The special liquidators of the IBRC (the former Anglo Irish Bank) have announced the successful conclusion of the sale of the Rock and Salt projects within the IBRC portfolio worth €7.3bn. The Minister for Finance, Michael Noonan, welcomed the news of the sale, consisting mostly of commercial real estate loans written through UK subsidiaries of the IBRC.
“I am extremely pleased with the progress made by the Special Liquidators to date in relation to the disposal of assets in IBRC. The sale of this entire portfolio on top of the success of the Project Evergreen sale late last year will considerably reduce the amount of assets that are now expected to transfer to NAMA and bodes well for the ultimate success of the liquidation.”
“The sales processes for the remaining portfolios in IBRC are on-going and are expected to be concluded shortly,” he added.
IBRC: And the winners are…
Lone Star bought up 85% of the Rock and Salt portfolios, paying between €3.65bn and €4.86bn for loans with a face value of €6.68bn. 75% of these loans relate to assets in the UK, with the remainder in Germany and the US. Two large British hotel groups, Somerston Hotels and Puma Hotels, were included in the deal, which was financed with help from Citi, RBC and Well Fargo.
A consortium consisting of Sankaty Advisors, LLC/Canyon Capital Advisors LLC bought the remaining 15%. As a result, none of the loan assets within these books are expected to transfer to the National Asset Management Agency (NAMA).
It’s the remaining books that will be more difficult to sell. These include Project Sand, consisting of 12,700 residential mortgage loans with a value of €1.8 billion; Project Stone, mostly commercial real estate loans originated through the Irish offices of IBRC, valued around €9.3 billion; and Project Pebble, another portfolio of commercial real estate loans from the Irish offices of IBRC with a value of approximately €800 million.
All the remaining portfolios will hold significantly more risk for interested bidders, especially those containing residential mortgages.
Vulture funds hovering overhead
ValueWalk recently reported on mortgage holder concerns that overseas vulture funds, unregulated by protective legislation, would buy up residential mortgages and not engage with homeowners in financial difficulty. Subsequently, two of IBRC’s special liquidators, Kieran Wallace and Eamon Richardson of KPMG, were called to appear before a state body (Oireachtas Joint Finance Committee) to answer questions about the sale of the loans would affect Irish residential mortgage holders.
The committee wanted to see if bidders for the former Irish Nationwide home loans would comply with the Central Bank’s code of practice. This code obliges institutions to engage with those whose payments are in arrears and find a possible resolution. Mr. Wallace and Mr. Richardson said in an official statement that those bidding for the loans have agreed to abide by the Central Bank’s Code of Conduct on Mortgage Arrears (CCMA):
“We are pleased that the bidders have voluntarily indicated that if successful, they would direct that the mortgage loans were serviced in accordance with the terms of the CCMA.”
No guarantee that mortgage holders will be protected
Which might sound like good news for mortgage holders, had not the term ‘voluntary’ been used later in their statement:
“We are satisfied that the voluntary nature of this arrangement strikes a fair balance between the interests of mortgage holders as well as interests of the creditors of IBRC.”
A worry echoed by David Hall of the Irish Mortgage Holders’ Organisation:
“It’s voluntary, it cannot be enforced by the Central Bank or anyone else,” he said, adding that the code had to be made compulsory for any organization that buys the loans.
Whether successful bidders stand by the mortgage code or not, the fact that the Irish government is keeping a watchful eye on proceedings will mean interested bidders will flag these loans as highly risky and will be reluctant to take them. Unless, of course, the price is very attractive, in which case, there will be outcry from mortgage holders, not permitted to buy the loans themselves at the discounted price.
All this comes in a week when figures from the Central Bank this week show that the number of mortgage holders in arrears of three months or more fell for the first time in five years in the last quarter of 2013. However, those in long-term arrears of two years or more had risen slightly.