South Street Securities Is Said to Explore Strategic Options

(Bloomberg) — South Street Securities, a firm that specializes in borrowing and lending via repurchase agreements, is exploring strategic options including a possible sale.



a person walking down the street: A pedestrian walks along a street near the New York Stock Exchange.


© Photographer: Jordan Sirek/Bloomberg
A pedestrian walks along a street near the New York Stock Exchange.

Potential buyers, which include private equity firms and special purpose acquisition companies, have been contacted with information about the company, according to a document sent to would-be suitors seen by Bloomberg News and a person with knowledge of the matter.

South Street could fetch more than $300 million, the person said, asking not to be identified because the talks are private.

Chief Executive Officer James Tabacchi said South Street’s board recently asked him to look at strategic alternatives, including a possible sale, given that the firm had been building earnings momentum for several years. Tabacchi said he has since sought out strategic advice on the best option, including taking on additional minority investors.



a person walking down the street: A pedestrian walks along a street near the New York Stock Exchange.


© Photographer: Jordan Sirek/Bloomberg
A pedestrian walks along a street near the New York Stock Exchange.

“I have people knocking on the door all the time,” the CEO said in an interview.

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South Street has had a strong year in part due to market tumult and declining interest rates sparked by the Covid-19 pandemic, with projected 2020 revenue of about $104 million, or roughly 40% more than in fiscal 2019, according to the document.

South Street received an investment in 2015 from Atlas Merchant Capital, a firm co-founded by former Barclays Plc CEO Bob Diamond and David Schamis, a former J.C. Flowers executive.

South Street counts hedge funds, real estate investment trusts and mortgage lenders among its clients. Current market conditions — driven by the Federal Reserve’s open market operations — are expected to sustain the firm’s recent revenue growth, according to the document.

The market for repurchase agreements, or repos, is one of several alternatives for putting cash to work, alongside buying Treasury bills directly or investing in money-market funds.

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