BoI private equity fund remains ‘under water’

Bank of Ireland’s Newgrange equity fund, which was put together in mid-Nov 2006, is currently -5.5% under water, although there has been a significant recovery in value since the low in stock markets in early 2009, said the bank.

It is believed that Bank of Ireland Private Bank loaned a considerable amount of the capital that was invested in the Newgrange fund.

“All dealings between the bank and its clients are confidential and we would never comment as to how our clients fund their investments,” said a Bank of Ireland spokesperson.

Moreover, similar to Anglo Irish Private Bank, the private banking arm of Bank of Ireland had been active in lending to clients over the boom years, who then invested this money in geared property funds.

“Private banking invested in property on behalf of its clients over a number of years through property funds, syndicates and individual client deals. Results thus far for investors have been mixed, varying from positive performances and returns to more challenging situations in a small number of transactions.

“Where we face such situations we continue to work and to exhaust every possible solution, on clients’ behalf to ensure that the maximum capital is recovered,” the bank said, declining to comment further.

Many of the loans that were invested in the Newgrange fund and the property funds are due for repayment. It is believed that Bank of Ireland is rolling over these loans and working with clients on a case by case basis.

However, market sources say there are significant challenges working through the loanbooks of the private banking divisions of Anglo Irish Bank and Bank of Ireland as well as other financial institutions.

One source said property funds can be broken into three categories. Those that are still profitable, those that are hopelessly insolvent and those are under water but not hopelessly insolvent. Given the size of the property crash , most of the funds with exposure to the Irish market are sitting on heavy losses.

Legal sources say that there is a growing number of clients of Anglo Private taking legal action against the IBRC on the basis of advice that was given when the loans were originally taken out.

The outcome of this litigation hinges on the quality of documentation held by both sides. High net worth individuals have to sign a series of waivers and contracts before an investment can be made.

But as long the property market remains in the doldrums, then high net worth individuals will struggle to meet debt obligations.