Cerberus subsidiary collects €136m on Irish loans

US group Cerberus collected more than €136 million in repayments last year on Irish mortgages it bought from Ulster Bank in 2018, new figures show.

Cerberus purchased more than 5,000 mortgages and buy-to-let property loans with a face value of €1.4 billion from Ulster in 2018, giving the US company the right to collect the debts or take ownership of the homes should the borrowers default.

Accounts recently filed by Promontoria Scariff, the Cerberus subsidiary that owns the debts, show that it collected €136.8 million from borrowers last year, while it earned €179 million from selling some of the assets to US bank Morgan Stanley.

The loan collections and the sale cut the value of the financial assets held by Promontoria Scariff to €214 million at the end of last year from €509 million 12 months earlier.

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Cash generated

Promontoria Scariff used the cash generated during the year to repay loans that the company raised to buy the Irish debts.

These include a loan from Morgan Stanley and Austrian bank Bawag. By December 31st last year, Promontoria Scariff had cut this liability to €105.5 million from €347 million 12 months previously.

It also repaid part of two loans due to its immediate parent, Netherlands-registered Promontoria Holding 267 BV.

It cut its liability on one loan, with an interest rate of 8.5 per cent, to €64.8 million at the end of last year from €68.9 million on December 31st, 2020.

Promontoria Scariff reduced the balance on a second variable interest loan from its Dutch parent to €65 million from €138.6 million.

Property deals

Cerberus typically structured property deals here in this way, with the group providing part of the cash through loans from other subsidiaries, while borrowing the rest from a bank.

The US group bought the debt, which it describes as a mix of residential and commercial property loans, from Ulster in August 2018.

At the time, it was reported that the buy-to-let borrowers were on average €32,000, or almost three years, behind with their repayments.

Owner-occupiers were almost seven years in arrears and had fallen €61,000 behind with their repayments.

The loans dated back to a property bubble that burst in 2008, propelling the Republic into a five-year recession.

Cerberus was one of the most active buyers of Irish property loans following the crash.

The US fund bought debts directly from banks and from the State’s National Asset Management Agency, set up to take over property liabilities from Irish lenders.