Dilosk-backer close to buying Irish covered bonds bank

Deal may ultimately open new funding avenue for buy-to-let lender Dilosk

British investment firm Attestor Capital, which is a 20 per cent shareholder in Irish lender Dilosk, is close to sealing a deal to buy a covered bonds bank being sold off under the wind-up of failed German lender WestLB.

The move could eventually open up a new funding avenue for Dilosk, the buy-to-let specialist that brought Bank of Ireland’s ICS Mortgages brand in 2014. Dilosk, headed by chief executive Fergal McGrath, is working on plans to enter the owner-occupier loans market later this year.

Attestor, founded in 2011, focuses on investing in European businesses that are growing or in need of restructuring. Its plan to buy EAA Covered Bond Bank in Dublin would be the first banking licence deal executed in Ireland since the European Central Bank (ECB) took over the regulation of euro-zone banks in late 2014.

The firm has, however, received approval for two big deals elsewhere under the new regime. In 2015, it was involved in the acquisition of part of nationalised Austrian lender Kommunalkredit, a public sector covered bond bank with a €5 billion balance sheet. Since then, the owners have been building a new business model for the company in infrastructure debt lending.


Controlling stake

In recent weeks, Attestor has bought a controlling stake in Italy's Banca Intermobilare, which was part of Veneto Banca, which was put into liquidation last year.

Dusseldorf-based WestLB, which made a failed attempt to become a global investment bank, became one of the biggest German casualties of the 2008 financial crisis and needed a bailout of as much as €18 billion by the state and rival lenders. Much of its assets were put into a bad bank, Erste Abwicklungsanstalt, or EAA, in 2010.

EAA put EAA Covered Bond Bank on the market two years’ ago and The Irish Times reported in late 2016 that Attestor had emerged as the leading bidder for the niche bank.

A spokeswoman for EAA said this week that the company and the acquirer “are now hopeful that a decision can be reached in the near future” on the deal, after regulatory authorities recently carried out an extensive questionnaire on the matter.

Public sector lending

“Both sides retain a keen interest in concluding the transaction,” she said, while declining to identify the party looking to acquire the business.

Market sources have suggested that Attestor could re-establish EAA Covered Bank as a funding vehicle for public sector lending, similar to Kommunalkredit in Austria, or seek an amendment to its licence to allow it to issue bonds backed by mortgages. Representatives for Dilosk and Attestor declined to comment.

EAA Covered Bond Bank had €419 million of equity at the end of last year. However, it is expected to much of this will have been extracted by way of a special dividend to its its parent before a deal goes through.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times