'We want to pay our way': O'Donovan's Hotel and their battle with Everyday Finance
Dena and Tom O'Donovan at O'Donovan's hotel in Clonakilty. Dena says: 'None of it is right. There is a proper way of dealing with people.' Picture: Eddie O'Hare
It was Christmas week when a man walked into Options Boutique on Clonakilty’s Pearse Street and told the women working there that their time was up. The man was from a firm of receivers. He told the boutique’s proprietors that their premises was part of the O’Donovan’s Hotel group of properties which would now be placed in receivership.
Word spreads fast in a small town. Within the hour, Dena O’Donovan was getting calls from staff at the family hotel, wondering whether they would be facing into the festive season without a job. Some of the staff had been there for up to forty years. By the afternoon, the cancellations started coming in.
“We don’t do weddings, but we do the afters of weddings,” Dena says. “That very day a woman who had made a booking came and said she was cancelling and wanted her deposit back. It was all over town, people coming up to me and saying we heard you’re closing. Others arrived in and wanted vouchers to be cashed in, that the whole town had it O’Donovans was about to close down.”
The reality was the O’Donovan family, who have been hoteliers for seven generations, had no intention of closing what is a very viable business. The receiver’s representative had arrived because a loan which the family had taken out with AIB 16 years ago was coming back to haunt them through a vulture fund that now owned the loan. Like thousands of others around the country, the O’Donovans were finding out years after the economic crash that the fallout was being visited on them even though in terms of financial probity they had done absolutely nothing wrong.
O’Donovan’s Hotel has been a feature on the landscape of the west Cork town for over 200 years. Stepping through the door is like taking a walk into the past, the old world feel retained in dark mahogany and walls decorated with famous sons and daughters who stayed there on the road to immortality. Michael Collins called in on his last day, before moving onto the Munster Arms en route to Beal na mBlath. A generation earlier, Charles Stuart Parnell addressed the town from an upstairs window. Reel time back another forty years and the man who invented the radio, Marconi, found himself accidentally in Clon and made straight for O’Donovan’s where he was suitably refreshed and given specific instruction on how to extract himself from West Cork. Then, during the Second World War, an American B-17 made a forced landing in the white mashes outside the town, and the crew of 10 was officially “interned” in neutral Ireland in the hotel for over a week. The place, by all accounts, was hopping, as the displaced Yanks partied through their internment, providing the locals with an exotic distraction.
Such a storied history of a long-standing establishment is often related as an introduction to a tale of woe about how the place couldn’t keep up with the times. That narrative couldn’t be further from the truth in the case of O’Donovans. It remains a hub for the town, hosting all manner of gatherings on a weekly basis, frequently filling its 22 rooms, feeding off the buzz that is part of Clon’s charm. Sure, the bar business is under pressure, as it is all over the country. But the hotel itself? A thriving business, according to Dena, in which they employ 70 local people. Why then is it facing the possibility of closure?
The business is run by Dena and her twin brother, Tom. They have been in situ for the last 40 years through good economic times and bad. Their current troubles can be traced back to the Celtic Tiger, when they decided to take out a loan to expand the business. A couple of properties adjacent to the hotel were bought, including the boutique shop mentioned above. A loan for an amount in excess of €1m was taken out with the local AIB. Life went on, repayments were made, the O’Donovans’ business like so many others in the country prospered as the economy took off. Then came the crash and belts had to be tightened all around. In 2009, the bank wanted to restructure the loan. Tom and Dena sat down with the manager and a plan was hatched out.
“The idea was that we sell off a few bits of property, readjust the payments and carry on,” Tom O’Donovan says. “There was a bit of pain involved but we managed it and got things back on track at a time when a lot of others were, unfortunately, going under and the economy was going through tough times.”
According to banking sources, the format in restructuring loans since the economic crash generally means breaking down the original loan into three parts.
Part A is dealt with by coming up with an immediate payment through raising money quickly and knocking a portion off the original loan. Part B is the restructured repayments, usually by increasing the amount to be paid off monthly and often shortening the term of the loan with a review of the agreement typically after five years. Part C is then written off by the bank. Further trouble is only encountered if the new repayment schedule cannot be met by the borrower.
The O’Donovans were able to meet their repayments and believed they had gotten over the hump. Then a few years later, their loan was sold, most likely as part of a bundle, to vulture fund Everyday Finance. “We weren’t told a thing about it,” Tom says. “But if the status quo was going to be maintained and we could continue on the same terms we had with the bank, it wouldn’t have been a problem.”
In the years since the crash, the main banks have at various points bundled and sold off loans at discounts to vulture funds. In the main, these loans would have been “non-performing”, or not being fully serviced. However, these sold-off loans or mortgages could be classified as “non-performing” if at some point in the past repayments were behind for even a short period. Equally, loans that had been restructured at an earlier point have ended up being sold on.
