Wall Street lenders are scrambling to grasp the extent of losses on billions of kilos they lent to a UK-based mortgage supplier that collapsed instantly amid fraud allegations, reigniting fears of poor underwriting requirements within the booming marketplace for asset-backed lending.
Firms together with Barclays, Jefferies and Apollo’s Atlas SP Partners, its structured credit score arm, prolonged £2bn of financing to Market Financial Solutions. The London-headquartered agency previously lent to a Bangladeshi politician earlier than it collapsed into insolvency on Wednesday amid accusations of double-pledging of its collateral.
Others probably nursing losses stemming from MFS embrace TPG, the US personal fairness agency, and Avenue Capital, the distressed debt specialist, in keeping with two individuals acquainted with the scenario.
There is perhaps a shortfall in collateral backing loans to MFS entities of as a lot as £930mn, in keeping with two individuals with direct information of the matter.
The incident has triggered a way of déjà-vu for lenders who’re nonetheless coping with the fallout from the twin collapse of US companies First Brands Group and Tricolor Holdings, each of which additionally face fraud investigations by the US Department of Justice. The episode has additionally added weight to JPMorgan Chase chief govt Jamie Dimon’s prophecy that there are extra “cockroaches” lurking in credit score markets.
The CEO of the world’s largest financial institution added on Monday that some of his rivals are doing “dumb things” in pursuit of excessive returns, reminding him of the lead-up to the 2008 monetary disaster.
Worries about lenders’ publicity have weighed on their shares since MFS collapsed. Jefferies’ shares have been down 10 per cent in New York buying and selling on Friday, whereas Barclays’ closed down 4.2 per cent in London.
London-based MFS, whose registered handle was in a modern road in Mayfair, collapsed into administration earlier this week after entities tied to the group filed a court docket software that cited “real and serious concerns about mismanagement” of the enterprise, “serious irregularities in the management of the key bank accounts” and “a significant shortfall” in collateral that they mentioned may quantity to £238mn.
Amber Bridging Limited and Zircon Bridging Limited, the 2 MFS group entities that filed the applying and which have £1bn excellent, are each in administration. Insolvency practitioners from AlixPartners have been appointed to MFS.
Barclays is among the many largest lenders to the group — which claimed it may “deliver loans as large as £50mn, in as little as three days” — with about £600mn of publicity, in keeping with the decide overseeing the case. The British lender additionally offered banking providers to MFS. Barclays froze the group’s accounts previous to it submitting for administration, in keeping with individuals acquainted with the scenario.
Numerous credit score hedge funds at the moment are analysing the corporate’s funds, anticipating that its lenders will start dumping its debt at deep reductions as they try to claw again any worth they’ll.
Founded by Paresh Raja in 2006, MFS claimed to supply “complex, property-backed lending” made up of short-term bridging loans for actual property investments.
A big half of its enterprise concerned backing dozens of property offers linked to Saifuzzaman Chowdhury, a former land minister in Bangladesh. Along together with his relations, he constructed a sprawling $295mn property portfolio from 1992 till August 2024, when the federal government of Sheikh Hasina in Bangladesh collapsed amid scholar protests.
The MFS entities first began giving Chowdhury-linked corporations loans in mid-2019, simply after he took a submit within the Dhaka authorities and he was beginning to construct a British property empire.
They are listed as being concerned in 291 of the 495 costs registered by the businesses towards properties in England and Wales. Last yr, the UK’s National Crime Agency froze 342 properties linked to Chowdhury, worth about £185mn, as half of “an ongoing civil investigation”.
As an lively politician when the loans have been made, Chowdhury ought to have been topic to specific scrutiny, particularly as his official asset declarations in Bangladesh listed his internet value at solely round $2.3mn.
In January 2025, in response to questions as to how Chowdhury handed MFS’s checks, the lender’s attorneys at Harbottle & Lewis informed the FT: “MFS has a team that conducts extensive client due diligence and, where necessary, enhanced due diligence on all prospective borrowers.”
MFS financed its enterprise with debt from some of Wall Street’s largest monetary establishments, pledging the loans it made to prospects as collateral to its personal lenders. Banks together with Barclays, Jefferies, Santander and Wells Fargo, in addition to personal credit score companies Atlas and Castlelake, all chipped in to supply the family-owned and run mortgage lender billions of kilos.
According to its 2024 accounts, MFS secured £1.3bn in “new institutional funding to support increased lending demand”, on prime of £1.1bn it had already acquired from lenders.
Atlas mentioned that “following a breach of contractual terms by Market Financial Solutions, ATLAS proactively put two warehouses into default last week and is pursuing all legal avenues to maximize recoveries”. The agency has about £400mn of publicity to MFS, accounting for about 1 per cent of its stability sheet.
Raja managed to safe billions of kilos in financing for MFS as its sole director with full management over the enterprise.
“Paresh has oversight of all departments within MFS, ensuring every element of the business is performing to its utmost potential,” a submission for the 2026 Property Awards states.
Some of the entities linked to MFS record Raja’s spouse, Prathiba Raja, as a director. The pair are the one two shareholders of MFS.
But in London court docket proceedings this week the decide overseeing the case raised accusations of fraud, citing creditor allegations that MFS had been double-pledging its belongings to lenders who may now have a proper to much less collateral than they thought.
In a press release made earlier this week, Raja mentioned that it was “an extremely difficult moment for everyone connected with Market Financial Solutions. As a family-founded business that has been built over nearly 20 years, this is not a decision that has been taken lightly.”
“The current situation does not reflect a failure of the underlying business or the quality of our assets,” he added, “but rather a technical and procedural impasse that has temporarily limited our access to everyday banking facilities . . . I remain fully committed to preserving value and doing everything possible to support a positive outcome for all stakeholders”.
The collapse of MFS comes after the unravelling final yr of US automobile components provider First Brands — which is accused of double-pledging and faking invoices — and auto lender Tricolor Holdings, sparking issues over underwriting requirements all through Wall Street.
Jefferies, which has a roughly £100mn publicity to MFS, was stung by losses when First Brands collapsed final yr earlier than its founder Patrick James was charged with fraud in January. The financial institution was one of the automobile components provider’s largest monetary backers.
MFS didn’t reply to an e-mail in search of remark. Raja didn’t reply to messages despatched to him through LinkedIn, or through his attorneys.
A TPG spokesperson mentioned: “TPG’s total exposure is £44mn, which we believe represents less than 2 per cent of MFS’s loan exposures based on publicly reported figures.”
AlixPartners, Avenue, Barclays, Jefferies, Santander and Wells Fargo declined to remark. Castlelake didn’t reply to a request in search of remark.
The FT was unable to succeed in Chowdhury for remark.
Last yr, responding to questions referring to the FT investigation into Chowdhury, his property agent mentioned that “funds used by Mr Chowdhury to purchase UK property originated from legitimate businesses in the UAE, US and UK”.
Additional reporting by Simon Foy, Robert Smith and Alexandra Heal in London and Joshua Franklin in New York
