Cantillon: IBRC loans sale an application of lopsided notion of equity

The sale of the first tranche of Irish Bank Resolution Corporation loans by the official liquidators can be adjudged a success notwithstanding some confusion around a number of the sales.

KPMG succeeded in finding buyers for nearly all of the the loan book albeit at undisclosed discounts. It bodes well for the sale of the remaining portfolios which will take place over the coming months. We are step closer to dealing with the toxic legacy left by Anglo Irish Bank.

But there is no getting away from the fact that the tax payer is taking yet another bath and some of the former Anglo customers are the beneficiaries. Some of the successful biders were the original borrowers, or related parties.

Denis O’Brien (above), the wealthy tax-exile who is one of the investors behind services station chain Topaz has bought its loans at an undisclosed discount.

In some cases the discounts amount to a tax payer funded write downs of the debts of companies connected to people who can afford to honour them in full.

In other cases - such as TV3 - the taxpayer is lending them some of the money to buy the loans back.

This all sticks in the throat. Not least because small borrowers of the former Anglo Irish and Irish Nationwide are not being offered any such write downs., They instead must pay up in full or take their chances with the new insolvency regime. It seems unfair and it is unfair.

Once again the lopsided application of notions such as moral hazard and equity when it comes to banking has been demonstrated. That said, the the tax payer was going to have to take the hit on the loans regardless of who bought them. Transferring them all into the National Asset Management Agency to be worked though over time – as will happen to the rump -– s not with out costs or risk.

On the positive side a significant number of companies have had their debt restructured and hopefully jobs will be saved and economic growth fostered. It makes the notion of taxpayer write -offs for the not very deserving a slightly easier to stomach.