Fortress vies to invest in online lender CAN Capital: sources

Fortress Investment Group is one of the parties vying for CAN Capital Inc, the struggling online small business lender, two sources said.

CAN Capital is working with Jefferies to review strategic options for the business, a spokeswoman said. In January, CAN hired Realization Services Inc, a restructuring firm, for assistance with creditors, the Wall Street Journal reported.

It’s unclear whether Fortress is trying to acquire the company or its portfolio. Fortress did not return calls for comment. Executives for CAN and Jefferies declined comment.

CAN, New York, is an online lender to small businesses. It has provided more than $6 billion in working capital, its website said.

In November, CAN Capital put a trio of executives, including CEO Daniel DeMeo, on leave of absence. The lender’s problems stemmed from how it reported delinquencies among its SME borrowers, leading the platform to breach agreements with major lenders including Wells Fargo, PYMNTS.com said.

The problems forced CAN to stop making new loans last year, reports said.

CAN has raised venture funding. Accel Partners invested $30 million in CAN in 2012, Reuters reported. Two years later, in 2014, Meritech Capital Partners co-led a $33 million round for CAN. Accel took part. CAN Capital in 2015 secured a $650 million lending facility from several banks including Wells Fargo Capital Finance, Morgan Stanley and Barclays.

One PE executive doubted Fortress would buy CAN. “If they are, it’s a piece” of the business, this person said.

In February, Fortress Credit provided a $75 million credit line to BlueVine, which provides online working-capital financing to small and medium-sized businesses.

News of the talks comes as Fortress is being sold to SoftBank in a $3.3 billion deal. Fortress, New York, had $70 billion in investments under management at the end of September 2016. In addition to PE, the firm invests in real estate, hedge funds and credit. Fortress will operate within SoftBank as an independent business, Reuters said.

CAN Capital isn’t the only lender with problems. In May, Lending Club Chairman and CEO Renaud Laplanche resigned after an internal probe found that the company had sold an investor $22 million of loans the investor didn’t want, Reuters reported. Lending Club in June laid off 12 percent of its workforce, the Los Angeles Times reported.

Meritech, Accel and Realization Services could not be reached for comment.

Action Item: Contact Randy Nardone, Fortress co-founder and CEO, at rnardone@fortress.com

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