Fortress Investment Group to Provide £750 Million for Interest-Free Dental Loans

Key Takeaway

• Fortress Investment Group will provide £750 million ($954 million) to Tabeo Ltd. for interest-free dental loans in the UK.
• The deal is structured as a forward-flow agreement, highlighting the growing trend of asset-backed lending in private credit.
• Tabeo will manage loan underwriting and debt collection, ensuring compliance with UK regulations.

Fortress Investment Group's Funding

Fortress Investment Group is set to provide £750 million ($954 million) to Tabeo Ltd., a company specializing in consumer healthcare financing, specifically for dental work loans. This substantial funding will enable Tabeo to approve and manage loans for dental treatments in the UK. According to Ola Eriksson, managing director for the New York-based direct lender, Fortress plans to hold these loans in a special purpose vehicle. The loans, which will mostly be interest-free, will have an average life of 18 months, allowing consumers to finance their dental treatments. Tabeo will receive a fee for managing the debt and ensuring timely payments from borrowers.

Loan Structure and Market Context

The deal between Fortress and Tabeo is structured as a forward-flow agreement. This means that the financial backing for the loans is provided in advance, and the debt is not kept on the balance sheet of the firm originating the loans. "Forward-flow agreements take time to put together because you need to do thorough underwriting," said Eriksson. This type of specialty finance, or asset-backed lending, is gaining traction in the $1.7 trillion private credit sector. As traditional banks pull back from providing consumer loans, direct lenders like Ares Management, BC Partners, KKR & Co., and Medalist Partners are stepping in to fill the gap. Debt backed by assets such as real estate, automobiles, or dental work is seen as providing greater security to lenders.

Tabeo's Role and Underwriting Process

Tabeo's Chief Executive Officer, Paul Ebert, highlighted that the deal was managed internally by the firm's chief financial officer and general counsel, without the involvement of banking advisers. "There’s a lot of competition between finance providers on smaller deals in specialist lending, but given how big this ticket is, there are only a handful of players in the market," Ebert said. Tabeo is responsible for underwriting both the dentists providing the financing and the individual consumers taking out the loans. "We underwrite each loan separately, assessing credit worthiness as well as affordability, in line with UK regulation," Ebert explained. This approach differentiates Tabeo from other models like buy-now-pay-later or credit cards.

Street Views

• Ola Eriksson, Fortress Investment Group (Neutral on specialty finance):

  "Forward-flow agreements take time to put together because you need to do thorough underwriting."

Management Quotes

• Paul Ebert, CEO of Tabeo:

  "There’s a lot of competition between finance providers on smaller deals in specialist lending, but given how big this ticket is, there are only a handful of players in the market."
  "We underwrite each loan separately, assessing credit worthiness as well as affordability, in line with UK regulation. It’s a different model compared to buy-now-pay-later or credit cards."