Friday 20 July 2018

Goldman-Pimco bid is frontrunner for Danske mortgages

Danske’s Irish headquarters in Dublin
Danske’s Irish headquarters in Dublin

Gretchen Friemann

Goldman Sachs and US funds giant Pimco are closing in on preferred bidder status for Danske's €1.8bn retail book, according to sources.

It is understood the consortium is on course to trump rivals including Bank of Ireland, Prudential and the US hedge fund, Elliott Management, and win exclusive due diligence on the portfolio of performing loans. The sale underscores the mounting appetite for Irish mortgages amid the economic recovery and the housing shortage.

Goldman Sachs staged a late entry into the process to team up with Pimco. The pair are understood to have offered close to 95c in the euro for the loans. Danske retail's book holds €2bn of mortgages but its principal value - meaning the amount of money outstanding on the loans - is €1.8bn.

The portfolio's large volume of low-growth tracker mortgages deterred some Irish bidders, most notably AIB which did not even submit an offer.

According to sources, Goldman Sachs and Pimco, which manages $1.6 trillion in assets, are likely to securitise the Danske portfolio - borrowing against the bundle of debt amid a rebound in investor appetite for the mortgage backed bond market that fell out of favour after the financial crash.

In August, Pimco's chief investment officer, Mark Kiesel, said "housing has got legs" and described it as "the sector we probably have the highest conviction on."

Over the past few months the two US financial services giants have been stockpiling mostly US mortgage bonds and jettisoning speculative, junk-grade company debt.

Yet the legacy of the crisis, a stricter regulatory environment and the deepening housing shortage are all helping to constrict loan growth among the Irish lenders. The Danske loans are the most sought after mortgage portfolio to hit the market since the banking crisis.

Bank of Ireland, which bid for the assets, is viewed as the most nimble domestic player in the sector.

But the bank is understood to have been outgunned by the combined Goldman Sachs-Pimco bid.

The Irish Independent first revealed the sale in June.

Irish Independent

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