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.