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