Investors target non-performing Irish loans

DUBLIN WILL be the seventh most targeted place for the purchase of non-performing loans in Europe by distressed-debt investors over the coming 18 months, according to a survey of investors by US firm DebtX which sells bank loans.

The company polled more than 50 firms with €150 billion of funds under management and found that Germany was the market distressed-loan purchasers plan to target most, followed by London, Spain and the rest of the UK.

The wider Irish market, excluding Dublin, would be the 10th most targeted market, said DebtX, which is on the National Asset Management Agency’s panel of loan sale advisers.

“There is unmet demand for Irish distressed commercial real estate loans from both mid-sized and large investors,” said Gifford West, head of international operations at Boston-based DebtX.

“The Irish market could digest half a dozen smaller transactions of say between €50 million and €150 million face-value loans over the next six to nine months.

“There is new money out there that would like to come in.”

Mr West said that selling loans can be easier than selling the underlying property or asset particularly given the size of the portfolio of loans that have to be worked through in Ireland.

“The attraction to the investor is that you have more options to play with because the borrower remains in place,” said Mr West.

DebtX’s study found that more investors would be active buyers of distressed European bank debt if the loan sales were structured in smaller pools or if investors could buy individual loans or small groups of loans. Investors told the firm that financial institutions selling distressed debt “appear willing to sell only to the largest institutional investors” and urged them to make the bidding process more open and transparent.

The Irish banks are “deleveraging” themselves of about €70 billion of excess loans and other assets under plans to wean themselves off cheap funding from the European Central Bank. Nama has loans with a face value €74 billion bought for €32 billion.

The European market in non-performing loans is not as mature as in the US where there are between 200 and 300 sales of distressed loan portfolios every year.

Bank of Ireland has exceeded its deleveraging target of €10 billion in loan sales. AIB chief executive David Duffy told The Irish Times last week that the bank’s €20 billion deleveraging plan would be more than 90 per cent complete by the end of the year.