GE CAPITAL is selling its A$5bn (£3.2bn) Australia and New Zealand mortgages books to Pepper Homeloans as concerns rise over a softening of the Australian housing market and the rising cost of funds.
GE Capital, which shed part of its Australian home loans portfolio in 2008 when global conglomerates were restructuring their lending arms, said yesterday it will sell the rest of the portfolio for a small discount to non-bank Australian lender Pepper Homeloans.
GE Capital Australia’s chief executive Skander Malcolm declined to specify the discount but said GE Capital would now focus on its other eight lines of business that span consumer and corporate finance.
“We can now focus on those businesses where we believe we have sustainable competitive advantage,” he said.
GE is streamlining its GE Capital finance unit to focus on funding purchases of heavy equipment, lend money to mid-sized companies and to invest in commercial real estate.
Analysts said the equity value of the deal could be around $100m assuming the risk weighted assets were 25 per cent of the portfolio and the equity on them was about a tenth of that.
Pepper, which was formerly part of Oakwood Global Finance that counts Merrill Lynch as its key shareholder, will fund the deal via a consortium of banks and mezzanine debt.
It said it would also look at raising funds by securitising the mortgages in the “not too distant future”.
GE Capital’s move comes amid some concerns over the Australian housing market, which has seen a strong run up in prices, but has recently seen some softening after hikes in interest rates.
City A.M. Reporter