Sunday 16 December 2018

Goldman and Pimco cash in after Danske book deal

Firms launch €1.5bn mortgage bond for securitised portfolio

Nearly a fifth of homebuyers in the Proteus prospectus are on rates of 0.5 to 0.75pc. Stock image
Nearly a fifth of homebuyers in the Proteus prospectus are on rates of 0.5 to 0.75pc. Stock image

Gretchen Friemann

Goldman Sachs and Pimco, the buyers of Danske's €1.74bn residual retail book, have moved swiftly to capitalise on the rising investor appetite for Irish residential mortgages with the launch of a €1.55bn bond deal backed by performing home loans.

The investors tapped debt capital markets in mid-December, barely two months after concluding the acquisition of Danske's Irish portfolio.

Goldman Sachs and Pimco paid close to 95c in the euro for the Danish bank's retail book, outmuscling competition from final-round bidders Bank of Ireland, Elliot Management and Prudential.

As reported by this newspaper, the investors intended to securitise the portfolio from the outset, as record low interest rates and Europe's recovering economy combine to fuel interest in asset-backed bond issuances.

The securitisation was executed via a special purpose vehicle, called Proteus RMBS DAC, and listed on the Irish Stock Exchange.

While the entire portfolio has been bundled into the vehicle and separated into five tranches, maturing in October 2054, only the top two generate an income.

The bulk of the mortgages, or €1.22bn worth of loans, are shunted into the Class A tranche, and pay an interest rate of three months over the Brussels-based Euribor.

The margin generated equates to .45pc, according to a prospectus to the deal.

A further €340m are classified as class B notes and generate a margin of 1.30pc

Investor appetite for securitisations, where assets are transformed into easily tradeable bonds, have surged in the past few years although deal volumes throughout Europe remain far below their pre-crisis peak.

The Danske sale largely involved low-yielding tracker mortgages.

But Goldman Sachs and Pimco refinanced the deal at even lower rates on offer from debt capital markets, enabling the investors to bank a tidy profit.

According to the Proteus prospectus 9,414 of the 12,892 mortgages included in the portfolio are linked to tracker rates, which were set at a small increase to base ECB rates prior to the crash.

Almost a fifth of the home owners transferred onto the books of Proteus, pay rates of between .5 to .75pc.

That marks a stark contrast to the new mortgages rates on offer today, which range from as low as 2.6pc to over 4 pc.

In total 67.3pc of borrowers are paying back both the capital and the interest on the loans with 31.1pc repaying just the mortgage interest.

Over three quarters of the mortgages in the portfolio were issued at the height of the property boom between 2006 and 2008.

Irish Independent

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