Struggling buy-to-let mortgage lender Paragon is in talks with Blackstone about a potential takeover, which shows the US private equity group may be ready to call the bottom of the credit crisis.

The move shows private equity groups are still keen to invest in the mortgage market, in spite of the crisis it has suffered, as they believe the financial turmoil is creating opportunities for buying bargains.

Shares in Paragon have fallen almost 90% in a year, as the credit crunch has inflated the Solihull-based company’s cost of funding, eroded its profitability and restricted its ability to write new mortgages.

akeover speculation has fuelled a rally in Paragon shares. They have gained almost 50 per cent in a week and closed up 1?p at 84p yesterday, giving the company a market capitalisation of £246m.

Financial Times