Liquidators face tough task trying to sell bank's €15bn loans into market

Fri, Feb 8, 2013, 00:00

Large portion of loans will have to be worked out by Nama over time

At 5pm on Wednesday, Alan Dukes, the chairman of the Irish Bank Resolution Corporation, arrived at the Department of Finance for a meeting with Michael Noonan, secretary general John Moran and Anne Nolan, who heads the financial services division.

It had been brought forward by a few hours with the result that the IBRC chief executive Mike Anysley missed it as he was coming back from London.

Mr Dukes was told that the Government had decided to liquidate IBRC.

Rumours had been circulating for about 24 hours and the IBRC senior executives were alive to them.

IBRC was being sacrificed as part of a series of moves to land a deal on the much-talked about promissory note.

Mr Dukes was told that the services of the board were no longer required.

The meeting lasted about an hour. At about the same time, the bombshell was being dropped with the bank’s 1,048 staff.

Made redundant

A handful of executives and senior management have been made redundant but the rest of the staff remain in situ, albeit with the prospect of nothing more than statutory redundancy in the near future hanging over them.

The Government’s plan had been hatched over the past 15 months, accelerating in intensity in the second half of last year.

Tensions between the senior executives and the department were believed to have been high in recent months, especially since the secondment of Neil Ryan to the bank last October.

What now for IBRC and the portfolio of corporate and personal loans that it was managing?

The original plan was that IBRC would be wound up in 2020.

The board had actually planned for an earlier wind down in 2018, leaving two years to tidy up any residual issues.

Instead, the special liquidators – Kieran Wallace and Eamonn Richardson of KPMG – will now seek to sell into the market IBRC’s €15 billion in borrowings, that underpinned €15 billion of loans from the Central Bank via its exceptional liquidity assistance facility (ELA). It’s a hotchpotch of loans, many performing, some not. They range from loans to department store Arnotts and fuel retailer Topaz, to borrowings held by Denis O’Brien, and Paddy McKillen’s interest in the five-star Maybourne hotels in London. There is also Seán Quinn and his family.

The special liquidators will seek to get the current value of the €15 billion in borrowings.

If that is not possible, the loans will be transferred to the special purpose vehicle that is being established by Nama.

These loans will then be worked out over time with a view to getting the maximum return for the taxpayer.

Nama chairman

Nama chairman Frank Daly said yesterday that it was “fully committed”to realising the “maximum possible return” for the taxpayer from the portfolio.

The special liquidators will spend six months trying to sell the loans.

The balance will then be transferred to Nama, which has repaid IBRC’s €15 billion in ELA loans from the Central Bank and expects to recoup the money via the the liquidation and its own efforts. .

Selling the loans will not be easy. For a start, it’s far from the ideal time to be placing such a large volume of loans into the market. And nothing like this has been tried in Ireland before, although IBRC has successfully shifted large loan portfolios in other jurisdictions.

It seems inevitable that a large chunk of the loans will be worked out by Nama over time.

IBRC also has shareholdings in Quinn Group and Liberty Insurance, legacies of its takeover of former multimillionaire Seán Quinn’s business empire.

For the companies, it’s business as usual but the holdings might revert to being held by the Minister for Finance, as is the case with state owned companies.

What of the legal cases it is pursuing, notably against Seán Quinn and his family?

Pursue them

For now at least, it will fall to IBRC in liquidation to pursue them but they might ultimately end up with Nama.

Despite the many months of preparation, there are still a number of dots to be joined up.

Only time will tell if the Government has made the right decision.

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