Archive for March 3rd, 2013

Well, this will give some developers in (the Republic of) Ireland pause for thought.

ACC Bank has just succeeded in overturning the August 2012 bankruptcy of Wicklow property developer Sean McCann. Back in August 2012, ACC Bank had been pursuing Sean through the Dublin courts in respect of €5.5m loans provided to his development company, Killorglin Investments Limited.

But in a surprise move, Sean was bankrupted in Northern Ireland on foot of a GBP 1,400 (€1,600) bill for rent arrears.

ACC Bank then contested the bankruptcy, apparently claiming that Sean’s centre of main interest (COMI) was in the Republic and not Northern Ireland.

The High Court in Belfast last week accepted ACC’s case and overturned the bankruptcy.  The High Court judged that Sean had only “a very tenuous link” to Northern Ireland.  Furthermore the person to whom Sean owed the GBP 1,400 in rent was described as “at very least” an acquaintance if not a friend.

Last week in the Dail, the Minister for Justice and Equality, Alan Shatter admitted that he had had discussions with UK and EU counterparts as part of an EU summit in an attempt to homogenize bankruptcy procedure across Europe. However, this present case seems more akin to the reversal of Sean Quinn’s bankruptcy after Anglo objected to Sean;s original bankruptcy order in Belfast’s High Court, and Anglo subsequently bankrupted Sean in Dublin.

The current bankruptcy period in (the Republic of) Ireland is 5-12 years but that is set to be reduced to three years when all sections of the Personal Insolvency Act 2012 are finally commenced.

UPDATE (1): 4th March 2013. The Belfast High Court judgment which overturned the bankruptcy is now available here.

UPDATE (2): 4th March 2013. The BBC reports on the case in some detail here.


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It is unacceptable that we have been waiting more than three weeks for Minister for Finance, Michael Noonan to publish the Directions he issued to NAMA on 7th February 2013 which included a direction to make €1bn available to Irish Bank Resolution Corporation, the insolvent bank now in special liquidation. Remember when Minister Noonan pulled the stunt last year with the payment of the Anglo promissory note on 29th March 2012, the Direction that was issued to NAMA was published the very next day. Minister Noonan said two weeks ago he would publish the Directions by last Friday week 22nd February 2013, and still nothing.

In the Dail this week, we learned a little more about the €1bn credit line from NAMA – which we own – to IBRC, a bank which is dangerously insolvent. Remember we only know about this credit line, thanks to the obiter dicta of NAMA chairman Frank Daly at a gathering of journalists on 21st February 2013.

In response to questioning from the Sinn Fein finance spokesperson Pearse Doherty, Minister Noonan said

(1) The Direction was issued on 7th February 2013

(2) NAMA didn’t charge an arrangement fee, but is charging the one-month Euribor rate plus a premium of 140 basis points as interest.  The one-month Euribor rate is presently 0.12% per annum. So NAMA is presently charging 1.52% per annum on a €1bn loan facility to a deeply insolvent bank.

(3) The NAMA board – see here for the members – approved the facility on 7th February 2013

The full parliamentary questions and responses are here.

Deputy Pearse Doherty: To ask the Minister for Finance if he will explain the decision to provide €1 billion credit facility from the National Assets Management Agency for the use of the special liquidator of the Irish Bank Resolution Corporation; when the decision was made; what the credit facility is intended to be used for; the way the €1 billion if used will be repaid to NAMA; if he had to seek permission to use NAMA for such a credit facility from another entity such as the European Central Bank; if the funding of the credit facility comes from cash assets at NAMA; and if NAMA can still meet its bond repayments due at the end of 2013.

Deputy Pearse Doherty: To ask the Minister for Finance further to the announcement by the National Asset Management Agency on 21 February 2013 that it has made a €1bn credit line available to Irish Bank Resolution Corporation, if he will confirm the interest rate and arrangement fee that applies to the facility and any moneys advanced under it.

Deputy Pearse Doherty: To ask the Minister for Finance further to the announcement by the National Asset Management Agency on 21 February 2013 that it has made a €1bn credit line available to Irish Bank Resolution Corporation, if the NAMA action was subject to a NAMA board decision; and if it was, the date of the board decision..

