Carlyle and KKR Lead Bidding for Discover’s Student Loans

Private equity firms Carlyle and KKR have emerged as the top bidders to acquire a $10 billion US student loan portfolio from Discover Financial., FT reports.

The two firms are collaborating on the bid as more private investment companies aim to increase their involvement in credit markets, according to the Financial Times.

Both institutions have been looking to diversify beyond their private equity origins, seeking to finance assets like rooftop solar power, credit card receivables, mortgages and rail cars.

Other private equity firms, such as Ares, Blackstone, Brookfield, Fortress and Oaktree, had also reported studied bids for the loan portfolio.

Discover first announced it would explore the sale and transfer of its student loans portfolio to a third-party provider in November as part of a strategic review.

During the review, Discover determined that the sale of its student loans would enable the firm to focus on its core banking products and capitalize on growth opportunities.

Following the announcement, it ceased accepting new applications for student loans on February 1.

Discover stated there is no deadline or definitive timetable set for completion of this process, but FT reported the deal is likely to conclude later this month or early in July.

The news follows the announcement that Capital One would acquire Discover Financial for $35.3 billion to make it the largest credit card company by loans, surpassing JP Morgan.