Davidson Kempner Capital Management and the UK government have teamed up to provide capital relief for specialist agricultural lender Oxbury Bank Plc, with the risk transfer trade guaranteeing as much as £500 million ($662 million) of existing loans to small and medium-sized farming businesses. The British Business Bank is underwriting the senior portion of the portfolio, while New York-based Davidson Kempner invested in a junior tranche. Chester-based Oxbury will retain some credit risk while gaining a boost to its regulatory capital to enable increased financing for the sector.

The British Business Bank is partnering with institutional investors in synthetic risk transfers to make it more attractive for lenders, particularly smaller specialist firms, to tap guarantees issued under the Enable program. Around 20 SRT investors have expressed interest in participating, according to Michael Strevens, a managing director at the bank.

"We think this structure can be replicated by other agencies in the UK, as well as Europe, to mobilize fresh lending from smaller lenders," said Strevens, who leads structured financial institution solutions. The Oxbury deal follows an Enable guarantee first agreed with the lender in 2023 and supports term lending to farming businesses, including discounts on loans meeting sustainability metrics.

Davidson Kempner manages over $40 billion of assets and invests in SRTs as well as capital relief transactions.