Loan Sales creating uncertainty for Irish business owners

It has been a sad number of weeks for Businesses right across Ireland.

The indigenous Banks have now taken to selling their loan books to American Vulture Funds. The latest that has been widely reported but in a very banal and mundane fashion particularly by some of the local media has just reported that the Vulture funds are buying these loans particularly from Ulster Bank, The RBS Group and their reconstruction division R.C.R. This is a sure sign if we needed to be told of how distressed Ulster Bank are and their draconian model for dealing with impaired borrowers and how they would exit the Irish Market.

Their new business model would appear to be to support people who would require  new lending not necessarily for new businesses but who have cash in the Bank. We could all do that as there is very little risk involved. However what about lending to those people previously who now find themselves as part of the vulture fund loan sales.

The question has to be asked from not only a business but from a moral perspective, if Ulster Bank made funds available to these borrowers and are now selling the loans what lies ahead for the borrowers? What thought have Ulster Bank given the fate of their clients and customers who they lent money to and who are now with the Vulture funds from the United States? As has been widely reported by us and in other media outlets there is no debt forgiveness with the Vulture Funds.

They are not a Bank - they are a Business. They are there to make as much money as possible. I am not saying that they are making as much money as possible at whatever cost to the borrowers and it would be unfair of me to criticise their business model as they are seeing and taking up an opportunity presented to them on a plate by the financial institutions who are now selling their loans.

Surely our overriding concern should be for the treatment of the borrowers? The Banks and in particular Ulster Bank  lent and advanced money  to them recklessly and now like Pontius Pilate they are washing their hands of the problem. Will the borrowers now be crucified by their new Masters?

We would like to ask Ulster Bank one more time because there is a deathly silence from them in this regard if have they no regard for their incumbent clients and customers whose loans they are selling wholesale to the American Vulture Funds?

The knock on affect as previously raised by GDP on the borrowers and business in Northern Ireland will be extremely dramatic and felt right across the Province and indeed throughout Ireland.

It is noticeable that PriceWaterhouseCoopers  have come out and said that the Northern Ireland budget is not balanced for 2015/2016 and that this is the sign of grave AUSTERITY  to come for the residents of Northern Ireland. The Loan sales will only add to this. The sale of the loans by the Ulster Bank rather than work through the problems with the borrowers will only heap further misery on distressed borrowers who have been going through professionally and personally a most distressing at this time since the crash.

We further call upon the media to investigate these sales and hold these Bankers to account.

JAMES GIBBONS LLP

BANKS BACK LENDING - BUT TO WHO?

We have been reading with interest over the last number of months that the various Irish Banks including Bank of Ireland, AIB, Permanent TSB and the U.K. Bank are keen to start lending again. Our Market soundings would suggest that this is proving more difficult than would first appear. We understand that most of the Banks are off loading their impaired property assets to repair their balance sheets so that they can improve their Capital position thereby offering new borrowers new facilities.

If and when this happens it will obviously be excellent news for not only the Irish but also the U.K. Economy. However one matter seems to have been overlooked. As the Banks off load their property book to the American Vulture Funds the problem really hasn't gone away. The overused term moving the deck chairs on the Titanic means that the borrowers remain in situ except they have a  new lending master. This new master does not have the patience, willingness nor desire to work with borrowers for the medium to long term. They are here for short term solutions and a big quick returns, it is a ‘smash and grab’ business model. So if the remaining borrowers are still caught up in the property debacle even though their loans may have been bought by American Vulture funds will the Banks lend to these people. The short answer is no. So who is left to borrow money from the Banks, yes SME's in a small way, Entrepreneurs if there are any left and people who have potentially re-invented themselves. Do we not hear the PR machine from the Banks crying out that there is no demand from SME’s for their loans?

How large is this market? This will not get the economy moving again and will not allow the Banks to release further capital nor will it improve the liquidity for businesses throughout the Island of Ireland. So what is the solution, surely the current Banks that are off loading their property book must take a more pragmatic approach to lending and relax their overall lending criteria to borrowers who have decent proposals but due to high levels of due diligence now required by the Banks who are still risk averse cannot borrow the funds. As I look around Belfast this morning on a bright and beautiful November morning I can see two cranes currently in operation at the new university planned for York Street.

Nothing else in the construction property market is happening in Northern Ireland. Will we catch up with Dublin not in the immediate short term as there is a huge lack of finance available for the industry to move forward.

Perhaps the only good thing to come out of these loan sales is the 7 years of stagnation we have had is now coming to an end but the question is how we will encumbered borrowers deal with their new masters and the huge overhang of debt that still has to be addressed.

We will keep a watching brief on the treatment of borrowers by the Vulture funds and by the Banks as the next 3 months will prove critical for borrowers and the economy alike.

 

JAMES GIBBONS LLB

WHAT DOES THE FUTURE REALLY HOLD FOR NI?

Last month I ran the Dublin marathon in just under four hours.  It was a great day with the people of Dublin coming out in force to support over 15,000 runners through the 26.2 miles.  The feel good factor after doing something like a marathon is always great.  However on this occasion the euphoria was short lived as I drove back to Belfast listening to the radio local politicians were sniping at each other over the austerity program and the incoming cuts to our budget with the added occasional descent into a rant with name-calling.

