Goldman Sachs has acquired key economic interests to more than €1 billion of mortgages written by Finance Ireland before it exited the home loans market this year, according to sources.
The loans were originally financed by UK investment firm M&G and are mainly packaged in so-called residential mortgage-backed securitisation (RMBS) deals, where bond investors buy the right to interest backed by income from the loans.
M&G retained the equity portion and other key rights on RMBS deals, including call options that entitles it to repurchase RMBS notes before they are scheduled to mature. A sponsor behind an RMBS deal can make a profit, for example, by redeeming bonds and refinancing the loans in another transaction in an environment where market interest rates fall.
The equity interest has been acquired by Goldman Sachs, the sources said.
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The loans have been managed on a day-to-day basis by loan-servicing firm Pepper Advantage Ireland. This will remain the same.
A spokeswoman for Goldman Sachs and spokesmen for M&G and Finance Ireland declined to comment. M&G owns about 40 per cent of Finance Ireland.
A spokesman for Pepper confirmed that the firm is “supporting the migration of a portfolio of loans from Finance Ireland to a new owner”. Pepper is taking over the loan titles from a Finance Ireland entity.
“Having serviced these loans on behalf of Finance Ireland, we are committed to maintaining the same high level of service following the transfer, ensuring a seamless experience for borrowers,” he said. “Affected customers do not need to take any action at this time, and we remain dedicated to supporting them throughout this process.”
Finance Ireland, led by chief executive Billy Kane, entered the Irish mortgage market in 2018, making it the first nonbank lender to move into home loans in the wake of the crash a decade earlier.
It had been effectively out of the residential mortgage market for some time as its lending rates were high. The company also specialises in small business and agri-lending.
Mr Kane, had repeatedly spoken in recent years about how mainstream banks have been “cross-subsidising” their mortgage books with cheap deposit funding. About 86 per cent of customers’ money in Irish banks is in on-demand or current accounts, which are earning little or nothing, even as they offer rates of up to 3 per cent on certain savings products.
Nonbank lenders such as Finance Ireland raise their funds through the wholesale banking and bond markets, where borrowing costs soared in recent years as the European Central Bank hiked official rates. However, borrowing rates have come back sharply again, helped by the ECB cutting its main deposit rate to 2 per cent from 4 per cent over the past 13 months.
The Irish Times reported in April that PTSB made an unsolicited overture late last year to buy Finance Ireland, which is 51 per cent owned by US investment management giant Pimco.
While PTSB is known to remain interested in doing a deal, there is said to be a wide gap between both sides on price expectation. PTSB chief executive Eamonn Crowley reiterated on Thursday that Finance Ireland is “a fine business”, but declined to comment on the talks when asked by reporters about the matter. He was speaking at a press briefing after PTSB unveiled its results for the first half of the year.
