Stories
Many of the farmers, homeowners and small businesses who borrowed from the defunct ACC Bank are seeing the identity of their lender change for the fourth time in nine years. This results from two of the most active US vulture funds in Ireland changing their carve-up of a mortgage portfolio acquisition in 2019, new company information shows.
Four years ago, Dutch lender Rabobank sold Project Omni, which included all the remaining loans of the old ACC Bank “valued at approximately €800 million”. Cabot Financial acquired the unsecured portion of the debt; CarVal Investors paid €159 million for secured agricultural loans in arrears; and Goldman Sachs reported the €163 million acquisition of the commercial and residential mortgages in the portfolio, with the majority of borrowers up to date in their repayments.
But Goldman Sachs has now reduced its exposure to the deal, with CarVal taking on some more of the legacy ACC mortgages while juggling the disposal of others, disclosures by Irish special-purpose vehicles (SPVs) of the two financial institutions show.
NewGrange Loan Acquisitions DAC, the Goldman Sachs-controlled SPV used for the Omni deal, first reported that it was selling down in a filing signed at the end of October. “On 3 October 2022, the company signed an agreement to sell certain loans it held which had a carrying value at 31 December 2021 of €10,862,933,” its directors reported.
The disposal accounted for just over one-tenth of the residual value of its mortgage portfolio at the time. Yet this was not the end of Goldman Sachs’s retrenchment from Project Omni.
Disposals by CarVal too
A few days later, Otterham Property Finance DAC, the SPV used by CarVal to acquire its farming share of the loan book, appeared in a filing as the “seller” of a portion of the Omni portfolio covering 161 “connections” — debt situations each linking a particular borrower and loan. Otterham filed the information as part of the partial satisfaction of a charge held by Credit Suisse, which had funded the bulk of CarVal’s heavily leveraged 2019 portfolio acquisition.
Then towards the end of last year, Goldman Sachs and Carval traded some Omni loans with each other. New documents released by Otterham have now revealed that it was the buying party in a “mortgage sale agreement” it entered into on November 29, 2022 with NewGrange Loan Acquisitions as the seller.
Neither company has yet disclosed how much of the commercial and residential mortgage book held by NewGrange transferred to Otterham on this occasion. The transaction may represent a partial or full exit from Project Omni by Goldman Sachs in favour of CarVal.
It was, however, substantial enough to trigger a refinance of Otterham. Separately from any residual debt it might owe to Credit Suisse, a new charge registered by the CarVal SPV shows that it raised new senior loan notes from Nomura International on December 22. The document links Otterham’s new leverage debt to its acquisition of NewGrange’s loans.
The full details of Otterham’s recent portfolio evolution and returns are unclear because the company last filed accounts to the end of 2020. Its latest annual return is now overdue, according to Company Registration Office records.
NewGrange, meanwhile, had collected €91.3 million on the loans it held between April 2019 and the end of 2021, before it started to sell down its portfolio last year. The Goldman Sachs SPV valued the remaining mortgages at €94.8 million one year ago.
At that point, NewGrange had paid or owed €10.7 million in investment management fees to related Goldman Sachs companies and repaid them €63.4 million under the profit-participating notes (PPNs) they had advanced to fund the portfolio acquisition in full. NewGrange hoped to repay a further €110.9 million to Goldman Sachs PPN holders in subsequent years.
If those estimates were correct, the New York financial institution then stood to collect €22.3 million in fees and returns on its share of the Omni deal. This is roughly equivalent to a 4.2 per cent compound annual interest rate between its initial €167.2 million investment and the end of 2021. Over the past three years, it claimed exemptions under Section 110 of the tax code and reported a total tax liability of €271, while its immediate Irish parent reported none.
In the world of Wall Street investment banks, this is hardly a stellar performance. No surprise then that Goldman Sachs’ priority in the past year has been to sell down its share of Omni – including to CarVal, which has specialised in leveraging the potential of non-performing loans with cheaper loan-on-loan debt.
Now that this model has become riskier amid interest rate volatility, the terms CarVal negotiated with its own lender Nomura a few days before Christmas will dictate how much profit it can squeeze out of Ireland’s legacy ACC borrowers.
Further reading
Vulture structure: The €18bn debt deals that turned Ireland into CarVal’s bridge to the world