For me it’s all theatre as despite all of the bickering and fighting Stormont approved a budget for next year, all be it, not one we should celebrate too quickly. 

In the last few months I have listened to some elements of the media, politicians and economists tell how the economy is improving.  Apparently more people are working; the private sector is picking up and the property market is moving again! It is going that well that Stormont is preparing asset sales of their crown jewels to pay for the £100m so called Wonga loan note that Westminster has lent to us.

In short and from a statistical point of view, yes the economy in Northern Ireland has certainly picked up.  However I would suggest that the man on the street is not feeling this and furthermore won’t be feeling the benefits of an upturn anytime soon. 

Recently I have seen evidence of the huge household debt overhang facing many people and with the insolvency cases hitting record numbers this year it is forecast that this trend will continue.  It is accepted that Northern Ireland has a greater problem dealing with debt than the rest of the UK, with 27% of the population over indebted, compared to the UK average of 18%, that’s according to the Money Advice Service.

However there is another problem facing the economy that has gone largely unnoticed which is causing me concern and it has the potential to put the Northern Ireland economy back into a nosedive. 

By 2014’s year end, billions of pounds worth of property loans will have been sold by NAMA and Ulster Bank which relate to our small to medium sized business community.  These loans have been and will be bought by American Vulture Funds for the most part.  These Funds will now own the loans and will be responsible for the out-workings of these loans. 

The challenge for the SMEs through no fault of their own is how they remain in control of their assets and their business.  If we look at what happened in Cork of late whereby an American Vulture fund tried to take control of a very lucrative family business by calling in a personal guarantee at very short notice – this is alarming!

In the last few weeks our practice has been contacted by dozens of companies from all over Northern Ireland. Their bank has advised, Ulster bank in most cases, that their loans are being sold.  The businesses have no say in the matter and the bottom line is they will soon have to deal with a new bank or to be more accurate private equity companies that want their money back.

Having worked in this space for the past eighteen months I advise that for the SMEs in this position it will prove extremely tricky to keep everything on track.  The private equity companies which are buying these loans aim to get 15/20 % internal rate of return on their monies per annum, and this type of business model is not conducive to supporting a local business which maybe working to a longer term business plan.

It would appear that one exit strategy for the SME is to find a finance partner or a bank that will support them.  The challenge in Northern Ireland is that our banks are not open for business for the most part and those that are, their terms are such that they cannot or will not assist.

SMEs that find themselves in one of these loan trades need to be proactive in terms of putting together their own proposals and ultimately trying to stay in control of their businesses. It’s certainly not for the faint hearted however a solution is possible.

For me the austerity program is now starting to unravel and with its lifespan due to run to 2020 it is very hard to be optimistic. Maybe I need to run more marathons to have any chance of experiencing euphoria in the near future as any sense of optimism or business optimism in Northern Ireland is someway off giving the current sorry state of affairs.

Conor Devine MRICS

VULTURE FUNDS ARE CIRCLING

Last week it was announced that Goldman Sachs has purchased yet another portfolio of loans included in Project Nadal loan sale by Ulster Bank.

This portfolio purchased by Goldman Sachs includes the Radisson Blu Hotel, near St Patricks Cathedral in Dublin, The Radisson Blue Hotel at Dublin Airport; The Hilton Hotel in Kilmainham, close to Heuston Station; The Arlington Hotel at Lord Edward Street, Dublin, and the five-star Merchant Hotel in centre of Belfast.

As reported in the Sunday Business Post, Goldman Sach’s strategy is to sweat these assets for a period of time and then sell these assets or float them on the stock market which will no doubt net them a huge profit. This is great business for Goldman Sach’s and they have an excellent track record in delivering these opportunities . Why wouldn’t they as it will make them millions ? 

It is not however great business for the current owners who have built up these businesses over years of seriously hard work. This strategy by Goldman Sachs demonstrates how vulture funds got their name.

Having dealt with these vulture funds on numerous occasions on behalf of borrowers we have a clear insight to how they work. Their modus operandi  is quite simple. They want as much financial return from the borrower/asset as possible. Negotiating with the vulture funds will be a difficult process as they hold most of the cards and can demand repayment of the loan at anytime as most of the original loan agreements are in default due to the property crash. The borrower has to demonstrate to the vulture fund very quickly how they can bring value to the them or within 3-4 months the funds will have moved the borrower out of the equation.  That's how they work!!!

The only way out for the majority of borrowers is to try and refinance their loans with another lender or capital partner. As most of the Banks in Europe are broken they have little or no interest in lending to commercial property or hotels due to the new Basel banking rules. Alternative finance is therefore hard to source at this time, however it is possible. 

GDP Partnership have sourced funding of £30MM in the last three months to assist borrowers retain control of their assets and life’s work. This has been hard work but we have helped several international funds understand that Ireland both North and South is a great place to invest for the long term. This is different to the vulture funds that have taken a short term view and want to get out of Ireland in the next 2-5 years.

Ulster bank only last week have increased their most recent loan sale form £2bn to just over £6bn of assets.  This trade will likely go through before the end of the year.  This is a clear indication of the strategy RBS now has for Ulster Bank here and although painful for the bank and its balance sheet you can understand why they might want to go down this route.  However Northern Ireland is currently dancing on the head of an economic period of disaster with £850m of cuts due to be announced this week.  The next six years will see the austerity program continue to be rolled out.  Bearing all of this in mind, Ulster Banks most recent announcement will only add to the economic woe of the country.  Already we have been inundated with SME's who are now part of this loan sale who are really concerned about their businesses, and so they should be. 

