SMEs told to seek examinership to block vulture funds

Small firms advised to apply for court protection from owners of loans

Small businesses whose bank loans were bundled into portfolios and sold to “vulture” funds have been advised to consider going into examinership to protect themselves should the funds call in their loans.

Hughes Blake accountants, which specialises in examinerships for small businesses, said seeking court protection from the funds could be a “valid tactical maneouvre”.

It said many of the funds behave differently from each other so businesses should familiarise themselves with the approach of the fund that bought their loan.

“[Some] are known for their aggressive and predatory style of doing business; others are more mindful of the social issues around their actions,” said Hughes Blake.

SMEs should research the owner of their loan and plan ahead for when it moves against the business.

Hughes Blake expects to see several smaller businesses use examinership to escape the funds in “coming weeks and months”.

Meanwhile, many funds that bought distressed Irish business, consumer and property loans from Irish-based banks are active in the courts system, filing summary judgment cases to make borrowers pay their debts.

High Court cases

Ennis Property Finance, which is affiliated with Goldman Sachs, has filed several cases in the High Court in recent weeks, as has the US giant CarVal via its affiliates,

Emberton Finance

,

Pentire Property Finance

and

Stapleford Finance

.

Stapleford was very active in the courts in the run-up to Christmas, filing a number of cases against prominent Irish business people and professionals, including barristers and solicitors.

On the consumer side, Cabot Asset Purchases, which is owned by US distressed debt specialist Encore Capital, is prominent among High Court listings for debt cases.

Ulster Bank, meanwhile, is preparing to sell loans attached to a large number of small businesses and their owners, after passing a deadline of last Thursday for the borrowers to indicate if they were able to refinance or face having their loan bought by a fund.

One Munster legal practice said several of its clients were told that even their performing loans would be sold if they were unable to refinance their distressed loans.