‘We had to roll up our sleeves and re­mind our­selves how to lend’

Irish Independent - Business Week - - INTERVIEW -

Af­ter over­see­ing re­struc­tur­ing in sev­eral chal­leng­ing roles, the head of com­mer­cial lend­ing at Fi­nance Ire­land tells Gretchen Frie­mann about start­ing over

KTrue to form, Mur­naghan down­plays the work re­quired in con­jur­ing a busi­ness out of air. He does point out that the new di­vi­sion in Fi­nance Ire­land did not have the ad­van­tage of an ex­ist­ing bal­ance sheet. “As well as build­ing up the team, the fran­chise and the cus­tomers and all that, we also had to build up the cap­i­tal and fund­ing”. In that con­text, “ev­ery loan counts”. The painstak­ing growth has paid off. Mur­naghan’s busi­ness, launched in 2017, now con­trols a €150m-plus loan book and is rac­ing to­wards the €200m mark. In three years he ex­pects that fig­ure to ex­pand to €500m and is tar­get­ing €1bn in five years.

The up­swing in mo­men­tum how­ever is likely to hinge on a suc­cess­ful maiden se­cu­ri­ti­sa­tion or bond is­suance. Mur­naghan cut his bank­ing teeth at AIB’s lever­aged fi­nance unit, a riskier form of fi­nance, typ­i­cally re­lied upon by pri­vate eq­uity firms to back a takeover deal. Shep­herded by Robert Gal­lagher, head of AIB’s cor­po­rate mar­kets di­vi­sion and now the chief ex­ec­u­tive of Ac­ti­vate, a pri­vate eq­uity and State-backed lender, Mur­naghan turned his hand to se­cu­ri­ti­sa­tion and col­lat­er­alised loan obli­ga­tions, an es­o­teric cor­ner of the mar­ket but sim­i­lar to other se­cu­ri­ti­sa­tion ve­hi­cles in that it is­sues mul­ti­ple tranches of debt.

In 2015, Dublin-based lender Dilosk forced open a win­dow in the mort­gage-backed se­cu­ri­ti­sa­tion mar­ket with a €206m bond deal se­cured against a book of for­mer ICS mort­gages.

Mur­naghan wants to launch some­thing sim­i­lar, which would mark a ma­jor mile­stone, and, he says, en­able the firm to raise funds at lower rates.

It’s all a far cry from the re­lent­less slic­ing and dic­ing at Ul­ster. While Mur­naghan is keen to present that ex­pe­ri­ence as a valu­able les­son, he con­ceded “it is weari­some mak­ing things smaller and of course it is emo­tion­ally drain­ing”.

Af­ter seven years of re­struc­tur­ing, the en­tre­pre­neur­ial chutz­pah of Billy Kane’s new ven­ture must have seemed a breath of fresh air.

The two hit it off in 2014 over a cup of cof­fee. Mur­naghan main­tains the meet­ing was in­tended as a rou­tine “so­cial catch-up”. “As head of busi­ness bank­ing my job was to talk to peo­ple all the time”. Kane was scout­ing for op­por­tu­ni­ties. He was con­vinced the re­treat of the banks pre­sented an op­por­tu­nity for more nim­ble play­ers.

Kane has spo­ken of this am­bi­tion in the past. Mur­naghan re­it­er­ated an ini­tial pub­lic of­fer­ing of takeover re­main the “likely exit routes” for in­vestors.

But the whiff of an­i­mal spir­its ex­tends across the board. All the di­rec­tors, in­clud­ing Mur­naghan hold eq­uity stakes. So too do the se­nior lend­ing man­agers. “We’re all in­vested in how to make this big­ger and bet­ter for all of us.”

So far the busi­ness has is­sued over 80 loans at an av­er­age size of €1.75m. Mur­naghan calls it “gran­u­lar”, mean­ing, he ex­plains in mea­sured tones that even at this soft pitch seem to echo through in the firm’s el­e­gant board­room.

“We all had to roll up our sleeves and re­mind our­selves of how to lend”.

Fi­nance Ire­land is housed in a prom­i­nent pe­riod house, op­po­site the for­mer Burling­ton Ho­tel. It was snapped up by Kane in 2014, for €4.65m, who but­tressed the deal with a €3m loan from AIB. Iron­i­cally, the par­tially na­tion­alised bank sold the 10,000sq ft to an in­vest­ment firm in 2013 for €4.75m. It forked out €3m to break its lease.

Each suc­cess­ful mort­gage deal is cel­e­brated by the team. Mur­naghan points out the fi­nan­cial evis­cer­a­tion trig­gered by the crash was not lim­ited to the banks. Bor­row­ers also took a ham­mer­ing. The ex­pe­ri­ence taught them “how to man­age a lender”. In this ‘new en­vi­ron­ment’ busi­ness­men ea­ger to es­cape the clutches of a dis­tressed debt or pri­vate eq­uity fund have be­come par­tic­u­larly skilled in nav­i­gat­ing a fi­nan­cial tightrope. “They know how to man­age their loan re­la­tion­ship suf­fi­ciently well so they are still in con­trol of their as­sets, and I sup­pose not so suf­fi­ciently well that they have en­cour­aged their lender to fore­close against them,” says Mur­naghan.

So it has been an “ed­u­ca­tion” for us. “We have had to fig­ure out how to lend safely” in this mar­ket.

Mur­naghan, clean-shaven, clad in a sharp suit, and ex­ud­ing the rec­ti­tude the pub­lic, long ago, once as­so­ci­ated with the bank­ing pro­fes­sion, swiftly shuts down the con­ver­sa­tion when asked about the an­tic­i­pated loan de­fault rate on the book. In­stead he be­moans the in­dus­try’s patchy data on this front, point­ing out this paucity of mean­ing­ful in­for­ma­tion re­mains a key ob­sta­cle for in­ter­na­tional in­vestors.

But at the end of this year Mur­naghan, who once chucked in a Green Card for the US af­ter be­com­ing en­thralled by the fast-paced life in Hong Kong where he wound up work­ing as a tax con­sul­tant for EY, will have spent the guts of four years at Fi­nance Ire­land.

The ques­tion is will this small, rapidly ma­tur­ing busi­ness man­age to con­fine the rest­less am­bi­tion of a banker that by his own ad­mis­sion has thrilled at the op­por­tu­nity to pur­sue sharply di­vert­ing paths.

We’re all in­vested in how to make this big­ger and bet­ter for all of us. It has been an ed­u­ca­tion

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