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IL&P's British business emerges as takeover target
John Mulligan



IRISH LIFE & Permanent's UK mortgage business has emerged as a potential takeover target for US mortgage banks, with any deal likely to value Capital Home Loans in excess of 400m.

The buy-to-let mortgage operation is understood to be attracting attention from prospective buyers that could include institutions such as Bradford & Bingley, or possibly even some US operators.

US lenders are scouting Europe for sub-prime (higher risk) lenders so that they can securitise the mortgage books.

But London market sources believe that while Capital Home Loan's mortgage book would not be sub-prime, it is still likely to be the subject of scrutiny by potential buyers.

Capital Home Loans has sold four tranches of asset-backed bonds in the past number of years.

Davy Stockbrokers analyst Scott Rankin said that based on "conservative" multiples, Capital Home Loans could be worth at least 400m, and that at least part of the proceeds of any potential sale could be used to fund a share buyback.

Last week Irish Life & Permanent said that the Capital Home Loans division issued £1.4bn in gross new mortgages in 2005, which was 6% ahead of the 2004 figure. It added that mortgage balances outstanding in the UK rose by 35% to £3.7bn from £2.8bn at the end of 2004.

Irish Life & Permanent previously put Capital Home Loans up for sale in 2002, but failed to cement any sale after discussions with two potential buyers.

Since then, the business, which is IL&P's only venture outside Ireland, has shown a marked improvement and IL&P executives are known to be happy with its performance.

A UK analyst told the Sunday Tribune that Capital Home Loans has a "very much alive and growing [loan] book", while noting that there would be a number of institutions that could be interested in the business.

In 2003 Irish Life & Permanent sold is remaining US insurance businesses to a unit of Swiss Reinsurance for $121m.




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