Investec to sell Start Mortgages to Lone Star Funds

Investec is to sell its Irish sub-prime mortgage arm Start Mortgages to private equity firm Lone Star Funds for an undisclosed sum. The sale was initiated by the South African bank back in June.

The deal, which was announced this morning, includes Start’s mortgage origination platform, brand, operations, and employees, as well as “certain other Irish mortgage-related financial assets and liabilities”.

As part of the deal, it is understood that Start Mortgages’ 70 staff are secured and will transition with the business and continue to manage a total loan portfolio of € 1.1bn.The transaction is expected to take two-three months to close and It will be business as usual for customers following this sale. The existing contractual rights and repayment obligations of customers will remain unchanged and any individual agreements with customers will be carried over. Start will continue to comply with the CCMA as a regulated entity.

Lone Star has been active in the Irish market in recent years, acquiring a portfolio of assets from IBRC as well as property assets in Dublin.

In a statement, Investec said the deal supports its “strategic objective to simplify and reshape its specialist banking business”.

In the year ended March 31st 2014, Start reported a loss before taxation of £21 million (€26m), had gross assets of £540 million and approximately 70 employees.

Investec had a funding line in place to the mortgage operation of about £270m, and this will be repaid entirely upon completion of the deal.

Completion is expected towards the end of 2014 and is subject to regulatory approval.

Start Mortgages was formed by four former GE Money employees -- David Ingram, Dermot Nutley, Paul Murphy and Niall Corish -- in 2004. Investec acquired Start through its UK subsidiary, Kensington Group, in 2010, having taken a 65 per cent stake in 2007. It is currently closed to new business.

The deal is the latest in a line for Investec aimed at reducing the assets within its legacy non-core business.

Last week the bank announced that it was to sell its UK mortgage business, Kensington Group, to private equity firms Blackstone and TPG for £180 million.

Investec also has a private banking, capital markets and investment banking operation in Ireland, employing about 240 people.