Irish Life & Permanent is to initiate the biggest-ever securitisation of Irish residential mortgages when it sells €600 million (£473 million) of home loans to institutional investors.
The securitisation will involve IL&P selling off one in seven of its residential mortgage portfolio, although a spokesman emphasised that the relationship between IL&P and mortgage holders remains the same.
Securitisation involves a lender grouping together a number of mortgages and using them as security for raising long-term finance. It releases funds tied up in mortgage loans and the funds raised can be lent on to new mortgage borrowers.
IL&P is creating this biggest-ever mortgage securitisation by an Irish lender through its Fastnet Securities vehicle and with London investment bank Greenwich Natwest, as lead-manager. The securitisation will involve three separate tranches of mortgages, two which will carry a AAA rating and a third tranche which will carry a rating because it is subordinated to the two AAA tranches.
IL&P head of treasury, Mr Michael Torpey, said that the inception of the €600 million issue is not connected to the recent substantial mortgage rates and the resulting cuts in margins that mortgage lenders have had to accept. "We've been working on this securitisation since early summer.
"We did a £400 million sterling securitisation from our British mortgage book last year and that went very well. And given our level of growth, we decided that we needed to diversify our sources of funding," said Mr Torpey. He added that, in the short term, IL&P is unlikely to do another securitisation issue, given the size of this first issue.
"In the longer term I could see us doing more, it's a good, efficient low-cost of funding mortgages," he added.
In a separate move, Allied Irish Banks is raising $150 million through an issue of floating rate notes. The notes carry an interest rate of 0.65 percentage points over three month LIBOR dollar rates and mature in January 2010. The money raised from the note issue will qualify as Tier 2 capital and will strengthen AIB's balance sheet.
