Thursday 13 December 2018

Revealed: Secretive buyers of €1.3bn of mortgages from Permanent TSB will pay no tax on profits

Photo: Collins
Photo: Collins
Donal O'Donovan

Donal O'Donovan

THE secretive buyers of €1.3bn of mortgages from Permanent TSB will pay no tax on their profits, the State owned bank’s chief has admitted.

The heads of Permanent TSB, which is selling the home-loans, and Pepper Ireland, which will take over their day-to-day management, told the Oireachtas Finance Committee that they were barred from naming the ultimate beneficial owner of Glenbeigh, the financial vehicle that will be the true beneficial owner when the loans are sold.

That’s because both had signed non disclosure agreements, they said.

Executives refused to confirm whether US bond investor Pimco is the main investor.

Permanent TSB CEO Jeremy Masding also admitted the structure to facilitate the controversial sale will be tax free – using a so-called Section 110 company.

Use of low tax Section 110 companies by so-called vulture funds had led to the rules being tightened in 2016 but Permanent TSB’s retention of a 5pc interest means the Glenbeigh structure will be tax exempt.

The bank is obliged to retain that stake, Jeremy Masding said. That’s under so called “eat what you kill” regulations brought in after the Crash to stop banks

Permanent TSB’s sale is particularly controversial because many of the 6,272 borrowers affected had engaged with the bank after falling into arrears and agreed restructuring deals.

It includes thousands of so called split mortgages - where the borrower and bank agreed that part of the debt would be serviced and the rest parked for an agreed period.

Almost all of the debt is secured on the borrowers' primary homes.

Under intense questioning from TDs and Senators including Fianna Fáil’s Michael McGrath, Sinn Fein’s Pearse Doherty and Fine Gael’s Kieran O’Donnell, executives explained the anonymous and tax free structure of the new ownership. 

The Minister for Finance Paschal Donohoe was informed of the planned sale, and consented in writing at the end of November, Permanent TSB CEO Jeremy Masding said.

Pepper and Permanent TSB both said the terms of any restructuring agreed between customers and Permanent TSB will be unchanged after the deal.

Once the sale goes through, responsibility for day-to-day decisions about the mortgages including interest rate setting and any potential new restructuring will be taken by Pepper as master servicer, Pepper Ireland CEO Cormac Ryan said.

Pepper, which is regulated by the Central Bank here, will have legal responsibility for those decisions, he said.

However, he said Pepper and representatives of the unnamed Glenbeigh backer will hold monthly meetings to consult on the performance of the portfolio.

The latest mortgage sale comes as Permanent TSB along with other banks has come under intense pressure from regulators at the European Central Bank (ECB) to slash its stock of impaired loans. Ahead of the latest sale, Permanent TSB’s bad loans make up 16pc of its total lending, compared to a Euro zone average that has fallen to 3.5pc.

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