South Africa’s Investec sold £540m (€677m) of Irish mortgages to the private equity firm, it said yesterday.
The Irish business being acquired suffered a loss of £21m last year.
The sale is certain to have been at a significant discount to the face value – or amount owed – on the loans, given the well-publicised problems within the “book” of mainly sub prime home loans.
Unlike Lone Star’s previous Irish acquisitions, it is buying a business along with the home loans, including a staff of 70.
Earlier this year Lone Star hired loan servicing firm Pepper to manage a separate mortgage book acquired from the liquidators of IBRC.
Buying the Start platform means it can continue to manage the latest loans acquired itself.
Start Mortgages emerged as a specialist “sub prime” lender during the boom.
Since the crash Start has been behind a relatively high number of legal efforts to repossess homes, reflecting the high levels of customer arrears at what was a relatively small player in the market.
In recent times under Investec control, Start has not been advancing new loans, however it is still a regulated entity which entitles it to lend money.
Ciaran Callaghan, an analyst at Merrion Capital, said margins on new mortgage lending are now attractive to any new entrant that is not weighed down by loss-making historic mortgages, if it makes a foray into the market here.
Lone Star, founded in Texas by Irish passport holder John Grayken, has been buying up huge amounts of Irish and Ireland-linked loan assets since the crash.
It was a major buyer of mortgages, business debt and property lending from the liquidators of IBRC, the former Anglo Irish Bank, mortgages, business debt and property lending.
That included the majority of IBRC’s €7bn Project Rock and Salt books of mainly UK loans. Lone Star has also bought hundreds of millions of euro of loans from AIB and Nama.
It is backed by mainly US investments including wealthy institutions such as pension and insurance companies and the prestigious Harvard University.
In a statement Investec said that its sale of Start helps to “simplify and reshape its specialist banking business,” and along with the sale of Kensington, a UK mortgage arm, will substantially reduce the assets within its legacy non-core business.
The sale to Lone Star includes all of Start’s mortgage origination platform, brand, operations and employees, and some other Irish mortgage-related financial assets and liabilities, the company said.
Financial accounts published in March this year show Kensington’s Irish arm (Start) had total loans of £474m, with £138m of impairments.
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