Värde Partners and JC Flowers sell Fairstone Financial Holdings to Duo Bank of Canada

An investor group led by JC Flowers & Co and Värde Partners has completed the previously announced sale of Fairstone Financial Holdings (Fairstone) to Duo Bank of Canada, a Toronto-based financial services provider supported by Stephen Smith, Centerbridge Partners LP and Ontario Teachers’ Pension Plan.

Värde Partners and JC Flowers acted as equal partners in the transaction, which began in 2017 when the investor group acquired CitiFinancial Canada from Citi and rebranded the Company as Fairstone. Under the ownership of JC Flowers and Värde, Fairstone has grown into a leading Canadian non-bank provider of responsible credit solutions for near-prime borrowers. The group announced its initial agreement in February 2020.

During JC Flowers’ and Värde’s ownership, Fairstone more than doubled its operating net income through the course of operational and financing improvements. Fairstone diversified its capital structure and reduced its funding costs as a standalone entity, including issuing the first consumer loan ABS transaction in the Canadian market, followed by a second ABS transaction at better terms, obtaining a credit rating and issuing a high yield bond. Fairstone made significant investments to establish a best-in-class enterprise technology system, enhanced its data-driven custom credit scoring models, developed a customer-centric approach to client service, and diversified and enhanced its products to reach a broader customer base, including through its new e-commerce finance offering.

Citi and National Bank Financial Inc acted as lead financial advisors to JC Flowers and Värde, and Barclays also served as a financial advisor. Stikeman Elliott was legal counsel to JC Flowers and Värde.

Terms of the transaction have not been disclosed.