Debt-defying buys

Heavy hitting buyers from abroad are taking us on and buying heavily discounted Irish loan books. Surveyor Margaret Kelleher, a director at Lisney Cork, looks at what’s been going on in the commercial loan market

This past year was a busy one for European debt sales, a year during which several high-profile transactions were completed. The European credit and sovereign crisis of the past few years have led to the imposition of a series of new regulatory requirements with the banks. These include Basel III (revised capital, liquidity, and leverage requirements) and the European Banking Authority’s measure to strengthen banks capital positions. As a result, European banks have had to deleverage and sell debt. In particular, they are endeavouring to sell debt relating to non-core markets. Consequently, non- and sub-performing real estate backed loans have been the primary focus.

Ireland is a relative newcomer to the debt sale market. To date, sales of real estate backed loans have included both performing and non-performing loans and are varied between residential and commercial property. Purchasers are generally private equity funds and other non-bank entities with a clear message that US buyers are here and transacting in multimillion-euro acquisitions. A number of transactions occurred in 2012 as a result of foreign banks trying to exit the Irish market. In August, a major US bank, GE Capital Woodchester Home Loans, sold its Irish residential mortgage business to Australian company Pepper Home Loans, which is backed by Goldman Sachs. The portfolio comprised 3,500 properties and it was reported that it was bought for approximately €0.40 in the euro, indicating its distressed state.