‘Discount’ for corporate debtors criticised

Large corporate debtors will be able to buy out their loans with the former Anglo Irish Bank at a large discount and that is "absolutely unconscionable", the Dáil has heard.

Independent TD Catherine Murphy also hit out at the use of PricewaterhouseCoopers as advisers on loan valuation to the liquidators of the former Anglo Irish Bank, latterly the Irish Bank Resolution Corporation (IBRC).

The Kildare North TD pointed out that PricewaterhouseCoopers had previously assessed the balance sheet of Anglo Irish Bank and other financial institutions after the bank guarantee was introduced.

She questioned if the company’s advice could be believed given its previous role. “There is an issue of confidence in terms of where the information is being got.”

Ms Murphy raised the issue following a parliamentary written response from Minister for Finance Michael Noonan that the liquidators of IBRC intended to split the loan books into four segments – performing, non-performing, owner-occupier and buy-to-let in order to maximise market interest.

Ms Murphy criticised the way the loans were being sold and said “it is clear that only bids from big operators will be entertained” because the loans were being disposed of in blocks of 30 and 40 and “this has the effect of enabling large corporate debtors to buy out their loans at a discount”.

But Minister for the Environment Phil Hogan said the decision concerning how the loans were packaged for sale and what bidders constituted qualifying bidders was to be made by the special liquidators.

“The Minister for Finance is not in a position to interfere with these decisions as to do so would leave him open to challenge from other IBRC creditor,” he said.

'More costly'
Speaking for Mr Noonan who is abroad, Mr Hogan said many mortgage holders might be interested in buying their loans "but the time, cost and practicalities involved would make this option more costly. Taxpayers have already incurred far too high a price from this bank to impose further costs on them."

He also said the liquidators were obliged under legislation “to ensure the assets are sold at a price which maximises the overall return for its creditors, including the State”.

Ms Murphy said individuals whose loans were performing were not being given the opportunity to buy their loans. The only people “who seem to be rewarded in all of this are those in the big corporate sector”.

The liquidators were selling off the loans “as rapidly as they can with substantial discounts” including just over 11,000 owner-occupier mortgages and just over 2,000 buy-to-let mortgages.

“It seems moral hazard is a concept invented for the small guy,” she said.

People who had mortgages that were performing were being bounced around the place and they were “absolutely furious about what is happening”.

She asked: “Will we see people who gambled as bondholders, maybe foreign investors, and who were bailed out by this country coming back in to buy these loan books at a discount”.