Poor files to undermine IBRC loan sale

Poor loan documentation will undermine attempts by the IBRC special liquidator to sell loan books relating to the former Anglo Irish Private Bank, according to people familiar with the situation.

During the boom years, Anglo Private was very active in putting together highly leveraged property and other types of investment funds to high net worth individuals. Anglo Irish Bank also provided the loans to these high net worth individuals to invest in these funds.

Most of these funds are under water, which means there is now very poor collateral against the loans. But a source with direct knowledge of the situation said that there was inadequate due diligence in the personal loans drawn up by the former Anglo Irish Bank.

There is very poor quality loan documentation and in many cases, there had been no contact between IBRC and high net worth clients for a number of years prior to the bank’s liquidation last February.

The sales process of the entire €22.4bn IBRC loan book is scheduled to commence next week. Loans that were given to high net worth clients of Anglo typically ranged from €5m to €20m and it is believed that the combined total is just under €500m.

These loans are included in the Stone grouping of IBRC loans with a total par value of €9.3bn.

Another source familiar with the situation said that because these loans are deemed high risk — with litigation likely to ensue in many cases — the total book is unlikely to attract bids of more than 10 cents in the euro. “There may be a hedge fund who would be willing to take the risk, but there are unlikely to be too many bidders,” said the source.

These loans are in the process of being independently valued. The entire valuation process has to be completed by the end of November with sales completed by the end of December.

If there are insufficient bids for the loans relating to Anglo Private, then they will be transferred to Nama. However, given the state of these loan books, they will put the state agency under considerable pressure to wind them down.