US hedge fund Elliott Management has an estimated £200m exposure to UK specialist lender Market Financial Solutions (MFS) which collapsed last week sparking renewed concerns over underwriting standards across the asset-backed private credit market, according to a report by the Financial Times.

The exposure was acquired from Chetwood Bank, the Wrexham-based challenger bank majority owned by Elliott, which had participated in a lending facility to MFS. Elliott is understood to have purchased the position at face value.

MFS entered administration last week amid allegations that it had pledged the same collateral to multiple lenders, raising the prospect of a material shortfall. Court filings referenced “serious irregularities” in key bank accounts and a potential £238m gap in collateral coverage.

Elliott was among a syndicate of institutional lenders that included Barclays, Jefferies and a unit of Apollo Global Management, which collectively extended around £2bn in financing to the Mayfair-based bridging lender.

Founded in 2006, MFS focused on short-term, property-backed loans, funding its activities through secured debt facilities with major financial institutions. A substantial portion of its lending was reportedly linked to property transactions connected to Bangladesh land minister Saifuzzaman Chowdhury.

The situation follows heightened risk sensitivity in private credit markets after the failures of US groups Tricolor Holdings and First Brands Group, both of which are investigation by the US Department of Justice.

For hedge funds and credit allocators, the MFS collapse is likely to reinforce due diligence focus on collateral structures, monitoring processes and counterparty transparency within asset-backed and specialty finance strategies.

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