP East Capital originally invested in Platinum, which has around 1.5 million clients, via its €500m East Capital Financials Fund.

Ukrainian GP Horizon Capital initially backed Platinum via its €102m Emerging Europe Growth Fund in 2007, a vehicle cornerstoned by Western NIS Enterprise Fund, a private equity fund managed by Horizon and founded by the US congress. The bank, then called International Mortgage Bank, was started by Horizon as an entrepreneurial venture in 2004.

"At that time, the idea of the strategy was that the mortgage market was very underpenetrated, so we would provide mortgage through Ukraine's first mortgage bank. This strategy functioned well from 2005 to 2008. We were able to borrow long-term financing from Overseas Private Investment Corporation, the International Finance Corporation as well as from FMO, a Dutch government development finance bank," Jaresko said. As part of the growth strategy, International Mortgage Bank merged with Favorit Capital, a provider of consumer loans, in 2006. From then onwards, the newly established company, International Mortgage Bank Group, began to follow two strategies: mortgages and consumer loans.

The strategy refocus helped the bank survive the crisis. The business is now able to report a compound annual growth rate of 129% for its unsecured loan portfolio from 2009 to 2012, according to Horizon. In 2012, Platinum reported a 22.8% return on equity based on international financial reporting standards.

People
East Capital - Kestutis Sasnauskas
Platinum Bank - Greg Krasnov
Horizon Capital - Natalie Jaresko

Advisers
Vendor (Horizon) - Baker & McKenzie (Legal); VTB Capital (Corporate finance).

This deal was originally covered on 19 November 2013

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