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Archive for May 8th, 2013

“The Black Book was the CB crisis management manual including guidance on subjects such as emergency liquidity assistance, legal requirements and more logistical issues.” Nyberg report on the banking crisis published March 2011

This sounds like something out of the Evil Dead, but it seems that the Central Bank of Ireland has a ”Crisis Management Manual” also known as “The Black Book” which is a “set of processes and procedures to assist it in the management of a financial crisis situation”. It was drafted in 2001 and updated in August 2007. Given that it was in existence before the Night of the Bank Guarantee in September 2008, before the nationalization of Anglo Irish Bank in January 2009 and the creation of NAMA in December 2009, you would think that we had a right to see this Black Book. Let’s not forget that this state has borne the €71bn gross cost of bailing out the banks – that’s the famous €64bn plus €1bn shoveled in, in March 2013 to pay IBRC bonds plus €6bn of state-aid given to the banks by NAMA.

In the Dail this week, the Independent TD for Wicklow and east Carlow, Stephen Donnelly asked Minister for Finance Michael Noonan to provide a copy of the Black Book, and…… yes, you’ve guessed it, it’s confidential. In fact Minister Noonan went further this time and said “The document was shared with the Department of Finance on the understanding it would be treated in strictest confidence given the nature of the matters treated in the document. I do not therefore propose to provide a copy of the document.”

It can’t have been a great read.

The parliamentary question and response are here:

Deputy Stephen Donnelly: To ask the Minister for Finance if he will provide a copy of the Crisis Management Manual, also known as the Black Book, as it existed at the end of 2006 and/or as redrafted during the period August 2007 to September 2008 under the auspices of the Domestic Standing Group, as referenced in the Honohan Report and the Nyberg Report (details supplied); and if he will make a statement on the matter. [21091/13]

Department of Finance, Michael Noonan: The document referred to by the Deputy in his question was drawn up by the Central Bank of Ireland to provide it with a set of processes and procedures to assist it in the management of a financial crisis situation. The question of releasing the document is therefore a matter for the Central Bank of Ireland in the first instance. The document was shared with the Department of Finance on the understanding it would be treated in strictest confidence given the nature of the matters treated in the document. I do not therefore propose to provide a copy of the document.

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All has gone quiet on the new personal insolvency schemes until the end of June 2013, when the Insolvency Service is set to open for business, and it may be the end of 2013 when we have our first personal insolvency cases processed. At that point, people will find themselves on a public register with their name, addresse and age. In a country where the quarterly tax defaulters’ list still instills shame, the humiliation of being published in the insolvency record will not be easy, particularly for those working their way through debts which resulted from the property boom/crash and unemployment.

They may also want to contrast their naming-and-shaming with the approach adopted with the recent debt writedowns at Thomas Crosbie Holdings and Independent News and Media.

TCH is the publisher of the Irish Examiner, Evening Echo, Sunday Business Post and other local papers as well as the operator of local radio stations, and it has been given a debt writedown by AIB. We presently own 99.8% of AIB and next Monday, we will own 99.99% of AIB when it pays us in ordinary shares, a dividend on our preference shares. In March 2013, just before TCH entered a pre-pack receivership and, in the case of the Sunday Business Post, an examinership, it is understood that TCH owed €28m to AIB; and although we don’t know the debt writedown that was obtained as part of the receivership/examinership, the betting on here is that the writedown was more than €10m. Most of the papers and radio stations in TCH are now owned by Landmark Enterprises which is controlled by Ted and Tom Crosbie, shareholders in the old company and the fifth generation in the dynasty of Cork newspaper owners.

A €10m writedown may be large in comparison with some of the modest writedowns that people undergoing the personal insolvency scheme, will see, but is tiny in comparison with the debt writedown at Independent News and Media, Ireland’s largest newspaper publisher which counts amongst its stable the Independent, the Sunday Independent, the Sunday World, the Herald, the Belfast Telegraph and Sunday Life. Last month it reported that its banks were to writedown €138m of about €430m of loans. Both AIB and 15% state-owned Bank of Ireland were two of 6-8 banks with loans to IN&M, and it is believed both had around €80m of loans outstanding. Again, the state will be taking a big hit. IN&M is 30% owned by Denis O’Brien, who, with wealth estimated at €4bn is Ireland’s second richest person. And how many millions of a writedown has Denis received via his stake in IN&M?

You may never know. In the Dail this week, the Minister for Finance Michael Noonan was questioned about the writedowns. The response was curt – “due to data protection rules and customer confidentiality the banks are not in a position to discuss details of individual customer circumstances”

Alas, data protection won’t save the humiliation of those named-and-shamed on the new personal insolvency register.

The parliamentary questions and response are here:

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the amount of debt forgiveness that will be provided by Allied Irish Bank to Independent News and Media as part of the latter firm’s recently announced reorganisation plans.

Deputy Luke ‘Ming’ Flanagan: To ask the Minister for Finance if he will state, in both absolute and percentage terms, the amount of the debt being written down by wholly and partly State owned lending institutions for Thomas Crosbie Holdings Ltd. and Independent News and Media Ltd; and if he will make a statement on the matter.

