Bank of Ireland gears up to refinance €375m of problem loans

Bank has mandated Lloyds and Morgan Stanley to find investors for securitisation

Customers who have restructuring arrangements with Bank of Ireland are not affected by the transaction.  Photograph: Bloomberg

Customers who have restructuring arrangements with Bank of Ireland are not affected by the transaction. Photograph: Bloomberg


Bank of Ireland is planning to refinance a basket of non-performing mortgages worth about €375 million in a move designed to reduce its exposure to troubled loans.

The State’s biggest domestic bank by assets has mandated Lloyds Bank Corporate Markets and Morgan Stanley International to arrange an investor roadshow for a potential securitisation, the process whereby the portfolio is refinanced on the bond markets.

Securitisation involves bonds being issued to international investors, who would receive interest payments financed by income from the portfolio.

Bank of Ireland is doing the deal because all banks in the Republic are required to hold more significant levels of capital against non-performing loans than performing loans.

If it goes ahead, the bank expects to see a reduction in its non-performing exposure (NPE) ratio from 6.3 per cent, measured at the end of 2018, to about 5.8 per cent.

In a statement, Bank of Ireland said the transaction will allow it to make further progress in reducing its NPE ratio, a “core element” of its strategy. Additionally, it will assist the bank in managing regulatory capital requirements applied to NPE mortgages.

Buy-to-let properties

The proposed portfolio includes loans secured on buy-to-let properties and the bank said the majority of loans involved have been restructured and are performing in line with the agreed restructuring arrangements.

A special purpose vehicle called Mulcair Securities DAC has been created to hold the 1,730 loans with an average size of about €217,000. The loans pertain to 790 different customers. The weighted average remaining term on the portfolio is just over 14 years and the bank has held the mortgages for an average of 12.5 years.

Nevertheless, the loans included in the securitisation deal are classified as non-performing in alignment with European Banking Authority and European Central Bank guidelines.

Any customers who have restructuring arrangements with the bank are not affected by the transaction, nor will there be any transfer of servicing or legal title.

“Bank of Ireland expects to continue to service these mortgage accounts,” it said, adding that customers do not need to take any action arising from the announcement.