Alternative finance is vital to truly restarting the economy across the whole island of Ireland and not just the major cities. By being proactive, entrepreneurs and established businesses can source new funding for their business.

Don’t wait for the Vultures to pick over the carcass……Act now.

LOUIS WATTERS ACA

ARE THE LIGHTS GOING OUT AT STORMONT?

Commentators and journalists have been poring over the utterances and musings of our local politicians. As they try to get a handle on what the next steps are for the House on the Hill following the referendum vote in Scotland and the ongoing welfare reform, many of us are wondering what it will take for our politicians to get their act together, make the hard calls required and ultimately keep NI PLC on the rails.

Unfortunately it appears that matters are spiraling out of control, with health care cuts, welfare reform, departmental malfunctions, ministerial changes and misleading letters, not to mention the very real and pressing issue of the short supply of monies for every department in the Executive.

Running a country is very much like running a business and on this comparison I think it’s fair to say that Stormont is currently in administration. Its Managing Director has stated in the past two weeks that the company is not fit for purpose, so if that’s the case then the p45’s are likely in the post and lights are about to go out.  Certainly the odds at this point appear to be stacked against it surviving in its current form.

I feel the business is savable, at the very least all efforts should be made to do so, however for that to happen there does need to be an agreement on the business plan and also a will to want to save it by all of those involved.  I am not sure that the board members of NI PLC even want to do this at this point, given the lack of progress over recent months.  This is a very depressing thought for all of us and the majority of us who do want to build on the peace established and put the building blocks in place for the country to prosper.

For any SME or larger businesses out there, most would agree that the business environment in NI is extremely challenging.  As our banks continue to try and get their own businesses in order after the property crash, the business terrain is extremely rocky.  The unsettled nature of Stormont and the fact that we have another six years of austerity ahead is a sobering thought for even the most optimistic of entrepreneurs.

Over the last few years our own company GDP Partnership has been able to help hundreds of businesses and individuals get back on track by dealing with many of the challenges, mostly financial that they have had to face in recent times.  Ultimately there are three ingredients to getting a business back on the rails;

1.      Diagnosis of the problem (s)

2.      Strategy to deal with same

3.      Execution of achievable business plan

If our MD Mr Robinson who is regarded by many as one of the countrys most astute strategists and business heads took on board the above and more importantly got his board to buy into it with him, then NI PLC would have a real opportunity to get back on track.  However, unfortunately the signs are not good. 

For everyone living and working here, we can only live in hope that the current challenges can be overcome.  I think its fair to say we have overcome a lot more difficult challenges in the last twenty years so lets hope those in control dig deep, get it sorted out and allow all of us to continue to make progress.

GOOD OLD RBS. . . . .

As we are all now unfortunately aware Ulster Bank are for all intents and purposes closing their GRG Resolutions group. This means that borrowers have been told to either re-bank or re-finance their loans or face the pleasures of recovery.

What happens if you can't escape from GRG?

You will be glad to know that RBS have come up with an innovative solution. Not only have they agreed to sell your loan to the American Vulture funds but as of this week RBS are now funding by way of Debt the purchase of the very loans that they are selling. Yes, what you read is correct.

On news wires this week it became apparent that RBS have funded Senior debt for a Company called Kennedy Wilson. Kennedy Wilson ARE the company who have bought loans and properties from Bank of Ireland from their distressed loan book.  They are what's known as an American Vulture fund.

 

Can you believe that RBS the parent of Ulster Bank WHO ARE CLOSING PROPERTY LENDING are now funding Vulture Funds with senior debt to acquire these loan books and/or to refinance.

You couldn't make this up......

How disappointing it is that the tax payer yet again is being caught with the losses that have been sustained by RBS and Ulster Bank as a whole on property loans while at the same time RBS are funding the very Vulture funds that are acquiring these loans.

If you were not aware of this you are now  - so let your representatives know across the board that this is the kind of activity that a state owned Banks are doing.

Watch this space and as ever we will keep an eye on the innovative ways that these Bankers are generating fees and returning their businesses to profit.

 

James Gibbons LLB

Lloyds Banking Group Unfairly Double Billing Borrowers In Arrears

***URGENT NEWS FOR BORROWERS WITH LLOYDS BANKING GROUP***

 

GDP Partnership brought this matter to the attention of Borrowers at the beginning of July 2014 and to date we have been able to assist many of our existing and new clients.

It has been publicly announced that Lloyds Banking Group has been unfairly double billing customers who fell behind on their mortgages, and in a scathing verdict, Master Ellison said the bank's behaviour had been "unconscionable".

The findings will have implications for thousands of Lloyds Banking Group mortgage holders across NI and the UK. If the bank's practice had gone unchallenged, many borrowers would have lost their homes.

The Lloyd's Banking Group include Bank of Scotland, Birmingham Midshires, Cheltenham & Gloucester, Halifax and TMB.

Basically the Group capitalised arrears but the banks continued to treat such mortgages as in arrears and used that as the basis for bringing legal cases.

