'Capital-hungry' Finance Ireland to launch €200m mortgage bond
Finance Ireland's rapidly expanding commercial property arm is expected to tap a fresh source of funding this year with the launch of a €200m-plus bond backed by a portfolio of mortgages to small-scale real estate investors.
If the deal goes ahead, it will mark the firm's first foray into the securitisation market and help underpin an ambitious expansion strategy.
Finance Ireland's commercial property loan book has grown swiftly since the unit, run by Ken Murnaghan, a former head of business banking at Ulster and a senior executive in AIB's corporate banking division, opened its doors in 2016.
The loan book now sits at over €150m and is racing to the €200m mark.
According to Mr Murnaghan, a securitisation or bond issuance is "likely" before the end of the year.
He said that our "assumption is that our growth and loan profiles should be securitisation friendly" but pointed out there are "no benchmark Irish trades for a deal like this".
He added it is "helpful that our other businesses are performing well, with more than €400m of new lending" executed by the group in 2017.
Finance Ireland, run by Billy Kane, a former boss of Irish Life & Permanent group, also operates a sizeable motor financing arm, as well as asset financing and agri-financing divisions.
The group is backed by Pimco, the US funds management giant, as well as the Ireland Strategic Investment Fund (ISIF), which injected €25m and €30m into the organisation respectively. Mr Murnaghan, who runs a 13-strong team stressed the "business is capital hungry".
A securitisation would enable the firm to tap cheaper sources of capital and drive growth.
Finance Ireland's move to the bond markets comes as yields on asset backed securities, a riskier form of debt, reach record lows.
Last year Permanent TSB achieved an effective negative yield on a $500m bond backed by mortgages.
Specialist lender, Dilosk, has also issued bonds backed by home loans while First Citizen Finance, became the first Irish firm to enter the auto securitisation market with a €158m bond.
Finance Ireland's commercial property loans are largely targeted at SMEs and consumers.