Private equity groups battle for €1bn AIB problem mortgages

Winner of sell-off of home loans deep in arrears expected to be chosen within weeks

Private-equity giants in the United States Apollo and Lone Star are the final bidders vying to acquire a portfolio of deep-in-arrears AIB home loans that were originally worth about €1 billion, according to sources.

AIB set about selling the portfolio, dubbed Project Oak, early last year but postponed the deal as it diverted resources to manage the impact of the Covid-19 shock on borrowers. The transaction was revived late last year.

The winner is expected to be selected within weeks, according to the sources.

The emergence of Apollo as a contender will come as a surprise to many followers of the loan sales market in Ireland. The New York-based group, with more than $400 billion (€331 billion) of assets under management, was among the first wave of buyers of Irish loans in the early part of the last decade as overseas banks retreated from the market. However, it has not been an active buyer in the Republic in recent years.


Lone Star has been among the most consistent bidders for non-performing loan (NPLs) portfolios brought to market in the State in recent years.

Cerberus, a US distressed-debt firm, had also previously been circling the AIB portfolio, largely involving borrowers who have not engaged with the bank for years, but is no longer involved in the process.

Spokesmen for AIB, Apollo and Lone Star declined to comment on the deal.

Sustainable level

“AIB has reduced NPEs [non-performing exposures] from €31 billion in 2013 to €4 billion in the third quarter of 2020. The vast majority of the reduction in NPEs has been achieved through working with customers,” the AIB spokesman said.

“AIB remains focused on reducing non-performing loans to a normal, sustainable level. Supporting customers in difficulty remains a key priority and, where feasible, the bank will continue to implement sustainable solutions for customers who engage with it on a case-by-case basis.”

Late last month, AIB sold a portfolio of problem mortgages, with an original value of €150 million, to an “ethical” investment consortium.

Most of the borrowers behind the 620 owner-occupier loans in the so-called Project Iris portfolio are expected to end up in the Government’s mortgage-to-rent scheme – whereby borrowers agree to surrender their homes but remain in the property as social-housing tenants.

The Home Solutions Initiative consortium comprises debt-collection agency Everyday Finance, London-based investment group LCM Partners, Arizun Asset Management, which offers a private rental scheme for those who do not qualify for the State's mortgage-to-rent scheme, and the Irish-based Home for Life group, which is backed by AIB.

Bank of Ireland, also under pressure to resolve legacy NPLs as the sector faces a spike in Covid-related defaults, is preparing to shift a pool of soured mortgages this year.

The bank is known to be looking at refinancing these loans in the bond market through a process called securitisation.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times