Plans to buy up to €100m in Irish mortgages from Pepper Asset Management ended with Permanent TSB (PTSB) pulling out of the talks, leaving Pepper needing to find a new buyer for part of their €600m portfolio.
Shares up after financial crisis
PTSB is a provider of personal financial services whose shares have soared by over 30% in the last two months following the completion of the sale of 9 billion in British and Irish loans. Declan Dolan, the interim Group Treasurer who oversaw and ran the deleveraging programme which helped to put PTSB back on track, was appointed to the role on a permanent basis last week. The company decided to withdraw from the proposal to buy up a large part of the former GE Capital’s €600 million portfolio. This would have been PTSB’s first purchase since their financial crisis and the taxpayer bailout in 2011. At €2.82 their shares are still well off of last year’s Government share sale price of €4.50.
Discount for Pepper
The portfolio of loans was part of the €600 million that GE Capital sold to Australian financial firm, Pepper Asset management, in a Goldman Sachs financed deal four years ago. The deal was struck at a huge discount for the mainly troubled portfolio of 3,500 mortgages, and helped Pepper get a strong foothold in the Irish market in 2012, allowing the restructuring of the loans and improving the footing of the overall book. Analysts now expect Pepper and Goldman Sachs to look for another buyer following the surprise move from PTSB after weeks of negotiations. According to reports, their €600 million portfolio was acquired for just 40 cents on the Euro.
Reduced downpayment for first-timers
The surprise move by PTSB follows reports that the Government will initiate a Help-to-Buy plan next year. This will help first-time buyers of new homes get into the housing market. The Central Bank has also announced a relaxation of the borrowing limits for first-time house buyers taking out their first mortgage. First time buyers will now only be required to pay a minimum deposit of 10% of the value of the property, regardless of price.
Rival buys up billions in loans
PTSB rival, Bank of Ireland, recently bought out €274 million in restructured mortgages from Danske Bank in a deal that included Goldman Sachs and Pepper Asset Management. Bank of Ireland is reported to have acquired the performing part of the portfolio, while Goldman Sachs and pepper took the distresses portion. They have also bought out hundreds of millions of Euros from Loan Star, a US private equity firm, and the Irish Bank Resolution Corporation, which went into liquidation early in 2013, after it failed to meet its obligations arising from claims by business investors.
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