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Saturday 20 October 2018

Mortgages on the move after Goldman Sachs and Pimco seal Danske deal

 

Danske insists customers will be unaffected by the deal
Danske insists customers will be unaffected by the deal

Goldman Sachs and Pimco are likely to securitise some of their newly-acquired €1.8bn Danske loans early next year.

An agreement to sell the portfolio of 13,000 mortgages, which includes many Dublin homeowners, was struck on Tuesday after a long period of negotiation and due diligence.

Danske confirmed yesterday it had sold the portfolio of performing loans - acquired from its ill-fated expansion in 2004, when it took over National Irish Bank - to a Goldman Sachs-financed entity, Proteus Funding.

According to sources, Pimco declined to be named as an official partner on the deal, although it is understood the California-based funds giant has stumped up the majority of the cash for the acquisition.

The 13,000 mortgages exchanged hands for close to 95c in the euro.

About 10,000 of the home loans are extended to primary dwellers, with the remainder classified as buy-to-let loans.

The GS-Pimco consortium fended off competition for the portfolio from three other contenders, including the UK insurer, Prudential, as well as Elliott Management, a US hedge fund, and Bank of Ireland.

Regulations

While the Danske portfolio contained a large volume of low-yielding tracker mortgages - some with rates of less than 1pc - the deal was hotly pursued by Bank of Ireland as it offered a rare opportunity to grow the loan book in an environment where lenders are hobbled by onerous regulations. Permanent TSB and AIB did not bid.

It is understood the GS-Pimco consortium intends to refinance the loans, potentially the entire portfolio, in the first quarter of next year in what would mark the largest securitisation of performing Irish mortgages since the crash.

A paucity of euro-denominated residential mortgage-backed securitisations, or RMBS, which convert home loans into tradeable securities by ascribing each tranche a different credit rating, has helped fuel demand for this once unloved asset class.

Earlier this month, PTSB attracted an effective negative yield on a €500m RMBS deal.

Most included in that deal carried a top-notch rating, which secured a sub-zero yield.

The expected securitisation of the Danske book is likely to receive a similar reception, as the mortgages are performing, and enables GS-Pimco to bank a profitable spread on the loans.

Danske has notified borrowers of the ownership transfer and stressed "customer agreements" remain unaffected.

The largest loan sale so far this year was a fee bounty for investment banks and lawyers with Matheson, Maples and Calder, Clifford Chance, and Allen & Overy all involved.

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