Minister for Finance, Michael Noonan: I propose to take questions 64, 94 and 95 together.

On the 7th February 2013 I issued a Direction (NAMA/3/12/IBRC Act) to NAMA pursuant to the IBRC Act 2013 to provide such credit facilities to a special liquidator on such terms and conditions, as are specified in the direction. NAMA has complied with this Direction and made a €1 billion credit facility available to the special liquidator. The interest rate as per the facility agreement is referenced to the daily one-month euribor rate plus a margin of 140 basis points. The facility will be advanced to IBRC (in Liquidation) as needed for both the general corporate purposes of the Company and to discharge the Company’s obligations to derivatives counterparties under derivative collateral arrangements and/or obligations to the NTMA under the NTMA ISDA Master agreement. The amounts drawn under this facility shall constitute and rank as costs of the liquidation of the Company.

I am advised by NAMA that following receipt of the Direction, the Board of NAMA met on Thursday, 7th February 2013 and approved the €1 billion facility.  NAMA has made this facility available to the Company in accordance with its approved liquidity policy and from its own liquid assets. The granting of this facility does not impact on NAMA’s ability to redeem its senior bonds in accordance with the previously indicated senior bond redemption targets.

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Mortgage borrowers at Irish Bank Resolution Corporation are in a state of flux at present. Although the latest is that the Special Liquidator of IBRC, accountants KPMG have finally arranged for mortgage payments to be taken from customer accounts in March after the fiasco in February, it still appears that individual mortgage borrowers will not be able to buy out their mortgages at a discount.

However in the Dail this week, the Minister for Finance Michael Noonan confirmed that the Special Liquidator was readying the mortgage book – estimated to be worth €1.8bn – for sale in a single job lot. This may turn out to be good news for individual mortgage holders if the experience of another Irish mortgage book sale is replicated at IBRC.

Last year, subprime lender GE Money sold its entire mortgage book to Australian outfit, Pepper Home Loans. The price paid was understood to be about 40c in the euro, which no doubt reflects the severe impairment on Irish subprime loans. This operation recently reported its results for 2011. Last week, the Sunday Business Post – not available online without a subscription – reported that Pepper was doing deals with its borrowers and is writing down debt to what are considered more sustainable levels, in some cases by 50%. It should be remembered that GE’s loans were subprime and will be more underwater than Irish Nationwide’s which represent the bulk of the €1.8bn loanbook that the Special Liquidator will bring to market shortly.

Having said that, IBRC loans are distressed and it will be interesting to see who bids for them. The pillar banks, AIB/EBS, Bank of Ireland and Permanent TSB are in no shape to take on more residential mortgage debt. Nor will there be appetite at the foreign players, Danske, Ulster and KBC. So, it may well be a new player or a company like Pepper that buys the loans. There is a good chance that the buyer will cut deals with borrowers, particularly where there is negative equity and arrears – after all, the new owner will pay a price which reflects the profile of the loans.

Any sale will be concluded by August 2013, at which point, NAMA will be picking up any legacy unsold loans.

The revelation that the Special Liquidator would sell the mortgage loanbook in one job lot, was made this week in the Dail when the Minister for Finance Michael Noonan responded to a question from the Sinn Fein finance spokesperson Pearse Doherty. The full exchange is here with emphasis added. The exchange also revealed that sales in the pipeline at IBRC prior to 6th February 2013 will be halted as the Special Liquidator needs value the assets and start the sale process afresh.

Deputy Pearse Doherty: To ask the Minister for Finance following the Irish Bank Resolution Corporation Act and the appointment of a special liquidator to resolve IBRC’s balance sheets, the way the liquidator will deal with outstanding loans to the company; the way the liquidator will approach the outstanding issue of loans that are secured against mortgaged properties, where the property owner has arranged a debt write down with their bank following a sale; his views on whether the liquidator should allow property sales to go ahead and loans to be separated out from properties and repaid to the liquidator, or whatever asset manager is eventually appointed, on their own..