A recent analysis by the money advice website MoneySherpa.ie estimates that close to 60,000 mortgage holders have had their loans transferred to vulture funds.
Confidentiality clauses prevent the O’Donovans from laying out the precise terms of their loan, but typically when a vulture fund buys a loan from one of the banks, the Part C element of a restructured loan — which could have been agreed years before — is effectively rescinded and no longer written off. A recent Oireachtas committee hearing was told that these funds have been buying loans at a discount of up to 50%, which would infer huge potential for these funds to make major profits on the loans.
The O’Donovans assumed their arrangement with AIB would continue with Everyday Finance. However, the vulture fund had other ideas. “After we made the first repayment we got a phone call from this man who tells us that they have no interest in long-term finance and why don’t we put a few million on the table, we get the deeds to our business and they get their money,” Tom O’Donovan says. “Where did the idea for a few million come from? We were gobsmacked.”
The O’Donovans were now in a bind, Dena says.
Following advice, the O’Donovans stopped the repayments, but monthly they put aside the money due with a view to sorting it out once an agreement could be reached. They claim their efforts to engage with Everyday Finance came to naught. The has put a number of questions to the fund about how they deal with loans like this but no reply has been received at the time of publication.
Problems around engagement with vulture funds which have bought loans and mortgages from one of the high street banks are not unique to the O’Donovans. Once the loan has been moved, any relationship with the lender is gone too. There is no individual person appointed as a relationship officer to deal with the borrower.
“It was always intermediaries,” Tom says. “Every time I rang it was a different person and I had to start explaining the whole situation all over again. You couldn’t tie anybody down.”
David Hall of the Irish Mortgage Holders Association says he frequently comes across borrowers who have great difficulty in engaging with their new lender. “You have to remember that you are dealing with a bank that hasn’t got staff,” he says. “They have young people employed and it could be a different person you’re dealing with each time. In reality, you’re haggling with a computer. One of the biggest flaws in the system [in which vulture funds buy loans] has been the lack of proper engagement. What you get is tokenistic engagement but the issue is that it is the Central Bank that is allowing this sort of thing. It is all within the rules.”
The main communication from the fund was through letters repeating the O'Donovans were obliged to continue paying the loan. “They wouldn’t tie themselves down to any specific arrangement,” Tom O’Donovan says. “We got regular letters asking us what bank accounts we have, whether we have Sky [TV], what kind of car do we drive.
“All we wanted was clarity. You wouldn’t go into a garage, buy a car and drive away without knowing how exactly you were expected to pay for it.”
The ultimate outcome was the arrival of the man from the receivers. After the initial shock last Christmas, the O’Donovans tried again to make contact and see how a resolution could be arrived at. They invited the receiver to the hotel to see if they could talk things through.
“He arrived in the door with a valuer, a photographer, and a BER rating man,” Dena says. “They went around the place and then they left without ever discussing anything with us.”
The O’Donovans decided to go public with their plight. Local TD Michael Collins raised the matter with the Tánaiste in the Dáil at Leader’s Questions last month, and Micheál Martin agreed to meet with the brother and sister. There has also been some coverage in the local media and between it, word has got out about their plight. The result, according to the brother and sister, is that they have been inundated by calls from dozens of people who believe they are in a similar, and often worse, position as a result of loans being sold to vulture funds.
“We have heard some awful stories,” Dena says. “There was one man who actually called here to us. He used to employ 30 people, had a business, and then got into trouble and his loan ended up being sold to a vulture fund. Now he’s stacking shelves for a living. None of it is right. There is a proper way of dealing with people. And remember, in these cases, you’re talking about a situation where loans were taken out with the local bank and then suddenly end up somewhere else altogether.”
For now, the receiver has backed off. Yet the prospect of having their business closed down still remains a daily worry.
“The local people have been great,” Dena says. “It’s bordering on embarrassing. Some people want to organise a protest. The other day a woman said to me she wanted to start a GoFundMe page but I said no, no, that’s for people with illness or for a charity. We are not in that position at all. We want to pay our way as we have been doing. But there is a serious injustice in how we are being treated. And as we have found out in the last few months, we are far from the only ones.”
On April 5, the sent a series of questions to Link Financial, based in Galway, under which Everyday Finance operates. The email was sent to the general information address on advice following a telephone call to the offices. No specific address was provided for media queries. There has been no reply. The following questions were asked.
1. Is Everyday obliged to provide the same facilities and conditions as that of the bank from which it purchased the loan if the loan is performing?
2. What kind of licence has Everyday to practice in this jurisdiction?
3. Does Everyday operate through intermediaries and if so, are these intermediaries paid on a commission basis?
4. What kind of engagement does Everyday have with clients when an issue arises about repayments?
5. On what basis does Everyday appoint a receiver?
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