This perception of borrower affordability was distorted. This resulted in already struggling borrowers being threatened with repossession on account of an "erroneous and fictional arrears balance".

As a result "many" court decisions concerning suspended repossession orders had been made on "erroneous assumptions". Due to the smoke and mirrors presented by the bank through their legal advisors, many injustices have already passed through the courts and this is very concerning.

Master Ellison said that as a result of this he was imposing a series of strict conditions on the bank if it tried to enforce any existing suspended repossession orders. He said that if the bank failed to meet these conditions, it "may face an uphill struggle".

GDP Partnership has welcomed the decision and the stance being taken by Master Ellison. Publication of the findings may be too late for some, but welcome news for many.

Repossession should always be a last resort and it is more beneficial for all parties to come to an amicable agreement in respect of mortgage debt.

The GDP Partnership USP promotes education around these financial issues in order to empower borrowers to make their own decisions. It is important they are aware of ALL the options available when it comes to dealing with debt.

Since its inception we have helped 1000's of people deal with their debts and move on with their lives.

For more info or to see if we can help you...get in touch with our Equity Experts at info@gdpni.com.

DARWIN ALLEN AABRP
SENIOR RELATIONSHIP MANAGER

ALL NOT WELL IN EUROZONE

Paper doesn’t refuse ink so those with the requisite skills are able to take a story and make it sound positive or negative based on their own particular needs. Some would call it spin, others may describe it as blatantly or deliberately misleading to further their own aims but numbers or statistics are far more difficult to manipulate.

Depending on what and where you read your news, there is quite clearly a battle being waged between pessimism and optimism about whether or not Europe is stuck in a quagmire or marching back to growth and knocking every obstacle out of its way. Both sides have strong and lucid arguments but strangely whilst one is pessimistic and the other optimistic, they both agree on what needs to be done and where the focus for a recovery is required, be that continued recovery or the start of one – finance and lending.

Optimism in Ireland these days is never in short supply. Property prices are increasing nicely; positively streaking ahead in Dublin, the government is borrowing at lower and lower rates and Fitch have most recently upgraded Irish Debt. All appears well and whilst we are no longer careering towards ‘junk status, the backdrop in Europe is far from rosy. Being complacent caused many of the problems that we have been facing and being complacent and not cognizant of what is happening in the wider global economies may see us caught unaware once more. While the rest of the world recovers from the Great Recession of 2008-2009, Europe is stagnating.

The numbers don’t lie. This week’s figures for the euro-zone economy were far from healthy, however you try to decipher them.  An already feeble and faltering recovery has stumbled. Output across the euro area was flat in the second quarter, following a poor start to the year when the single-currency club managed to grow by just 0.2%. Yes, there were some more positive results, the Dutch and Portuguese economies, which had contracted in the first quarter, rebounded, growing by 0.5% and 0.6% respectively. Spanish growth picked up from 0.4% in the first quarter to 0.6% in the second. But these performances were overshadowed by the poor figures recorded in the three biggest economies. Italy, the third largest, had already reported a decline of 0.2%, pushing it into a triple-dip recession. France, the second biggest, continued to stagnate. But the real blow came from Germany, the powerhouse of the euro zone, where output slipped by 0.2%.

Should this be cause for concern? Of course, the new GDP numbers are yet more evidence that the euro-zone economy is in a bad way. Consistently low inflation has prompted fears that Europe will soon slide into deflation. Prices are already falling in Spain and three other euro-zone countries. Deflation is a real possibility and would be particularly grave for the euro area because both private and public debt is unrealistically high in many of the countries that share the single currency. Even if inflation is positive but stays low it hurts debtors, as their incomes rise more slowly than they expected when they borrowed. Not dealing with the debt burdens that we built personally, as businesses and as a nation will continue to come back to haunt us.

Access to capital remains an issue for all and lies at the centre of a continued recovery, both in Ireland and in Europe as a whole. Many of us remain concerned that Europe has not moved as fast as the U.S. when it comes to the cleansing of balance sheets of financial institutions. We want banks to bring their balance sheets in order but also lend more money; the contradiction is difficult to ignore.  There is a worldwide backdrop of banks deleveraging but we expect them to write new business. It simply cannot and will not happen.

Banks dominate the provision of credit in the euro area unlike the U.S., where companies raise much of their funding on the bond markets, concerns remain that not enough is being done to improve lending In Europe. The stress tests are belatedly getting the job done, but they still remain a powerful brake on lending until they are properly completed. There will be no safe recovery until this is addressed.

So whether your glass is half full or half empty based on what you see in Ireland, a lot of what happens in the future will be heavily influenced by what is happening in the rest of Europe. The numbers do not lie, it’s not as good as it may first seem.

Nick leeson

IMPORTANT NEWS FOR ALL BORROWERS

***URGENT NEWS FOR BORROWERS***

 

Fixed Charge Receivers may be liable for rates in respect of properties they are appointed on.

HAVE YOUR PROPERTIES BEEN PLACED IN A RECEIVERSHIP BY THE BANKS???

Please note that although the Fixed Charge Receiver is appointed by the bank, they act as an agent of the borrower. It has been confirmed by the Land & Property Services, that despite prior widespread belief by all professionals in the insolvency/recovery industry, Fixed Charge Receivers can be liable for the rates in respect of properties they are appointed.