Deputy Luke ‘Ming’ Flanagan: To ask the Minister for Finance the percentage stake the State will now hold through Allied Irish Banks and Bank of Ireland in Independent News and Media Ltd. as a result of the debt for equity swop to facilitate the write down of INM Ltd. debt; and if he will make a statement on the matter.

Minister for Finance, Michael Noonan: I propose to answer questions 132, 150 and 152 together.

I have been informed that due to data protection rules and customer confidentiality the banks are not in a position to discuss details of individual customer circumstances.

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Apparently the Labour Relations Commission has been granted more time by Minister for Public Expenditure and Reform Brendan Howlin to discuss the rejection of the Croke Park 2 agreement with unions and to formulate new proposals. I wonder what Minister Howlin’s response would be next week be if Kieran Mulvey at the LRC were to come back and say to the Minister “I’ve now discussed the matter with the unions, they’re not changing their minds, and the matter is now closed”

Because, that is the response which Minister for Finance Michael Noonan has given in respect of the three high-earning refuseniks at the NTMA/NAMA – you’ll recall that two weeks ago, we reported that 13 staff at the NTMA/NAMA were earning over €200,000 per annum and all had given 15% waivers in 2012; Minister Noonan was asked if the waivers were continuing in 2013, and the Minister responded that only 10 had agreed to continue the waivers with the other three’s salaries returning to pre-waiver levels.

In the Dail this week, the Minister for Finance was asked what further consultations were taking place in respect of the three refuseniks, and the answer is that the NTMA CEO has informed Minister Noonan that the three aren’t taking waivers, and Minister Noonan does “not plan any further consultations on the matter”

We don’t know if the three refuseniks are in NAMA’s 250 staff or the remaining 250 staff at the NTMA, though we do know that both the NAMA CEO Brendan McDonagh and the NTMA CEO John Corrigan have continued with their 15% waivers in 2013. [UPDATED] Minister Noonan has also confirmed the CEO of the National Development Finance Agency which is part of the NTMA, Brian Murphy whose salary is €297,000 has continued his 15% waiver.

The parliamentary question and response are here:

Deputy Pearse Doherty: To ask the Minister for Finance further to Parliamentary Question No. 224 of 23 April 2013, the consultation, if any, that he had on the three persons at the National Treasury Management Agency and the National Assets Management Agency who have not accepted waivers on their €200,000 salaries in 2013.

Minister for Finance, Michael Noonan: The Chief Executive of the National Treasury Management Agency informed me of this matter in the course of putting in place the administrative arrangements for the continuation of the gifting of 15% of salary or such lesser amount of salary as exceeds €200,000 by employees whose salary exceeds €200,000.  I do not plan any further consultations on the matter.

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PRTBLogo

The old media is today claiming that the new residential rent index from the Private Residential Tenancies Board provides for the first time an index of actual rents rather than the asking rents that Daft.ie tracks. That claim is rubbish, as the CSO incorporates private rents in its monthly inflation figures, and the source for their figures, are estate agents across the country providing actual rents. Apparently the PRTB index will support the findings of the CSO index and confirms residential rents are up modestly over the past year, 2% according to the old media which is in line with the 3.4% increase in the CSO index.

The PRTB index is not yet online but it should be available here later today. It has been produced with the ESRI – no, don’t groan – and in the near future, not today, the CSO will provide a facility whereby you can look at types of property is all parts of the country, so if you want to see what a two-bedroom apartment costs in Athlone, you’ll be provided with averages and an index to indicate if prices are increasing or decreasing.

“This is all great” I hear you say, so why are we being shortchanged?

It recently emerged in the Dail that the PRTB had provided the Minister for Social Protection Joan Burton with a complete listing of ALL residential property rented in the country including address and rent amount. The listing did not contain the name of the landlord and tenant, and apparently in this way, according to Minister Burton, no data protection laws were broken.

The Opposition tried to get hold of the database, but was told that the information had been provided by the PRTB to the Department of Social Protection pursuant to Section 146 of the Residential Tenancies Act 2004 and Section 261 of the Social Welfare Consolidation Act 2005. Minister Burton suggested to the Opposition that they might contact the PRTB themselves for the data, but because the Opposition is not the Minister or a Local Authority and therefore can’t rely on the 2004 Act, they’re not likely to be successful.

So, perhaps today, we will get a small additional chink of light refracted through the dubious lens of the ESRI, but there is no data protection impediment to getting the full listing of addresses with rents, so that you would have true transparency. If you can see what a particular property sells for on the Property Price Register, why can’t you see its rent.

The parliamentary questions and responses seeking the underlying data are here:

Deputy Pearse Doherty: To ask the Minister for Social Protection further to Parliamentary Question No. 586 of 16 April, 2013, if she will make available the file of data received from the Private Residential Tenancies Board, data which she says does not give rise to data protection implications, but which presumably provides addresses, details of accommodation and rent costs.

