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

BREAKING NEWS FOR MORTGAGE HOLDERS

Attention!!!! Mortgage holders with the Lloyds group -  including Bank of Scotland, Birmingham Midshires, TMB, Halifax and GE Money.

 

Breaking News! Breaking News! Breaking News! We have been advised that there is an issue with Mortgages in arrears with the above mentioned companies.

We understand from our legal sources in the High Court of Justice in Belfast that a number of cases are currently under review by the High Court as to a degree of overcharging and/or Malpractice pertaining to the above mentioned companies. This has prevented the companies from enforcement action against borrowers in default and you should contact GDP immediately if you have or are in difficulty with any of the above lenders.

There may be a solution to resolve of your issue with these lenders so please contact us as soon as to determine if our TEAM AT GDP EQUITY EXPERTS can help in the resolution of your problem.

 

EQUITY EXPERTS

IS HISTORY REPEATING ITSELF WITH DEBT. . .?

There has been a lot of discussion about a recovery of late and some economic indicators would suggest this is the case, such as an increase in employment and forecasts from the IMF which predict the highest growth amongst the big G7 economies. However, a closer look at the fundamentals of this recovery causes concern.

 

In 2013 the UK economy grew by 1.7%. When broken down by expenditure household expenditure accounted for 1.5% of this growth. This means that people are spending more to get the economy going again. Some but not all of this expenditure can be accounted for by the PPI claims paid out by the Banks. However a worrying sign is that people are spending more but wages have not increased and have actually fallen by 0.5% when adjusted for inflation. People are therefore spending money they do not have which means that debt is financing the recovery. Debt in moderation is good; however the debt to household income in the UK is currently 140% and rising. In 2008 this figure was 170%, which suggests that history could repeat it’s self. This debt is mainly driven by increases in house prices in London and Dublin. Increases in house prices only make people feel richer and encourage consumer confidence without actually increasing their spending power.

 

All is not well with SME’s in the UK and Ireland, the IMF recently released data showing that the number of non performing loans in small companies has been rising since 2009 and now stands at £800 billion across Europe. Ireland is one of the main culprits of this debt. The Central Bank of Ireland announced a total of 41% of loans to SME’s are in arrears. While these firms continue to struggle to pay down their debts they will not invest in their businesses and employ more personnel and growth, they will more than likely stagnate and eventually run out of steam. This is evidenced by the statistics which show that manufacturing actually had a negative impact of -6% on the UK economy. In a true recovery this would be more like +6%.

 

With the impending increase interest rates, this may rise to 5% within the next decade, making debt more expensive to service. What is the solution to this debt crisis? The central Bank of Ireland and England will not introduce radical measures such as those in Iceland where the government implemented a policy of debt write offs. Therefore it is up to both the SME and individual to tackle their debt problem now before they run out of steam. Debt can be restructured by the Banks on a case by case basis but it is up to the borrower to instigate these negotiations and be pro active. Specialised help is available to assist in negotiations however the first step is to take ownership of the problem and not to simply hope it will sort itself out. Once the debt is restructured growth will follow as you will focus on the future and not on paying down historical debt.

 

LOUIS WATTERS ACA
SENIOR RELATIONSHIP MANAGER