The key point to confirm liability is depending on whether the property is occupied and who is receiving (or entitled to receive) the rent. In brief if the property is:

* Unoccupied - the ratepayer remains liable for the rates.

* Occupied - (with rent being paid or entitled to be paid) the Fixed Charge Receiver is determined to be the 'owner' and thus liable for the rates.

NB: If the property is not tenanted but a Fixed Charge Receiver is appointed, the ratepayer remains liable for the rates.

If you have been affected you can contact our team for professional help .We can advise you on your course of action. Please also note that if any recovery action has begun on the accounts, all recovery proceedings can be suspended while we await information to determine who has the liability of the rates.

GDP Partnership welcome the recent stance taken by the Land & Property Services. Due to a lack of affordability on property debt it has been unfortunate that there has been an increase in defaults and the appointment of Receivers.

It has been widely recognised by all professionals that it is unfair and unreasonable that Receivers collect/collected the rent from a property and the borrower is/was then expected to pay the rates. Many borrowers relied on the revenue from the property to pay the rates.

Whilst this will be welcome news for some, for many it has unfortunately came too late. There has been countless Bankruptcy Petitions against borrowers for rates debt by the Crown Solicitor Office on behalf of the Land & Property Services.

In light of this, some unanswered questions now remain. They may explain why this new policy and position has not been publicly announced but been implemented by the Land & Property Services since July 2014.

The main question is how many injustices have passed through the courts? Are there cases where debtors, who were declared bankrupt, were actually not liable for the rates of which they were being asked?

Equally as important will the Fixed Charge Receivers repay the rates to the Land & Property Services for the historic property debts to which they are personally liable?

Let's also remember they will have forwarded these funds to the charge holder who appointed them, usually a bank. Will they return the funds to the Receiver?

Whilst we watch these points with interest, in the last 24 hours our team of experts has already saved our existing clients thousands of pounds in respect of rates they thought they owed.

If you have any queries about your property rates, especially when a Receiver had/has been appointed, please do not hesitate to contact GDP Partnership.

DARWIN ALLEN AABRP
SENIOR RELATIONSHIP MANAGER

BLOOD ON THE STREETS - DOSE OF REALITY REQUIRED IN IRELAND

In December 2010, the CEO of Blackstone told an audience that they were ‘waiting to see how beaten up people’s psyches get and where they are willing to sell assets’ and that ‘you want to wait until there’s really blood in the streets’. He was talking about Ireland and you the Irish people. Blackstone have already amassed a €2bn portfolio of Irish assets and last week appointed receivers on the single largest borrower in that portfolio, Michael Flynn, so quite clearly that time has come

Many saw the American funds as white knights riding in to save the day. Unfortunately, this was extremely naïve, an artery has been severed and the blood is pumping. They’re not called vulture funds without reason. A Vulture spends time circling their prey, waiting until they’re near death and then swoops on an easy target, tearing every part of flesh, muscle and sinew until nothing remains leaving a rotting carcass in their wake. Vulture Funds are no different. They’ve existed for decades and are a necessary evil and an important part in any economy’s recovery from recession, depression, austerity and over lending. But they are aggressive, efficient and profit orientated

Whilst they buy loans at huge discounts, their first target is to receive back the par value of the loans, making huge profits. Ask yourself the question, were you lending the money, would you target a different outcome? The honest answer is no. It is a very simple spreadsheet exercise, the vulture fund will look to recoup all of their money as quickly as possible, lock in their anticipated profit and then deal with the rest of the portfolio. If the remainder of the portfolio doesn’t look great, they’ll either pass it to an asset manager to recoup the money through a repayment schedule much like a bank or having already made their money, sell it on to another debt purchaser.

Many of you will have seen the movie Wall Street. The prevailing mantra of the movie was ‘Greed is good’. Let’s rephrase that, Greed is the norm. Steve Schwarzman, the CEO of Blackstone earns $211m a year, the best part of $4m a week. He earns this huge sum of money, not by being nice but by repeatedly and consistently delivering on his targets. If it was me in Upstate New York, cold, impassioned and trying to justify a huge salary, I’d have no problem putting anyone’s lights out.

Michael Flynn and others before him will take to the courts to try to ascertain details over how their loans were sold. Unfortunately it is largely irrelevant. Most of these funds when looking to arrive at the price to bid on the loan book will do one of two things. They will either value the twenty best performing assets in the loan book or fifty of the worst performing assets. If you are in the former, you’re in trouble. You are already ear marked as the easiest way for the fund to recoup their initial outlay. This is just common sense. In the absence of you not being able to buy-out your loan, the likelihood is that they will engineer default, break up your businesses and sell to the highest bidder, normally your closest competitor. Is it nice? No. Is it ethical? Borderline. Is it good business? Definitely.

Did NAMA sell Michael Flynn and others down the river? Absolutely! They understand the process and know that many of these loans that are currently being sold will be sold time and time again until they eventually change hands for decimal points of their original par value.

