Wall Street lenders were rattled on Friday by the collapse of UK mortgage provider Market Financial Solutions Ltd (MFS), sparking worries about broader bank losses and reviving concerns about hidden risks within the private credit industry. The failure of MFS impacted shares of Barclays and Jefferies, contributing to a broader selloff in financial firms as the market grappled with the potential for widespread credit issues. MFS specialised in complex property-backed loans. The London-based company had applied for administration, a form of UK insolvency protection.
Shares in Jefferies fell 10.7% in U.S. trading. Barclays shares were down 4.2%, while Santander shares dropped nearly 5%. Creditors cited financial irregularities and mismanagement in court documents as reasons for placing MFS into administration. Administrators indicated in court documents that they had support from major international financial institutions for the administration. However, the institutions’ names were redacted.
Administrators working on behalf of creditors warned of a potential collateral shortfall of £930 million ($1.25 billion) due to possible double-pledging of assets. For loans totalling £1.16 billion, only £230 million of “true value” was available in the collateral accounts. Barclays, Santander, Wells Fargo, Jefferies, and Apollo Global Management-backed Atlas SP Partners are among the lenders to MFS, which had borrowed over £2 billion ($2.69 billion). Atlas SP Partners said it has approximately £400 million of exposure to MFS.
MFS described itself as a specialist provider of buy-to-let mortgage lending and bridging finance. According to its most recent filings, it had net assets of £15.9 million and 149 employees as of December 31, 2024. The company reported a loan book of £2.4 billion at the end of 2024. The collapse of MFS has intensified scrutiny of asset-based financing practices and raised questions about potential risks in the broader credit market.
