Saturday 23 September 2017

KKR in €435m bid to buy non-bank mortgage lender Pepper Finance

Pepper lends residential, buy-to-let and commercial mortgages in its own right in Ireland, specialising in customers who can't get loans from the main banks. File photo: Depositphotos
Pepper lends residential, buy-to-let and commercial mortgages in its own right in Ireland, specialising in customers who can't get loans from the main banks. File photo: Depositphotos
Donal O'Donovan

Donal O'Donovan

US PRIVATE equity giant KKR has launched a A$650m (€435m) bid for Pepper Finance, the Australian stock market-listed mortgage lender and loan-servicing group.

Pepper Ireland is a subsidiary of the Australian group and the deal would give KKR added reach into Ireland and Europe.

Pepper set up here in 2012, part of a wave of specialist loans businesses that moved here as banks shrank and sold assets.

The business now lends residential, buy-to-let and commercial mortgages in its own right in Ireland, specialising in customers who can't get loans from the main banks. It also services loans for funds that bought portfolios from banks and employs about 400 people in Shannon and Dublin.

KKR's Irish units include Avoca Capital, a Dublin-based global credit investment manager with assets of about €6bn, and a stake in Activate Capital, a builders' lender that is also backed by the State.

Yesterday, KKR bid for non-bank lender Pepper Group at an indicative price of A$3.60 per share, a 4pc discount to Tuesday's close.

Pepper shares sank 7.2pc to A$3.48 yesterday.

The bid has been rumoured for some time. Australia's A$1.7 trillion mortgage market is highly profitable, with very low delinquencies and lucrative commissions but regulators are increasingly worried about debt levels and affordability for households.

As banks backed off risky lending, Pepper's Australian loan book jumped 36pc in 2016, far outpacing banks.

KKR's bid comes more than two years after it bought General Electric's Australia and New Zealand consumer-lending arm for an equity value of A$1.2bn.

It offers a similar suite of low-document home lending and credit cards to Pepper.

Including its own lending and mortgages managed for other lenders, Pepper oversees A$50bn in assets.

In Europe, its servicing of distressed loan portfolios is seen as a growth business, ahead of expected non-performing loan sales by banks in Italy and Spain.

(Additional reporting Reuters)

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