Investcorp Buys Stake in Marblegate Who is Known for Buying Taxi Medallion Loans

Posted on 09/26/2021

Alternative investment manager Investcorp, which touts Abu Dhabi-based Mubadala Investment Company as its largest shareholder, acquired a minority stake in middle-market special situations credit specialist Marblegate Asset Management LLC. The fund manager focuses on distressed assets. The deal would benefit Marblegate by giving access to Mubadala’s balance sheet, as well as Investcorp’s platform. Investcorp will be a passive, non-voting partner and Marblegate’s team, consisting of co-founders Paul Arrouet, managing partner, and Andrew Milgram, managing partner and chief investment officer, will remain intact. Marblegate currently has almost US$ 3 billion in assets under management.

Marblegate Asset Management is the largest holder of New York City taxi-medallion loans. Taxi medallions were once worth over a US$ 1 million in value, but the value of them plummeted when ride sharing apps like Uber Technologies and Lyft proliferated in major U.S. cities. The asset manager had given about 2,000 medallion-owner drivers a loan payment holiday every month since the middle of March 2020. In late 2019, the fund manager maintained measure to write down the taxi medallion loans to ease the burden of taxi drivers’ debts. Some industry experts estimate that Marblegate controls nearly a third of the city’s 13,500 taxi medallions.

On February 19, 2020, Marblegate Asset Management acquired 3,500 distressed medallion loans at auction from the National Credit Union Administration, which took over the medallions from multiple failed credit unions.

According to the NCUA press release back in 2020, “The NCUA’s holdings included medallion loans from Melrose Credit Union and LOMTO Federal Credit Union, which supported the New York City taxi industry for nearly a century until their liquidations in 2018. To date, the Share Insurance Fund has lost more than $750 million because of these and other credit union failures related to taxi medallion loans.1

For nearly 18 months, the NCUA evaluated a variety of approaches for resolving this portfolio, including holding and servicing the loans, pooled sales, structured sales, and securitization. After careful consideration, investor outreach, and consultation with an independent financial advisor, the NCUA determined a single bulk sale was the best option to meet its statutory requirements and prevent any unnecessary volatility in the already stressed taxi medallion market.”

NCUA’s acting General Counsel at the time said that the loan amount and exact number of loans sold to the hedge fund are exempt from the U.S. Freedom of Information Act. Some news sources say that amount was around US$ 350 million for the medallion loans.

Before the NCUA deal, Marblegate owned roughly 300 taxi medallions and around 1,000 medallion loans that they bought from Capital One Financial Corporation.

Keywords: Investcorp Holdings BSC.

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