So what can the borrower do? Quite simply, you have to gain back control as quickly as possible. The only way to do this is to re-acquire your loans from these funds as efficiently and quickly as you can. There is a window of opportunity - absolutely. Many loans will have moved to a fund under the same terms that were agreed at the previous lender. This won’t last forever. Very soon, your new lender will be looking for principal and interest repayments on your loan, which of course they are entitled to do but clearly wasn’t possible before and no more is it now. Failure to do so will place you in the uncooperative, non performing pigeon hole that Michael Flynn finds himself and any chance that you had will be lost.

There are investors and funds who specialise in this type of process. They understand the valuation process that the funds have gone through and are equally aware of the buy-out price that the fund is looking for. If you find yourself in the situation that your loans have been acquired by one of these ‘white knights’, you need to act soon. Michael Flynn and others thought everything was going well, it wasn’t.

Mr Schwarzman spoke initially about the psyche of the Irish people, that’s no longer relevant. Borrowers need to wake up and smell the coffee, they need to understand the process. It doesn’t matter if it’s Cerebus, Lone Star, Carval or Blackstone ; they are all fairly similar.

Nick Leeson

GOOD NEWS FOR ULSTER BANK........ OR IS IT?

It looks as if RBS the parent of Ulster Bank has turned a corner in the U.K. and now with the drastic reduction in their property book dealing with mis-selling of  PPI, Swaps and other claims, the parent looks to be nearly out of the woods.

Off the back of this Ulster Bank have announced a £55 million pre-text profit in the first 6 months of 2014.

Of course the borrower's and the general public have no visibility as to how this was realised. We have no visibility where the impaired property loans sit on the balance sheet of the Bank. We cannot determine if this is a trading arm of Ulster Bank or does it include the vastly impaired loans that are in R.C.R. Ulster Bank.

This day last week Ulster Bank took to the market under Project Achill the sale of their impaired loan book which information is now widely available on the net. How is it that they can generate a substantial profit in 6 months of the back of the borrowers and yet continue to book losses in a separate divisions?  Transparency is the key for everyone to move forward so that we all understand were Ulster Bank will be in the next 3 - 5 years and how they continue to deal with their impaired loans and WILL they be in a position to lend to SME's.

I have only have to ask 1 question …..where is Ulster Bank Business Banking?  At one time everywhere you went in the Provence there was someone who was working for Ulster Bank business banking. Can you now name me 3 people that you know who work in Ulster Bank Business Banking, I can't.

It would be very beneficial for the Northern Ireland Economy if we were to understand the plan of Ulster Bank and how they intend to deal with businesses given the fact it is the biggest Bank in Northern Ireland. We as the borrowers, the entrepreneurs and business men in Northern Ireland need to understand where they are and consequently were we are going from here.

Perhaps the Ulster Bank would be good enough to let us know.  

James Gibbons LLB

ULSTER BANK MAKES MOVE TO DEAL WITH TOXIC PROPERTY DEBT

Late yesterday afternoon, Ulster Bank announced that they will be accepting bids on a portfolio of loans totalling €1.1 Billion in the next two weeks. This loan sale is known as Project Achill.
Project Achill is comprised of assets and lands over 3.53m sq ft of commercial property and a further 1,565 residential units, 817 acres of land and 918 hotel rooms. By real estate value, Project Achill is weighted Dublin, 46.9%, Northern Ireland, 26.3%, Rest of Republic of Ireland, 9.5%, England, 9.3%, Scotland, 7.6%, Other, 0.4%.

This sale is similar to the recent sales of loans by NAMA and IBRC which were bought by US vulture funds Cerberus Capital management, Goldman Sachs and CarVal Real Estate Investment company.  Typically what has been happening in Ireland over the past twenty four months is that the US vulture fund are paying in some instances as low as 10c in the € for these loans with the view to getting a very strong return over a relatively short space of time. Not a bad deal if you could get a piece of the action. 

Where does this sale leave the borrowers? 

We have seen previous vulture funds take a cold clinical approach to realising their new acquisitions. The Vulture funds are driven by profit like any business and therefore any borrower wishing to retain their assets will have to be savvy and intelligent enough to demonstrate that by working with the borrower the (Vulture fund) they will get more profit back. This is not an ideal process for a recovering economy, and in many cases it won’t be a pleasant process for the borrowers many of whom will have viable businesses and will need to negotiate with the fund and have their “A” game in place. With change there is opportunity and therefore potential for adding value to your business, however borrowers will need to act quickly in order to get the best deal possible and survive.

What actually happens?

The fund / investors write the cheque for the loan and subsequently contract the servicing of the loans to debt servicing companies like Pepper Finance or Capita to name two.  They will then write out to the borrowers and invite proposals to pay down the debt.  The debt servicing company will then make a recommendation to their client in terms of the next steps.  The trend in this country to date is that they appear to favour the road of enforcement, get full control of the assets and then work to a business plan.  If you were writing a cheque for £1bn then you would likely do the same, unless you are in receipt of fairly innovative and strong business proposals.. 

What should borrowers do?

The borrower needs to be ready to engage with the new lender and have a plan / strategy  in place. To do this in most cases the borrower will have to have access to new finance if they are to have any chance of retaining ownership of the assets.  The new owners of the debt will not be here to procrastinate.  They will work to a very tight 3/5 year business plan for the most part, with their main aim being threefold 1) profit 2) profit and 3) profit.

