Businesses face 'second tsunami' from vultures
Banks save themselves and clients pay the price
Published 10/04/2016 | 02:30
Small and medium business owners who survived the economic crash are now being hit by a "second tsunami" owing to the sale by banks of their loans to so-called 'vulture funds' and other international investors, according to Liam Griffin - the hotelier and former All-Ireland-winning hurling manager with Wexford.
Mr Griffin, whose Griffin Hotel Group operates the five-star Monart Spa Hotel, four-star Ferrycarrig Hotel, and four-star Hotel Kilkenny, is just one of thousands of Irish business owners now getting used to dealing with new lenders after decades of doing business with Irish banks.
The sale by the Ulster Bank of a number of the Griffin Group's loans as part of its Project Coney portfolio to Sankaty Advisers - an affiliate of the US private equity giant Bain Capital - is among the 974 individual transactions filed with the Companies Registration Office (CRO) since January 2013.
An examination by the Sunday Independent of these files shows how hundreds of small and medium businesses, such as pubs, petrol stations, newsagents, hair salons, hotels and even nursing homes, have seen the loans they took with their local bank snapped up by international investors, in most cases for fraction of their original value.
Referring to his own relationship with his banks prior to the recession, Liam Griffin said: "I'm a long time in business. I have been on my own in business since 1974. Through all of my life dealing with the banks, I have always done what I should have done. I've complied in every manner, shape and form."
Commenting on the consequences for business owners of the banking system's collapse in 2008, he added: "The banks were hit by a tsunami that you can argue they contributed to themselves, but the unfairness of it all was scandalous with the number of people who lost their businesses."
The Griffin Hotel Group chief believes the banks' efforts to restore their balance sheets through the rapid sale of their loan books to international investment funds poses a major threat to those businesses who survived the initial crash.
He said: "When the economy tanked, a new system was brought in to cleanse the banks' balance sheets. What's happening now is a second tsunami where those who managed to survive are being hit. It may have suited the banks to have a quick cleansing of their books, but the impact it is having on ordinary people in business is like another tsunami."
In acquiring Ulster Bank's Project Coney portfolio, Sankaty Advisers took control of loans associated with companies behind numerous well-known Dublin pubs including Houricans of Leeson Street, Brady's pub in Terenure and The Weavers on Lower Clanbrassil Street.
Also included in the Project Coney sale were loans taken out by the leading Dublin publicans Larry Crowe, Brian Flannery and Robin Payne in connection with the Camden Deluxe Hotel and Palace night club on Camden Street.
Elsewhere in the files held at the Companies Office are records relating to the sale by Permanent TSB of a €481m commercial loan book to Cheldon Property Finance - a subsidiary of the US-based private equity fund, CarVal.
Included in the transaction were a range of loans taken by the kind of businesses that meet the everyday needs of their towns and villages, existing as part of the glue that binds communities together.
Browns Checkout - the company behind Browns Checkout and Browns Off Licence on the Dublin Road in Portlaoise - is a good example, as is Allen & Company, which owns and operates a petrol station and convenience store in Belgooly, Co Cork. Both companies saw loans they took from Permanent TSB acquired by CarVal.
Also included in the Permanent TSB sale were loans extended to Jabeth Ltd, the company behind the House of Hair hairdressing salon in Lucan, Co Dublin and Ken Dressing, the company behind a family-owned tailors, Sew Alterations on Dublin's South Anne Street.
The US private equity giant, Cerberus, also appears in the records with filings from several of the Irish subsidiaries it established to manage the loans it took ownership of as part of its acquisition of Ulster Bank's sale of its non-performing Project Aran loan portfolio.
While Cerberus subsidiary Promontoria Aran came to prominence last year on foot of the Sunday Independent's revelation that it had taken control of borrowings secured by Independent TD Mick Wallace's Italian restaurant, La Taverna Di Bacco, the Project Aran sale also saw it acquire the ownership of debt linked to some 5,400 other properties.
Dealing with Cerberus could prove to be more challenging for some clients than it does for others. Take the case of Newlyn Homes - a company owned by Christopher Dowling, Robert Kehoe and George McGarry, who also are indebted to Nama. The difficulty in dealing with two lenders with a limited lifespan will invariably require skilful negotiation skills and navigation.