One of the biggest overseas buyers of Irish mortgages following the banking crisis, Mars Capital, is poised to refinance €332 million of former Irish Nationwide Building Society (INBS) and Permanent TSB subprime loans in the bond market.
The transaction is being carried out by bundling the portfolio of owner-occupier and buy-to-let loans into a new special purpose vehicle, called Grand Canal Securities 1, which plans to issue bonds with various degrees of risk in the next month. Citigroup is managing the transaction for Mars Capital, which is an affiliate of US private equity giant Oaktree, with marketing of the deal beginning on Tuesday. The bonds are not due to be repaid until 2055.
While 0.7 per cent of the loans are behind in repayments, none are more than three months in arrears, according to market sources. Almost 14 per cent of the portfolio has been restructured.
Special liquidators
The INBS loans stem from the special liquidators of the failed lender selling a €1.8 billion portfolio, covering 12,702 mortgages, in 2014 to private equity firms Lone Star, Oaktree, Mars Capital and Bank of Ireland.
Mars Capital has become the second so-called "vulture fund" that snapped up Irish loans at discounted values
The former Permanent TSB loans comprised a subprime mortgage business, known as Springboard, which the bank sold in 2014 as it shed unwanted assets. Mars Capital paid about €250 million for the Springboard loans, reflecting the fact that three-quarters of the €468 million of par value loans were in trouble at the time.
Mars Capital has become the second so-called “vulture fund” that snapped up Irish loans at discounted values following the property market collapse to turn to the bond markets to refinance loans. Lone Star moved in November to set up a company, called European Residential Loan Securitisation (ERLS) 2016-1, to sell bonds against €564 million of mainly non-performing loans – opening up a new avenue for buyers of loans to take money off the table.
Restructured loans
Last month, Lone Star set up another vehicle, called ELRS 2017-1, to refinance €651 million of restructured loans from Bank of Scotland (Ireland) and Start Mortgages. These loans had mainly once been in default, but have been restructured in recent years.
The main servicing of the Mars Capital loans was outsourced in 2014 to a UK company called Acenden, which has an office in Dublin. However, once a loan in the portfolio goes beyond 35 days in arrears, Mars Capital steps back in as “special servicer” for the loan in question, according to Standard & Poor’s, which was hired to assign ratings to the bonds being issued by Grand Canal Securities 1.
Over 60 per cent of the portfolio is made up of INBS-originated loans, with the remainder having been originally issued by Springboard, according to S&P. Almost 70 per cent of the loans out to 2,232 accounts are paying standard variable rates of interest.
