Saturday 18 November 2017

'Rigid' IBRC loans sale process could scare off potential buyers

Minister for Finance, Michael Noonan
Minister for Finance, Michael Noonan
The half-built Anglo Irish Bank headquarters on Dublin's quays
Chairman of Nama, Frank Daly

Peter Flanagan Commercial Property Editor

THE sale process of IBRC's remaining property portfolios ais "too rigid" and could scare off potential buyers, forcing billions of euro worth of more loans being taken on by the taxpayer.

The special liquidators of the former Anglo Irish Bank are selling off €22bn worth of loans in four portfolios – Projects Evergreen, Rock, Sand, and Stone.

The portfolios have to be sold by the end of this year or as quickly as is practicable, and what isn't bought will be transferred into Nama.

"Data rooms" have been opened up on all four portfolios, and a number of international investors are known to have assessed the quality of the loans.

However, those potential investors are believed to be concerned about how the loans have been valued and the sale process itself.

IBRC's special liquidators Kieran Wallace and Eamonn Richardson hired KPMG to value the loans, and the liquidators can only sell the portfolios if an offer is made that at least matches their valuation.

International investors such as the likes of Lone Star, Kennedy Wilson and Blackstone, have all made major moves into Ireland during the bust, and they are believed to be among the groups that are at least mulling over bids now.

Finance minister Michael Noonan has also made clear that once the loanbooks were valued, the special liquidators could only sell the portfolios at or above the current valuations.

That has sparked oppositions from potential buyers, who are looking for a "bulk discount" if they are buying one of the books.

One agent, who works regularly with big international investors questioned if the rigidity around the process will prove beneficial in the long run.

"If you take something like Project Stone, the current value of that portfolio is probably something like €1.5bn to €2bn.

"Realistically, if you want to sell a portfolio of that size, there are maybe three or four firms who have the capacity to buy it.

"When we speak to them, the first thing they ask is 'what's the discount?'

"They are used to receiving an additional discount as an incentive because they are buying in bulk like this. Now with the restrictions that have been placed on the IBRC sales, there is much less of an incentive for these same investors to come in and do a deal," he added.

That agent's words were echoed by other experts in the commercial property sector.

One investor, who represents a major international player that has been heavily investing in this country, said the lack of flexibility afforded to the liquidators would hold back the overall process.

"It's likely that Evergreen – which is made up a slew of corporate loans – will be active as firms look to buy back their loans, but the likes of Stone and Sand will be more problematic because the liquidators are restricted in what they can and cannot do," he said.

"If a portfolio is valued at €1bn and the highest offer is, say €950m, can the liquidators accept that bid? They way it has been worded, then strictly speaking they can't, and it's not clear what room for manoeuvre, if any, they have on that."

While concerns have been raised about the sale process, potential issues have taken on greater urgency with the sale of each book now formally under way.

Project Evergreen hit the market in September, while Project Sand – which is made up of 13,500 Irish Nationwide residential mortgages – came to market in October.

Project Rock – mostly UK commercial property loans – hit the market at the end of last month, while Project Stone, which is a mix of European commercial property loans is also on the market now.

Despite the scepticism around parts of the process, the special liquidators have previously said they were "not disappointed" by the level of interest that has been shown in the portfolios.

When contacted this week a spokesman for the special liquidators declined to comment.

Sunday Independent

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