Foreign vulture funds to step up court actions against debtors
Irish independent published 31/12/2016 Shane Phelan
Foreign vulture funds are expected to significantly step up efforts to recoup their investments in Irish loans in 2017.
The funds have been turning to the courts with increased frequency in recent months as they seek to recover debt bought from Nama and other financial institutions.
Debt analysis experts Stubbs Gazette predict a rise in court judgments against debtors in the coming year, now that vulture funds have "got their feet under the table" in Ireland.
Securing a judgment allows a fund to pursue various avenues to recover the debt, including attaching it to property or future earnings.
Although debt enforcement cases took a dip in 2016, major funds bucked this trend.
Big international players, such as Cerberus, Goldman Sachs and Carval, ramped up their activity in the courts in the past 12 months.
Taken together, the Irish operations of the three funds initiated at least 120 High Court cases against debtors in 2016 compared with just 58 cases the previous year.
None of the funds wished to comment when contacted by the Irish Independent, but it is understood the vast majority of the cases relate to company debts.
Three of the cases involved Goldman affiliate Beltany Property Finance, the firm which purchased loans at the centre of the Tyrrelstown controversy, where dozens of renters were issued with eviction notices when the developers sought to sell the properties to pay off construction debts.
Two subsidiaries of Cerberus, which acquired large loan portfolios from Nama and Ulster bank and recently bankrupted TD Mick Wallace, initiated 18 cases in the High Court in 2016 compared to just five the previous year.
In the past two months Cerberus's Promontoria (Aran) Ltd subsidiary has sought High Court judgments of €21.45m and €4.8m respectively against businessmen in Cavan and Wicklow arising out of loans bought from Ulster Bank two years ago.
Goldman Sachs, which bought up Irish loan portfolios from IBRC, Ulster Bank and Danske Bank, used three of its affiliates to issue High Court proceedings in 50 cases in the past 12 month, compared to just 11 in 2015.
Another US fund CarVal, which along with Goldman Sachs bought up €3.7bn in Irish commercial loans from Lloyds Bank in 2014, initiated 52 High Court cases via three Irish firms, up from 42 in 2015.
Around 90,000 Irish loans are now thought to be owned by foreign investment funds.
Stubbs Gazette managing director James Treacy said that following a significant dip in 2016 he expected increased vulture fund activity and other economic factors would lead to a rise in debt judgments in the coming years.
"As the economy continues to grow at an expected 3-4pc for the next few years there will be a temptation to relax credit policies as shareholders insist on higher revenues and profits," he told the Irish Independent.
"In conjunction with this we also expect the vulture funds to step up their debt recovery efforts now that they have got their feet under the table, and the combination of both will see a rise in judgments over the next few years."
While debt recovery proceedings by vulture funds are on the rise, the overall trend in 2016 was for a major decline in the number and overall size of judgments being registered in the courts.
The number of judgments dropped by 32pc in the past 12 months, falling from 4,479 to 3,031, according to figures compiled by Stubbs Gazette.
The overall value of judgments dropped from €567.8m in 2015 to €277.6m in 2016.
The Revenue Commissioners secured 44.5pc of debt judgments in the past 12 months, banks accounted for 8.1pc and credit unions 8.3pc,
Other institutions, including vulture funds, accounted for 38.9pc of judgments, up almost 5pc on 2015.
Mr Treacy said the legacy of the credit crunch was continuing with credit being "more tightly managed".
"As a result there are less bad debts and this manifests itself in the judgment figures," he said.
"We also see this being played out in the banking sector where most bad debts have already been through the courts and/or have been sold to the so-called vulture funds."