Crisis investors: helping people, or Gordon Gekko?
Published 03/10/2011 | 05:00
TRY to reserve a table in any of Dublin's top restaurants these days and you'll be promptly told that there is no room at the inn. Some of the capital's finest hotels and restaurants are packed almost every night with investors who have flown in from across Europe and the US -- all looking to buy up bits of Ireland.
They are all on a great post-crisis investment binge and hoping to profit from buying Ireland's 'distressed' businesses and properties.
But according to one venture capital veteran, we're not going bust at a fast enough pace.
Jon Moulton, one of the UK's leading businessmen, is known for taking distressed companies into private hands. He was in Dublin last week for a corporate debt restructuring conference where he told a packed house: "You and most of Europe have an unhealthily low level of corporate failure.
"People shouldn't be working in businesses which haven't got a future. It's a waste of their future and the future of the economy," he said. So what do you propose, Mr Moulton -- to liquidate hundreds of companies and fire thousands of people, sapping the tiny bit of confidence that is left in the country, so you can fly over every now and then and get in on the action?
Mr Moulton argued that it was no coincidence that Ireland had the third-lowest level of insolvencies in Europe, a rate lagged only by fellow bailed-out countries Greece and Portugal.
Investors such as Moulton, who purchase distressed businesses, usually profit from buying -- at depressed prices -- companies or loans that are in trouble, in the hope that the value of their stake rises through a restructuring or by taking over the business.
According to Moulton, people aren't willing to engage with him in Dublin. NAMA boss Brendan McDonagh proved the point an hour later at the same conference when he said there was no point approaching him and his colleagues with an offer below what they had paid.
"It is a waste of your time and our time," the Kerryman said bluntly.
But one of the most striking things about the conference was those attending it -- those who made money from the boom and who are now profiting from the bust.
These smart suits in private equity and debt restructuring businesses have a standard, elegantly simple defence: we are helping people out. Problem is, it didn't quite seem like that, especially when one insolvency partner spoke of the "smart" move made by Musgraves to "throw" €10m into the pockets of Superquinn creditors to keep them sweet after the retailer was taken over in a pre-pack process.
A select group of receivers and liquidators are receiving annual fees of up to €2m a year, a recent report on the industry revealed.
However, this didn't stop them from complaining that Allsop, the UK property auctioneer holding the giant property auctions in Dublin every few months, is coming in here and stealing their thunder.
These boys and girls want it all ways. They want to do whatever they like, with no competition from abroad.
The whole conference left me with a bad taste in my mouth. In fact, as I walked back to the office, I wondered: was I a capitalist at all? What sort of system allows people to publicly rejoice when small suppliers are not paid what they are owed?
Sometimes, private-equity firms turn failing businesses around, providing decent returns to their investors, pensions funds included. Sometimes, however, they give the impression of being little more than amoral asset-strippers after a quick buck. Casino capitalists enjoying huge personal windfalls from deals as they gamble with other people's futures. Gordon Gekko minus the scruples.