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Sub-prime lender Stepstone lines up liquidation

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Stepstone backer Lehman Brothers collapsed in 2008. Photo: REUTERS

Stepstone backer Lehman Brothers collapsed in 2008. Photo: REUTERS

Stepstone backer Lehman Brothers collapsed in 2008. Photo: REUTERS

Irish boom-era sub-prime lender Stepstone Mortgages is considering liquidation after a planned sale of its licence fizzled out, and after returning €57m to main backer Lehman Brothers in the past two years.

With no further business being carried out by the company, directors are considering placing Stepstone Mortgage Funding DAC into liquidation before the end of 2019, accounts filed with the Companies Office state. Liquidation costs of €300,000 have been accrued in the most recent 2018 accounts, which go on to say that directors' policy is to maintain sufficient cash reserves to meet commitments as they fall due.

Stepstone Mortgages's main creditor is Lehman Brothers - which itself has been in liquidation since 2008.

The latest 2018 accounts for Stepstone show the Dublin-based lender paid €57m over the past two years to the corporate remains of Lehman - the US investment bank whose collapse exploded the global financial crisis.

Stepstone was originally a joint venture between the US bank and what is now KBC Ireland. It stopped lending in 2008 when the crisis struck.

The latest accounts show Stepstone's directors paid €51.9m to Lehman Brothers Holdings Inc in March 2018, followed by just under €4m paid in March this year.

The 2018 accounts confirm Stepstone's sale of its entire portfolio of Irish mortgages to Promontoria, an affiliate of US vulture fund Cerberus, and that the deal closed in March 2018. No sale price is recorded in the accounts, but the filing shows a €53.6m "positive movement" in Stepstone's loan accounts, and net cash generation of €47.65m in what had been a relatively stagnant portfolio.

At the end of its 2017 financial year, Stepstone had valued €119.77m of mortgages at €53.6m, which indicates Cerberus paid around the written down value of the mortgages.

It left Stepstone Mortgages as a shell and the accounts go on to say that a third party approached the directors and Lehman Brothers in 2018 and expressed an interest in acquiring the Irish company's shares. Due diligence was carried out, but the third party withdrew its interest, the filing states.

It is understood the interest in the remains of Stepstone related to its regulated status - which could potentially have given a buyer a licence to lend in Ireland and the rest of the EU.

Meanwhile, Stepstone is one of the lenders caught up in the tracker mortgage scandal since 2015. The accounts say the company had never attempted to remove customers from their tracker rates, but following the tracker review, some customers were found to have been charged incorrect rates and have subsequently been returned to the cheaper rate.

Tracker compensation costs are estimated at €770,000 in 2018 and 2019, according to the accounts.

Irish Independent