Minister for Finance, Michael Noonan:  I am advised by the Special Liquidators that any properties for sale where the sales contract has not been signed will be included in the valuation process as set out in the IBRC Act.  No property will be sold unless the bid is equal to in excess of the independent valuation that is to be obtained as part of that process. The contractual terms and conditions of mortgage customers will not change as a result of the appointment and all debts owing to IBRC (In Special Liquidation) remain due and enforceable.

I have been advised that it is the intention of the Special Liquidators to package and sell the mortgage book as a portfolio. Borrowers, third parties and other financial institutions will be given the opportunity to bid for specific portfolios (or component parts therof) as part of an open and transparent process.  As this sales process has not yet commenced, the Special Liquidators are not in a position to comment or speculate on the impact this may or may not have on the borrowers concerned or the arrangements that may or may not be agreed with the eventual purchasers of those assets.

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NAMA might have just about have drawn a line for now under the Enda Farrell debacles last year – where the former NAMA employee whilst still employed at NAMA had bought a property from a NAMA developer at a price which NAMA didn’t convincingly defend and where the same employee allegedly removed confidential information on loans and disseminated it to third parties.

But there have been no lines drawn as far as Enda Farrell himself is concerned.

In the Dail this week, the Minister for Justice, Equality and Defence Alan Shatter confirmed that the Gardai are still investigating the removal of information. You might recall that NAMA first made a complaint to the Gardai on 12th September 2012, so the investigation has been ongoing for six months, and it is over three months since the High Court case taken by NAMA against Enda concluded (save for the legal costs which are understood to be still outstanding). Enda faces a fine of up to €5m or five years in prison, or both, if the Gardai prosecute under the National Treasury Management Agency Act 1990, the NAMA Act, the Ethics in Public Office Act 1995 as amended by the Standards in Public Office Act 2001 and the Official Secrets Act 1963.

Separately, Minister for Finance Michael Noonan said he didn’t know anything about the investigation by the Data Protection Commissioner into the alleged leaking of the information, but it is understood the investigation there, too, is continuing.

The wheels of justice grind slowly…

Here are the two parliamentary questions and responses.

Deputy Pearse Doherty: To ask the Minister for Justice and Equality if he will provide an update on the Garda Siochana investigation of the alleged unauthorised removal of confidential data by a former employee of the National Assets Management Agency.

Minister for Justice and Equality: I am informed by the Garda authorities that An Garda Siochana received a complaint in relation to the alleged unauthorised removal of confidential data by a former employee of the National Assets Management Agency.

I am further informed that the matter is under investigation and a file will be submitted to the Law Officers upon completion of the investigation.

As this matter is under investigation it would be inappropriate for me to comment further at this stage.

Deputy Pearse Doherty: To ask the Minister for Finance if he will provide an update on the Data Protection Commissioner investigation of the alleged unauthorised removal of confidential data by a former employee of the National Assets Management Agency..

Minister for Finance, Michael Noonan: As the Deputy can appreciate, it is not my function, as Minister for Finance, to formally monitor cases been taken by the Data Protection Commissioner against individuals and companies. The Minister for Justice and Equality has advised me that the Data Protection Commissioner is independent in the performance of his duties.

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News on Friday last that Bank of Scotland (Ireland) has had receivers appointed to various assets of county Down developer, MAR Properties and five of its subsidiaries. The BBC reports that there are nine properties affected which are shop units on Bangor’s Main Street – presently for sale through Osborne King here – the Mountpottinger YMCA building in Belfast, houses and development sites in Kircubbin, Groomsport, Bangor, Ballywalter and Carrickfergus.

The MAR group was founded in 1997 by Noel Murphy (“M”), Adam Armstrong (“A”) and William Rush (“R”). The group developed residential and commercial property in Northern Ireland, Scotland and England. In January 2013, it sold the Cultra Railway Station in county Down. Some of its loans are in NAMA, and loans to MAR are understood to be one of NAMA’s largest exposures in Northern Ireland and no doubt NAMA will study the latest developments carefully.

NAMA has acquired GBP 3bn (€3.5bn) of loans from Northern Ireland by reference to original par values and paid GBP 1.26bn (€1.5bn), and to date, it has advanced €125m to Northern Irish developers for the development of projects, though some of this money has been spent in the mainland UK.

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