Friday 15 December 2017

GE's finance unit wrote off €400m in effort to exit Irish mortgage market

Peter Flanagan

Peter Flanagan

THE finance arm of US giant GE wrote off loans of more than €400m in order to exit the Irish mortgage market.

GE Capital specialised in subprime mortgages in the Irish market during the boom. The business was sold to Australian firm Pepper last year.

Accounts filed for GE Capital Woodchester Home Loans Limited for the nine months up to September 27, 2012, when Pepper took over, show losses continued to mount, and the GE group forgave inter-company loans worth €424m to the company before it sold up.

The accounts for the firm, which has since been renamed Pepper Finance Corporation (Ireland), paint a grim picture of the mortgages market here.

For the nine months, losses in the business after tax came in at €60.5m, compared with €107m for the whole of 2011.

The business set aside €49m to cover bad loans last year. Provisions now cover about 30.9pc of the business's loan book, up from 25pc in 2011.

Overall, accumulated losses at the company stood at €283m at the end of last September.

GE Capital was a major player in the subprime mortgage market in Ireland during the boom, but stopped writing new business towards the end of 2008 as the market began to crash.

DISTRESSED

Crucially, it financed its mortgage business through inter-company loans from the wider GE Group.

Writing off those debts of €424m is believed to have been one of the conditions for Pepper taking over the business last September.

About €600m of the former GE Capital mortgage book remains outstanding, with collections "remaining high".

It is believed Pepper paid about 40c in the euro for the company. Goldman Sachs is a partner with Pepper on the deal, in what is thought to be the first transaction of its kind for the bank. As well as buying up loans, it is looking at offering its services to other lenders as a "servicer" of debts owed to other institutions.

In January, Pepper won a deal to manage €380m of distressed Irish property loans formerly owned by Lloyds.

Carval Investors bought the portfolio of commercial property loans from Lloyds for around 25pc of its face value, and in turn hired Pepper to manage the book.

Speaking after the takeover of the GE business, Pepper Group chief executive Patrick Tuttle said the deal was "the beginning of our ambitious plans to establish a best-in-class, pan-European loan servicing and real estate asset management platform.

"We have identified a significant number of potential third-party servicing opportunities in the Irish lending market which we hope will enable us to grow our employee numbers in Ireland", he added.

Irish Independent

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