Credit unions to decide on €35m deal over losses

MORE than 100 credit unions are due to meet in Dublin today to discuss the offer of a combined €35 million reimbursement package for losses incurred from investment products purchased on the recommendation of Davy Stockbrokers.

Davy advised on the purchase of floating rate CMS (constant maturity swap) perpetual bonds to 149 credit unions and offered, in May, to buy them back at their then current value.

In essence, Davy offered to pay €60 per bond — down from their original value of €100 — and to grant each credit union another fixed rate 10-year bond that would have a guaranteed worth and make up the remaining €40 “loss”.

Davy initially set a deadline of July 4 for interested credit unions to sign up, but that date looks set to be extended with the new date expected to be announced at today’s meeting. It is understood that around 102 credit unions are to attend at Dublin’s Citywest Hotel.

Following last month’s offer from Davy, the Irish League of Credit Unions (ILCU) agreed to forward the proposal to its members.

Speaking yesterday, ILCU chief executive, Kieron Brennan, said today’s meeting is not intended to either recommend the offer to members or dissuade them from taking it up; even though the whole issue of the reimbursement programme was instigated by the league when it approached Davy earlier this year in a bid to find some kind of “exit strategy” from these bonds for its member unions.

Around one million people here are members of credit unions.

“We merely want to offer a neutral explanation of the legal and financial implications of signing up,” said Mr Brennan. “It is up to each individual union to consider their own position.”

Davy Stockbrokers — which will also be represented at today’s meeting — has, over the course of the last month, met with the vast majority of the affected credit unions (about 140 out of the 149 affected).

According to Davy, credit union reaction to the offer has been broadly positive.

Last week, the registrar of credit unions, Brendan Logue, said unions should “consider the financial, accounting and tax issues arising from the Davy proposal”.

It is understood that Davy had hoped to get this offer concluded before July 8, the scheduled commencement date of its High Court appeal against the verdict of Financial Ombudsman Joe Meade in the case of it selling investment bonds to Enfield Credit Union, Co Meath. However that now looks unlikely.


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