Saturday 7 December 2019

Experts warn surge in vulture fund debt cases 'just tip of iceberg'

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Shane Phelan

Shane Phelan

The value of court judgments secured by vulture funds against debtors more than doubled last year, and experts warn the massive surge is just the tip of the iceberg.

The rise coincided with a 200pc increase in the number of High Court debt actions taken last year by the foreign funds, which bought large portfolios of debt from banks and Nama during the financial crash.

Data compiled by debt analysis experts StubbsGazette reveals judgments amounting to €13.6m were secured by vulture funds in 2017, compared to just €5.6m the previous year.

Once secured, the judgments allow such funds to take steps to pursue the borrowers' assets to clear or partially clear the debt.

In contrast to the surge in vulture fund debt judgments, the value of judgments secured by banks and credit unions slumped by 43pc and 49pc respectively during 2017.

There are now fears the level of judgments involving vulture funds will explode even further during 2018 and beyond.

StubbsGazette managing director James Treacy. Photo: Gareth Chaney, Collins
StubbsGazette managing director James Treacy. Photo: Gareth Chaney, Collins

A number of large funds are expected to vie for Permanent TSB's €4bn Project Glas portfolio, which is thought to include as many as 20,000 struggling homeowner mortgages.

Some of the largest distressed debt funds look set to escape a political campaign aimed at thwarting the sale of some 20,000 residential mortgages to so-called "unregulated and unaccountable vulture funds".

Fianna Fáil's finance spokesman, Michael McGrath, has led a push to exclude these players from Permanent TSB's €4bn auction of home loans.

But his efforts risk a charge of political grandstanding given many of the global opportunists Mr McGrath views as unsuitable owners of the mortgages already run regulated entities in Ireland.

Those firms that don't may avoid any restrictions rushed through the Oireachtas by simply partnering up with investment banks such as Deutsche or Goldman Sachs, two well-known players in the sector.

Meanwhile, StubbsGazette managing director James Treacy said he believed the judgments secured by vulture funds to date were "just the tip of the iceberg".

Some 885 High Court actions were initiated by the main funds last year, up from just 282 actions in all of 2016.

He added that judgments secured by banks and the credit unions were at the lowest level since the crash, indicating that they have sorted out the worst of their impaired loan books.

"In contrast, the vulture funds are only really beginning their endgame of enforcement. This is likely to escalate dramatically over the coming years," he said.

Cerberus, CarVal and Goldman Sachs were the most prominent vulture funds in the courts last year. Promontoria (Aran) Ltd, an Irish affiliate of Cerberus, secured judgments valued at €4.8m last year, up from €2m in 2016.

The most pronounced increase in judgment values involved two affiliates of another vulture fund, CarVal. These firms, Cheldon Property Finance and Emberton Finance, secured judgments totalling €4.46m between them in 2017, compared to just €3,600 the previous year.

Irish Independent

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