Timeframe to offload €22bn IBRC loanbook in doubt

Doubts have been cast on the ability of the special liquidators of IBRC to offload its €22bn nominal value loanbook by the end of this year.

Concerns have also been raised about the suitability of Nama as a final destination for many of the IBRC loans.

IBRC, which was the wind-down vehicle for Anglo Irish Bank and Irish Nationwide, was liquidated last February as part of the restructuring of the €28bn in promissory notes.

The loanbook was originally supposed to be independently valued by the end of April, with the sales process completed by August.

However, delays on agreeing the valuation methodology among other issues caused a delay in the process. The current deadline is that the valuation process with be completed by the end of November, with sales finalised by the end of December.

Steve Rodgers, a partner at Dublin law firm Eversheds, said: “The parties to loan portfolio sales can sometimes underestimate the amount of time a proper due diligence exercise will take.

“Bidders and their financiers will need to get comfortable with the loans and the underlying assets and this can take significant time and resources.”

Eversheds has acted on major loan portfolio sales in recent times, including Project Aspen, which was Nama’s first significant Irish loan portfolio sale.

“As part of the process, bidders are likely to raise a significant number of questions in relation to the loans and the security so that they know precisely what they will be dealing with post acquisition,” Mr Rodgers said.

“Depending on the number of bidders and the volume of questions raised, this will require substantial resources on the part of the special liquidators and their advisers.”

The cost of funding will be a huge factor in the eventual amount of loans offloaded. Nama can get access to cheap funding, meaning it can manage the IBRC loans at a profit.

But the cost of funding will be higher for private equity firms and this will be reflected in the offers made.

Unless the loans meet a reserve price stipulated by Finance Minister Michael Noonan, they will have to be transferred to Nama.

At a corporate restructuring summit in Dublin yesterday, Tom Kavanagh, a partner with Kavanagh Fennell, questioned the appropriateness of Nama as a destination for loans attached to underlying trading companies such as Topaz energy. He noted there were 200 publicans with IBRC loans.

Where these loans ultimately end up creates uncertainty which is not good for the businesses, Mr Kavanagh said.

Moreover, Nama’s skills set is focused on winding down assets. Most of these trading companies are going concerns that will need special banking relationships to meet the needs of their businesses.

Nama paid the Central Bank €12.9bn for the IBRC loanbook at the time of liquidation. If the special liquidators fail to raise more than €12.9bn for the loanbook, then the finance minister will have to make up the shortfall.