Minister for Social Protection, Joan Burton: As part of the review of rent limits, the Department has received information from the Private Residential Tenancies Board (PRTB) from its register of tenancies. This data exchange is provided for by legislation under Section 146 of the Residential Tenancies Act 2004 and Section 261 of the Social Welfare Consolidation Act 2005. The data snapshot provided contains details of registered tenancies and does not contain names of tenants or landlords.

There are no data protection implications from the use of this information by this Department. However, the data provided to the Department remains the property of the PRTB.  If the Deputy wishes to access such data he should contact the PRTB directly.

Deputy Pearse Doherty: To ask the Minister for Social Protection further to Parliamentary Question Nos. 136 and 144 on 21 March 2013, in which she stated she had obtained data from the Private Residential Tenancies Board including a snapshot of the PRTB’s database which stores all annual rental values and relevant addresses, if she will confirm the way accessing such information was permitted in the context of data protection legislation

Minister for Social Protection, Joan Burton: The purpose of the rent supplement scheme is to provide short-term support to eligible people living in private rented accommodation whose means are insufficient to meet their accommodation costs and who do not have accommodation available to them from any other source.  The overall aim is to provide short term assistance, and not to act as an alternative to the other social housing schemes operated by the Exchequer. There are currently approximately 86,000 rent supplement recipients for which the Government has provided €403 million for 2013.

As part of the review of rent limits, the Department received information from the Private Residential Tenancies Board (PRTB) from its register of tenancies. This data exchange is provided for by legislation under Section 146 of the Residential Tenancies Act 2004 and Section 261 of the Social Welfare Consolidation Act 2005. The data snapshot provided contains details of registered tenancies and does not contain names of tenants or landlords. There are no data protection implications from the use of this information.

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“An Individual Voluntary Arrangement* would have produced a much greater financial return to NAMA and my other creditors. However, I have been advised that NAMA would never, and had by then never, engaged constructively with an IVA and so my only real option, in the absence of being able to satisfy the demand was to petition for bankruptcy. “ Businessman John  Fraher’s affidavit in his unsuccessful defence against NAMA’s application for a €5.9m judgment

This may not be a first, but it is the first that has made it into the media. Kerry developer John Cahillane is attempting to negotiate what the Brits call an Individual Voluntary Arrangement or “IVA” – see below* for summary explanation. This is an alternative to bankruptcy and is roughly akin to our Personal Insolvency Arrangement which allows for assets to be disposed of, for the debtor to work with their creditors over a period of time, and to provide what would usually be a better result for creditors.

In John’s case, he claims that if he files for bankruptcy, his unsecured creditors will receive 0c in the euro but through an IVA they will receive about 13.5c in the euro. John Cahillane says he has assets of €56m and liabilities of €73m. This is a Part 1 of a 2-part blogpost, Part 2 tomorrow will examine the IVA proposal in detail but in essence, John is trying to get NAMA to accept that its recourse is only to the property securing the loans, and John is saying he will make a €60k-odd contribution to the IVA from third party contributions – maybe from his wife, but that doesn’t appear to be specified – and from equity in his family home.

NAMA moved against John’s company in December 2011, having KPMG appointed as receivers to Cloonbeg Developers Limited. It would appear from the IVA that John subsequently relocated to the UK, his present address is in Kilburn, north London and he says he informed his creditors of this relocation in January 2013. He is presently employed as a business development executive with Purcell Development Services Limited, a new company in which John “identifies new development and construction projects for investors in the UK and Europe”.

John’s property businesses were based in Ireland (mostly Kerry, it seems), Portugal, mainland Spain, the Canary Island and Cape Verde.

John’s biggest creditor at €54m is NAMA following NAMA’s acquisition of AIB loans, and NAMA has apparently taken a negative position on the IVA proposal. This is seemingly a policy stance at NAMA, because John Fraher in a completely unrelated court matter last week, said in his affidavit that NAMA won’t entertain IVAs. NAMA was asked today to comment on its position on this IVA proposal, and also about its general stance towards IVAs. There has been no response at time of writing.

Other creditors, apart from NAMA, which comprise a minority of the €73m of debts, are more supportive – creditors in a Cape Verde scheme apparently owed €11m are supportive. There is a creditors meeting scheduled for Friday 10th May 2012 in London to determine the way forward. The London City branch of English accountancy firm, MHA MacIntyre Davis is acting on behalf of John Unfortunately John needs 75% of his creditors to agree to the proposal, and the scheme will fail unless NAMA accepts it.

What is an IVA?

Alternative to bankruptcy, akin to our personal insolvency scheme, but has very significant differences.

Term, can be days but typically is for five years, six if the IVA doesn’t force the sale of the family home

Assets and liabilities, like a bankruptcy, most assets are generally liquidated to pay the liabilities.

Pension pots, generally protected.

Family home. If your home is worth more than its mortgage, usually you’re required to re-mortgage and pay the equity into the IVA. If you can’t then your IVA period may be increased by 12 months.

Income. Like the personal insolvency scheme, you work out with your Insolvency practitioner, or IVA practitioner, what you need to live on and the rest gets paid into the IVA, which pays the practitioner and your creditors.

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