Friday 24 November 2017

Investec exercises option to buy 35pc stake in the sub-prime lender Start

John Mulligan

John Mulligan

A UK subsidiary of South African banking group Investec has exercised an option to buy out the 35pc management stake it didn't already own in Irish sub-prime lender Start Mortgages, the Irish Independent has learnt.

A spokesman for UK sub-prime lender Kensington, which is owned by Investec, confirmed the move yesterday, but wouldn't say whether it plans to manage Start's loan book with a view to winding down the business.

The move brings to an end the equity interest of four former GE Money employees -- David Ingram, Dermot Nutley, Paul Murphy and Niall Corish -- in Start Mortgages, the business they founded in 2004. It is understood their combined stake was bought for a minimal outlay.

Investec had secured its original 65pc stake in the beleaguered lender back in 2007 via its acquisition of troubled UK sub-prime mortgage provider Kensington for £283m (€413m at the time).

Kensington had invested in Start Mortgages at its launch as it sought to expand its business beyond its UK base at a time when property markets on both sides of the Irish Sea were in the midst of booms. The stake also enabled Start Mortgages to clear necessary regulatory hurdles.

Within six months of opening its doors, Start had received €400m worth of loan applications and was reckoned to have written €100m of business in that time.

In 2006, near the peak of the property bubble in Ireland, Start loaned €600m and its total loan book stood at more than €1bn by the end of 2008. The company raised additional finance by securitising its loan book.


With the economy having soured, it is believed that while Start is still technically accepting mortgage applications, the number of monthly enquiries is minuscule.

The firm has been among the most prominent lenders in High Court proceedings where efforts have been made to repossess properties.

A High Court judge chastised the firm in 2008, saying it wouldn't have been seeking so many repossessions if it had not provided loans to customers not in a position to repay.

Start Mortgages has always contended that it was cautious in its lending policies.

Start chief executive David Ingram also previously maintained that about 85pc of the firm's customers already had mortgages and that many were consolidating loans they held with the main banks.

The spokesman for Kensington said the decision to acquire Start Mortgages in its entirety will enable the UK firm to "fully maximise the performance of the [Start] loan book". He said Kensington would "investigate" its options for Start.

Irish Independent

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