Monday 22 January 2018

Man who broke Barings is helping debt zombies get back on their feet

Nick Leeson, who ran up $1.3bn in losses as a rogue trader, talks to Tom Lyons about his new debt consultancy, GDP

Tom Lyons

NICK Leeson calmly sinks into a green leather chair. It has been a busy first month for Leeson as a business adviser to distressed Irish borrowers.

The man best known for being the rogue trader who lost $1.3bn betting on risky trades in 1995, causing Barings Bank to collapse, has, over four weeks, met 100 Irish people desperate to put their unsustainable borrowings behind them.

Sitting beside Leeson around a circular dark wooden table in his new office on Harcourt Street is Conor Devine, a chartered surveyor, who along with solicitor James Gibbons, makes up the GDP partnership.

Leeson said GDP has been inundated with new business since the Sunday Independent first reported his return to the financial fray after 18 years.

"Growing up in the Eighties, debt was kind of a dirty issue but now it touches everybody," Leeson said. "The type of people we've been seeing are middle to upper middle-class people who have got themselves into difficulty. The level of indebtedness has quite shocked me," he added.

Leeson said borrowers seeking advice from GDP on how to deal with their debts typically owed under €5m, but in some cases their debts were between 50 and 100 times their incomes. Some borrowers, he said, had been unable to repay their loans for up to four years. "It is just astounding and I can't imagine it happening anywhere else in the world," Leeson said.

"It has just dragged on for both the bank and the borrower."

Devine said he believed GDP's experience of negotiating consensual solutions, often including debt writedowns, for borrowers in the North, would help them build their business in the Republic.

"We reckon the banks in the North are about 18 months ahead of the South," Devine said. "What is happening now is that all of the banks in RoI are building up their teams and going after security."

Devine said borrowers needed to be prepared to present business plans to their banks in order to cut deals with them. Leeson said GDP was meeting borrowers who were "stressed to the max".

"We've heard around this table of people not being able to turn on the electricity because they can't afford the bill," Leeson said. "You have banks and borrowers overwhelmed. There is desperation, stress and inability to comprehend the problem on both sides."

"The first thing you have to do is educate the borrower about solutions," Devine said. "They are more likely to be off the pitch and not engaging with their bank so the relationship has completely broken down."

GDP, he said, sought to engage with the banks after it had got a handle on the level of its clients' debts.

"We would give our clients proposals depending on the policy," he said.

For example, he said Bank of Scotland (Ireland)/Certus was much more open to writing off debt than the Bank of Ireland which he described as more likely to simply "sit tight."

Devine said he believed bank workers were under pressure and, as a result, it was up to the borrower to come up with their own solutions.

"We are bringing solutions to do deals – so, indirectly, we are completely helping the bank," he said.

Leeson said borrowers needed a range of skills to be able to negotiate with their banks from accounting to law.

Devine said the types of deal GDP had done were, for example, with a borrower who owed €10m but had assets worth only €2m.

"The business the borrower owns could only service debts of €5m so the logical thing to do was not to push the nuclear button and take the assets but instead agree to write off €5m and repay the rest," he said.

GDP, Devine said, was "pleasantly surprised" at news last week that banks, credit unions and credit card groups had agreed a plan to operate a pilot scheme to provide relief to people in arrears with multiple borrowers.

"There has to be a greater effort," he said, "to sort out the banks, their customers and the economy."

"Banks did not go bankrupt. They were bailed out and restructured," Leeson added.

"We believe every borrower presenting their case in the right manner should be able to restructure as well."

Irish Independent

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