Friday 18 August 2017

Hedge fund drives deal for Irish car finance firm

Chris Hanlon, First Citizen Finance
Chris Hanlon, First Citizen Finance

Gretchen Friemann

US hedge fund Magnetar Capital has become the latest offshore heavyweight to forge into the burgeoning non-bank lending market, buying a two-thirds interest in car financing business First Citizen Finance.

Magnetar paid €28m for a 66.7pc slice, leaving the remaining stake in the hands of First Citizen's management, headed by industry veteran Chris Hanlon, inset.

News of the €70m partial takeover, which includes a three-year line of working capital, comes as the company prepares to list a portfolio of securitised automobile loans on the Irish Stock Exchange today.

The €160m bond issuance marks a key milestone for the industry and First Citizen, which was spun out of Permanent TSB in 2012 as part of a €287m management buy-out deal, funded by Deutsche Bank.

It is the first time an Irish company has packaged up its car loans - all issued in Ireland - and sold them on to debt markts as asset-backed securities.

Most of the loans included in the maiden securitisation, underwritten by Deutsche Bank, are rated AAA and it is understood the book includes debt dating back to the PTSB era.

While the deal may foreshadow the development of a potentially lucrative market, it is familiar territory to First Citizen's new majority owner Magnetar.

The Illinois-headquartered hedge fund, in which US alternative asset manager Blackstone holds a minority stake, rose to prominence for its massively lucrative trades against the US housing market prior to Lehman's Brothers' collapse.

The firm's bets on structured debt instruments reportedly reaped Magnetar's co-founder, Alec Litowitz, $280m.

Magnetar's partial takeover of First Citizen comes as Ireland's economy roars ahead amid rising employment and robust consumer spending.

Yet Mr Hanlon told the Irish Independent that the uptick in car loans bears little resemblance to the frenzied lending of the pre-crisis era. He argued that "household debt continues to reduce" and claimed car loan applications remained far from the 2007 peak.

First Citizen began loan origination in 2014 with the help of Magnetar, Deutsche and the Strategic Banking Corporation of Ireland. Since then it has processed more than 61,000 loan applications with a value of close to €1bn. Its lending book spans agri and SME finance as well auto loans. Under the bank's ownership however the business, known as PTSB Finance, oversaw a €2bn loan book.

Mr Hanlon said the company intends to use Magnetar's cash to expand its product offering as well as veer into commerical real estate funding.

Irish Independent

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