Sub-prime lender facing collapse over €51m loss
SUB-prime lender GE Capital has admitted it may not be able to continue trading after a twenty-fold increase in bad debts pushed the lender to a €51m loss.
Dublin-based GE Capital, an offshoot of US conglomerate General Electric, is best known for giving €650m in mortgages to those who couldn't get money from traditional lenders.
In recent months scores of those deals have ended in harrowing scenes in the courts as householders unable to pay mortgages hand back the keys.
Accounts just filed for GE Capital's mortgage subsidiary, GE Capital Woodchester Home Loans, chart the extent of the company's soaring mortgage losses.
The documents show a surge in the company's provisions for "bad and doubtful debts" -- effectively, the amount of money GE thinks it will never get back.
In 2008, the mortgage lender's provisions for "doubtful debts" came in at just €3.4m -- in 2009 the provisions surged to more than €59.4m.
The latest accounts also show the home loans division was holding €4.9m worth of repossessed properties at the end of 2008, up from the €1.98m held at the end of 2009.
These were seized "as a result of a failure by certain customers to meet their contractual monthly mortgage repayments", GE's home loans division said.
The repossessions tally is likely to rise again by the end of this year after a recent flurry of activity in the courts.
Earlier this month, a Tipperary couple spoke of their devastation of losing their family home just before Christmas after falling into arrears on a €178,000 loan from GE.
In October, a young mother broke down in tears in the High Court after GE was granted a repossession order when her family's €393,000 loan went into arrears.
"Facing a challenging economic environment, the company will continue to manage its loan book and has redefined its collections strategy," the mortgage lender's directors said in a statement signed off in late September.
No further details of the revamped collections strategy are given, but separate filings for parent company GE Capital point to an "increased focus on collections and recoveries".
The €59.4m of bad debt provisions pushed GE's home loans division to a €51m loss for 2009 -- leaving the company with assets worth €43m less than its liabilities.
"These results may cast doubt on the company's ability to continue as a going concern," the directors admitted.
However, the lender hopes to continue on the back of support from its parent company.
GE has now halted all mortgage lending but continues offering car finance and other equipment leasing solutions through various divisions.