In the last month our own practice has launched a new £50m fund, which was set up to assist borrowers unlock exactly the sort of positions being created by project Achill.  If you need some more information on this, please give us a call.  Whether it be with us or someone else, access to new finance is the name of the game.

So what next for Ulster Bank?

Ulster bank has experienced its fair share of problems like a lot of the banks in the last few years.  Their policy has changed several times and being objective as possible it would be fair to say that their conduct and policy changes have been somewhat erratic.  What has happened in the last 12/18 months is that RBS are tightening the screw on the bank.  We all now know that Ulster has lost the RBS group billions of pounds as a result of the property crash, and it has also caused serious other stresses and pressure points within the group.  In the last few months they have got rid of West Register, the infamous property development wing of the bank and they have also rebranded the highly controversial and unsuccessful global restructuring division, which now trades under RBS RCR Ireland.

We were advised last year that the bank was moving towards a more aggressive stance in dealing with their toxic property book and this development with Project Achill demonstrates exactly where they are now and what they are trying to achieve. 

Some may see this loan sale as another signal of the impending exit of Ulster Bank from Ireland. Already some of the media are speculating today that this loan sale may be linked to the failed merger with PTSB which came up in the press recently.  Some suggesting that post this clear out, the merger may be back on.  Let’s wait and see what develops.

Although Ulster Bank is far from currently functioning as a normal Bank; its exit from the market could be bad for the long term economy in Ireland. A healthy economy needs strong competition between Banks who compete for customers, lending at competitive rates.

The only conclusion anyone could arrive at today regarding Ulster Banks future in Ireland is that it is less than certain.  It’s clear that RBS are trying to offload, however for the moment, there are no takers.

It’s certainly a very interesting development and we all watch this space with interest.

Conor Devine MRICS

GDP PROPERTY FUND STARTING TO PROVIDE SOLUTIONS

Two weeks after the announcement of our commercial property fund of £50,000,000 I thought it would be important to advise you that we have received a number of very interesting proposals with regards to restructuring current facilities with other local institutions.  As of today our office is working on a number of positions that collectively tote up to over £20,000,000.  What is absolutely clear in this climate is that property finance is still a dirty word and for the most part there is no debt markets in Ireland, North or South, and we have been advised this will continue for the short to medium term.

We hope to close out on our first refinance opportunity in the next number of weeks, and certainly from our clients point of view, this is a tremendous result.  GDP is at the forefront of solutions in this difficult time for the business community.  Our bank mediation team are doing some terrific work helping borrowers settle with banks, and after only a couple of weeks with our new finance platform, the New Money team appear to close to having some great success also.

I would like to thank our team of innovators internally for their recent efforts, and wish everyone a peaceful holiday period.

Conor Devine MRICS

BANKS NOW RUNNING DUMMY LEGAL FIRMS . . .

Media stories in the last two weeks will have come as a shock to many people. First there was the story of an estimated £1 billion underpayment in compensation accordingly due to borrowers further to the self bank admission of mis-selling Interest Rate Hedging Products.
Last week it was revealed that the Banks using threatening letters from 'pseudo' solicitor firms to make debtors pay up. Basically this is the process of issuing threatening legal letters from what appear to be solicitor firms are actually coming from a department of the Bank.

These stories, added to a recent admission by a main NI Bank to hiring Private Investigators, highlights the stress being caused to already anxious and distressed borrowers. Despite the extreme measures of the tactics being employed by the Banks, both the use of Private Investigators or letters signed by solicitors working within the Bank is legal.

at one of Irelands largest banks would hire Private Investigators to spy on distressed borrowers?What it does serve to highlight is that there has been a total breakdown in trust between the bank and the borrower, and where there is no trust there can be no solution obtained to their shared problems.Well it is absolutely true. The Bank solicitors do not deny the banks actions but defend them as being legal. Read more at the link.

Banks have had a lot of bad press in the last 6 years, some of which self inflicted and some of which is not. It is natural for people to look for someone to blame but the fact remains the Banks have been overwhelmed by the levels of debt in society and at the end of the day the banks are required for economic stability, economic growth and access to finance.

In the good times relationship between the banks and the borrowers were good and nobody had any reason to be paranoid of another. Since the economic recession and the property crash there has been a real lack of trust between borrowers and banks.

Our own view is that its companies like ourselves who bridge the gap between banks and borrowers, in particular were there has been a breakdown in communication and a loss of trust that was once shared. When feeling the pressure from the bank, you should have a team of professionals on your side to help you.

It has turned out a murky old world this bank and debt crisis and it has ruined many families and SME’s in the last few years.  Companies and traditions that have been built up over generations, wiped out in a flash.  Education though is still key to solving many of the world’s problems, and working out solutions with your bank, is no different. Informed decisions are the only way to progress.

Darwin Allen AABRP

Senior Relationship Manager

VULTURE FUNDS STARTING TO MAKE THEIR MARK IN IRELAND

In yesterdays Sunday business post, I read one of the headlines with interest; "Vultures Squeeze Irish Borrowers".  The story was around the fact that private equity giant CarVals, and financial heavyweights Goldman Sachs have acquired a portfolio of loans from IBRC and now appear to be taking a very firm line with borrowers.  Pepper, the Australian loan servicing company is also involved and their role is to manage the loan portfolio.  In laymans terms, what this simply means is that if your loan happens to be sold to one of these firms, you now owe them the money as opposed to IBRC.  Pepper will be in touch with you shortly and invite you in to make proposals to them on how you are going to pay 100% of the money back.  This is where the opportunity sits with borrowers.

