Business Irish

Tuesday 17 October 2017

US fund sought meeting on mortgages before bid

Finance Department defends communication before portfolio awarded, writes Ronald Quinlan

John Moran, ex-Secretary General of the Department of Finance. Photo: Collins
John Moran, ex-Secretary General of the Department of Finance. Photo: Collins
Ronald Quinlan

Ronald Quinlan

The Department of Finance and its former secretary general have defended their contact with representatives of a US private equity giant before it acquired thousands of Irish Nationwide mortgages from the special liquidators of the IBRC.

The managing director of Oaktree Capital affiliate Mars Capital, Alex Forrester, emailed the Department of Finance on the day before final bids for the portfolio of mortgages known as Project Sand were due to be submitted.

In his email of March 14, 2014, Forrester sought to arrange a phone call with the department's then secretary general, John Moran, for the following week with a view to discussing Oaktree's intentions in relation to the management of the mortgage loans it was seeking to acquire.

Forrester wrote: "As I briefly explained, the reason for calling was to see if we could find 10 to 15 minutes of Mr Moran's time on Monday or Tuesday of next week on the telephone to discuss Project Sand and our approach to the sale.

"Oaktree and Mars Capital will tomorrow [March 15] submit our final bid for some of the former Irish Nationwide mortgage loans being sold by the special liquidators of the IBRC."

Forrester noted in his email the "public discussion" about the possible future treatment of mortgage borrowers by the funds involved in acquiring loan portfolios, and said that Oaktree and Mars Capital had "committed" to adopting the Code of Conduct on Mortgage Arrears (CCMA) for the "relevant acquired loans".

He concluded by saying: "If Mr Moran does have a few minutes free in his diary early next week, we would very much appreciate an opportunity to discuss our approach to the management of acquired mortgage loans and also to discuss the question of establishing a new mortgage lending operation."

In the event, Oaktree Capital and its affiliate Mars Capital emerged along with another US fund, Lone Star, as the successful bidders for the Project Sand loans being sold by the IBRC special liquidators.

Referring to the Oaktree and Mars Capital executive's email in the course of the recent Dail debate on the PAC's report into Nama's sale of its Northern Ireland loan book (Project Eagle), Independent TD Mick Wallace questioned whether it was "proper policy for officials and the Minister for Finance to meet and engage with US vulture funds who are actively involved in bidding on Irish loans that are supposed to be for sale on the open market".

Asked for comment on the Oaktree email, a spokesman for the Department of Finance said: "The call to arrange the meeting happened before they submitted their bid. The meeting happened after they submitted their bid. The meeting didn't impact their bid."

Asked why Oaktree might seek to arrange a meeting with the Department's then secretary general, Moran, to discuss its intentions for the mortgages in the Project Sand loan sale before it had even submitted its final bid for the portfolio, the spokesman said: "I'm not sure why they'd make those arrangements the day before, you'd have to ask them."

The spokesman insisted that the special liquidators of the IBRC are independent and "insulated from any potential political interference".

Oaktree Capital declined to comment on the content of the email or why Forrester had sent it.

Moran, meanwhile dismissed Wallace's questioning of his and officials' engagement with Oaktree and other US investment funds.

Moran said: "Despite what Mick would like to pretend, it was not just hedge funds who successfully bought assets who met me, but sovereign debt investors, Fr Sean Healy, small business representatives, the IFA and even people representing people in mortgage arrears.

"Indeed, I might have even have met, or other officials might have met, with losing bidders. One thing is for sure, I did not make representations to the liquidator of IBRC on behalf of anyone. So no conspiracy here," he added.

The former finance chief defended his and the Department of Finance's decision to meet US investment funds and other potential investors, saying it had been essential in helping to restore Ireland's reputation internationally in the wake of the economic crash.

"Part of any decision to invest in a foreign country, especially one rebuilding its reputation from almost bankruptcy, is to meet with the policymakers as part of a due diligence," he said.

"A refusal by us to meet interested parties would have likely resulted in criticism from the same quarters for forcing a push-down of the price for the Irish taxpayer by our refusal to engage. Remember all we did after 2011 very much on the public record to try and get people, including Irish pension funds, comfortable with reinvesting in Ireland."

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