ICS Mortgages backer Chenavari eyes exit door

A major UK investor in Dilosk, the parent of ICS Mortgages, is looking into exiting the largest Irish non-bank mortgage lender after five years, according to sources.

London-based investment firm Chenavari had built up a stake of as much as 30 per cent in Dilosk by the end of 2018, before selling down more than half of its holding last year. It came at a time when Dilosk's founders, Fergal McGrath and his brother, Oran, increased their stake in the lender to just over 50 per cent.

US investment bank Houlihan Lokey is understood to be providing advice to Chenavari on its remaining 14.4 per cent stake. Efforts to secure comment from Chenavari and Houlihan Lokey were unsuccessful.

Representatives for another UK firm, Attestor Capital, which invested in Dilosk around the same time and holds an 18.8 per cent stake, did not respond to requests for comment on its holding.

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Dilosk declined to comment on the minority investors and reiterated that the company itself is not involved in any discussions that could lead to a sale of the business.

Chenavari had already been assessing the future of its investment long before ICS Mortgages, which had been offering among the most competitive mortgage rates in the Irish market, moved earlier this week to increase interest rates across its three- and five-year fixed-rate products by 0.2-0.45 percentage points.

It marked the first upward movement in Irish rates for some years.

ICS is seeking to shore up its lending margins in the wake of an increase in borrowing costs on the international bond markets, which it ultimately relies on for funding, in anticipation of the European Central Bank pulling back monetary stimulus.

It comes less than eight months after ICS cut rates across the board, including the setting of a 1.95 per cent fixed rate to match the then-lowest mortgage price in the market, offered by another non-bank lender, Avant Money.

Small portfolio

The preferential rate by both lenders was aimed at borrowers with high levels of equity in their homes. ICS’s previous 1.95 per cent rate has now jumped 2.25 per cent for a three-year loan, and 2.4 per cent for a five-year one.

Dilosk, which started off in 2014 with the purchase of the ICS Mortgages brand and a small portfolio of loans from Bank of Ireland, moved beyond its initial focus on buy-to-let mortgages and into the owner-occupier space in late 2019.

It's new lending rose by 143 per cent last year to €530 million, far outstripping the 25 per cent wider market growth, as non-bank lenders picked up the slack as Ulster Bank and KBC Bank Ireland decided to quit the Republic. That gave Dilosk a 5 per cent slice new lending in the Republic. It has a target of doubling its market share to 10 per cent within three years.