We all know that funds are buying these loans at significant discount and the whole exercise is devised around them making a profit.  Depending on how aggressive Pepper are to the servicing of the facilities and also more importantly their instructions are from their clients, will determine the outcome for the borrower.  According to the article in the Business Post yesterday, 25 of these loans have been taken over by receivers already on the instructions of the new loan owners and its thought that many more receiver appointments are being prepared. 

There is a school of thought going round currently that many of these funds will enforce on the loans fairly quickly, appoint receivers, try and sell the assets, and get their money and run from this lovely Island.  A sobering enough thought if you happen to owe any of them any money.

Lets see how this one develops. . . .

Conor Devine MRICS   

*** PRESS RELEASE *** TASK FORCE REPORT INTO NI NEGATIVE EQUITY PROBLEM

GDP Partnership welcomes the recent publication of the Initial Research Report by the Repossession Taskforce. Since 2011 Our company has been obtaining sustainable solutions for distressed borrowers facing repossession proceedings and the impact of Negative Equity on their home and their lives.

There are a number of key points made in the report by the Repossessions Taskforce:

• The Borrower profile in an NI context;
• Negative Equity;
• Ability to pay / Arrears;
• Forbearance; and
• Possessions.

The NI Government has recognised they need to help create the right conditions for a stable and sustainable housing market. The starting point is support for those currently experiencing difficulties with their debts and sustaining home ownership. Nelson McCausland, the Minister for Social Development who instructed the Taskforce concluded: “The earlier borrowers receive advice and engage with their lender, the more likely they are to arrive at an affordable and sustainable solution.”

Although we always welcome a proactive approach to problems, our overwhelming view for the most part would be that there is no new information in this report , which is somewhat disappointing.  We certainly welcome the interest now being shown by the Government into this serious “bread and butter” matter for the general electorate. We encourage this activity but at the same token fail to understand why the Taskforce was unable to obtain a full understanding of the NI debt problem.

In order to do so, our view would be that the Taskforce needed to engage with all of the stakeholders involved. The key stakeholders are the banks, the judiciary, the professional debt advisors and most importantly the distressed borrowers. Since 2011 GDP Partnership has been Irelands leading team of debt mediation professionals having engaged with banks on behalf of 100’s of borrowers and SME’s facing repossession and negative equity challenges.

This report has been eagerly awaited since its inception and unfortunately no new solutions have been offered by the report.  I would suggest it has been a useful fact find for Government, however we find ourselves asking the question, What happens now?

For example, In the Republic of Ireland over the past 18 months there are a number of solutions being made available to distressed borrowers, which has helped many people move forward.  AIB offer a number of options such as “debt for equity” and “split mortgages” which goes some way to solving some of the issues.  It’s very disappointing then that First Trust Bank in Northern Ireland for example, owned by AIB, do not offer similar solutions to their NI customers.  Why would this be so?

The fact remains post the report that the position of many borrowers, households and communities continues to be blighted by negative equity, repayment arrears and the risk of repossession. Unfortunately with our Finance Minister Simon Hamilton confirming of late that the austerity program will continue through to 2020 along with the rise in interest rates – this problem is about to exacerbate. 

 

Education around any issue is key to finding a solution.  We would echo Minister Mc Causland’s view, that borrowers need to engage with their lenders.  However to qualify this, in order to do so they need to come from an informed position, and have a full understanding of the process.

 

Darwin Allen AABRP

Senior Relationship Manager

HAVE YOU BEEN SOLD A FIXED RATE BUSINESS LOAN?

A new bank mis-selling scandal is sweeping the Nation that has led to small businesses going bust. If you were sold a fixed-rate business loan in 2007 with the promise that it will protect you against interest rate changes you may be affected.

Most small businesses were told by the Banks at this time that these fixed-rate loans were there to protect them in case of rate rises, many being told it was effectively a "free cap".

The fact is, the Banks secretly added a swap which had the reverse effect. Unlike standalone interest rate hedging products (IRHPs), widely referred to as “SWAPS”, the Financial Conduct Authority (FCA) classes these “Embedded SWAPS” as unregulated.

The mis-selling scandal is basically as follows:

-          Banks had access to market data that the customer did not;

-          From 2007 market data forecast a big fall in long-term interest rates (they went to 0.5%);

-          Despite this, the Banks continued to sell fixed-rate loans priced at around 6%;

-          The derivative traders would receive the fixed rate of around 6% from the customer;

-          They have only been paying out at the true market rate of only 0.5% for the last five years;

-          The Banks have been pocketing the difference; and

-          In addition to that, the Banks received large commissions for introducing the deals.

The Treasury Select Committee is scrutinising the regulatory process of embedded swaps. Committee MP John Thurso said: "There is nothing wrong with selling a business a fixed-rate loan, however where the bank adds a hedge and fails to tell the customer I regard that, at best as mis-selling and at worst, immoral."

If you have taken out a fixed-rate loan by your bank in and around 2007, you should get in touch with us at GDP Partnership.

Darwin Allen AABRP

Senior Relationship Manager