# Todays Indo - €1bn secret investors story



## csirl (21 Jul 2009)

Front page of todays Indo has a story about the liquidation of a building company who owes €1bn being prevented by the sudden appearance of "secret investors".

Where is this money coming from and why is it a secret? Has it been loaned by a bank? One that is covered by the State guarantee? Who would have this amount of cash to spare? Why would they lend it?


Am I missing something here?

http://www.independent.ie/national-...-head-off-83641bn-property-crash-1831813.html


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## rory22 (21 Jul 2009)

Had the same questions when I read it this morning. 

Can't answer those questions but would say that the amount of money being invested to save the company is unclear, in other words the secret investors are not pumping €1bn into the company, but rather enough to protect it for now.


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## dewdrop (21 Jul 2009)

There is still massive amounts of money in the country and perhaps some cute investors see a good return in whatever they have in mind


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## Ghodadaba (21 Jul 2009)

csirl said:


> Front page of todays Indo has a story about the liquidation of a building company who owes €1bn being prevented by the sudden appearance of "secret investors".
> 
> Where is this money coming from and why is it a secret? Has it been loaned by a bank? One that is covered by the State guarantee? Who would have this amount of cash to spare? Why would they lend it?
> 
> ...


 

They are potential equity investors, so there is no way it is a bank and the funding is not debt.

The investors wouldn't be investing anything like €1 billion euro, this figure just refers to the company's debts. They will probably just invest a few million, perhaps 10, perhaps 20, perhaps a little more.

Their identity is a secret because a deal has not been struck yet, and publicity might affect the striking of a deal or alert the potential investor's competitors to what s/he is doing. Also, it isn't really the public's concern who the investors are. If a private individual or company decides to invest in another private company, the negotiations are really a matter for that company and the investor. Only when a deal is in place and the company seeks the court's approval for a scheme of arrangement, does the public really have a "right to know".

It is also common practice in an examinership for the potential investors in a rescue package to be kept anonymous until a deal has been completed. This is not unusual or suspicious in any way.


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## mercman (21 Jul 2009)

Bottom Line - It really is nobody's business who the Investors are or might be.


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## Sunny (21 Jul 2009)

mercman said:


> Bottom Line - It really is nobody's business who the Investors are or might be.


 
I agree and yet I don't agree! I have become a cynic after recent events in Irish Banking and I just find it pretty convenient that investors have suddenly appeared to prop up a developer and therefore avoid what the banks want to avoid i.e. a property firesale before NAMA is set up. 

The real story in that article is the attitude of foreign banks to the setting up of NAMA. They have obviously decided that they want to recover what the hell they can and get out of dodge.


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## csirl (21 Jul 2009)

> The real story in that article is the attitude of foreign banks to the setting up of NAMA. They have obviously decided that they want to recover what the hell they can and get out of dodge.


 
I wonder if our banks are taking the same hard line and making efforts to recover money they have lent overseas?


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## smiley (21 Jul 2009)

csirl said:


> I wonder if our banks are taking the same hard line and making efforts to recover money they have lent overseas?



Very good question? Does anybody know??

Did Anglo pull the plug on a few companies in the UK recently? Or perhaps this isnt the same sort of thing Rabobank and Danske are doing at the moment?


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## Superman (23 Jul 2009)

smiley said:


> Very good question? Does anybody know??
> 
> Did Anglo pull the plug on a few companies in the UK recently?



The Irish and British governments have made a gentleman's agreement to play nice:
_Meanwhile, the British government has told its main financial institutions to adopt a sympathetic approach to Irish property developers and not to pursue them aggressively through the courts, under an informal accord reached between the Irish and British governments._
[broken link removed]


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## Ghodadaba (23 Jul 2009)

smiley said:


> Very good question? Does anybody know??
> 
> Did Anglo pull the plug on a few companies in the UK recently? Or perhaps this isnt the same sort of thing Rabobank and Danske are doing at the moment?


 

None of the Irish banks are aggressively pursuing property developers through the courts, as they are leaving that to Nama..... Irish nationwide has broken ranks once or twice, but only in situations when it thought ACC would get in there first.

It makes no sense for the Irish banks to all go after the developers separately. Just give the loans to Nama, and let it go after each developer....

Also, if the banks go after the developers, they will have to write down the value of the loans to whatever money they recover. They can't afford to do that.....


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## JackFeeney (24 Jul 2009)

mercman said:


> Bottom Line - It really is nobody's business who the Investors are or might be.


 
If its one of the Banks on the Irish Guarantee Scheme (Very Likely), anyone paying tax is entitled to know. If the company went now, it could perhaps realise 30% of its debt (using Zoe as a benchmark) but if its waits until NAMA is in place, it could realise up 70% - the 40% difference is what the Irish excheqer / tax payer will make up. 

There will be more 'Secret white knights' and many more calls for 100 days of examinership as well as calls to bring NAMA forward faster.

NAMA has to value the toxic assets at 70% or the Irish Banking system will fall OR so we're told. I would suggest that if this were investigated properly, Bankers, directly or indirectly, are behind it.


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## darag (25 Jul 2009)

The entire NAMA plan will collapse if the receiver is let anywhere near any Irish property company.

Liam Carroll's 1.2B of loans is backed by less than 300 million worth of property.  He has said this himself.

A NAMA which pays 25% of the book value for property backed loans will be of no use.

This is a nightmare scenario for those who believe that the way to save the Irish economy is to transfer the massive losses of the Irish retail banking and property development sectors onto the taxpayers shoulders.

I was a firm believer in Hanlon's Razor - "Never attribute to malice that which can be adequately explained by stupidity." - when it came to the government's response to the property/banking crisis and I've railed against what I perceived to be stupidity on the part of the government here.  I'm really not sure any more; it's very difficult not to believe in a political/property/banking conspiracy when you read about stuff like this.


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## z109 (25 Jul 2009)

darag said:


> I was a firm believer in Hanlon's Razor - "Never attribute to malice that which can be adequately explained by stupidity." - when it came to the government's response to the property/banking crisis and I've railed against what I perceived to be stupidity on the part of the government here.  I'm really not sure any more; it's very difficult not to believe in a political/property/banking conspiracy when you read about stuff like this.


Grim, isn't it? The little whispering voice in the back of your mind saying "something doesn't smell right about this" is now screaming "it stinks of corruption".


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## darag (29 Jul 2009)

Grim is not the word.  I'd promised to keep away from this part of the web-site as it causes me great stress just thinking about it.  I've already done as much ranting as I could manage (back when the "guarantee" was announced to great fanfare and an inexplicable degree of smug self-congratulation at how us clever Irish had solved our banking problems without spending a penny - it's worth remembering that a significant number of high-profile people claimed the exchequer would actually MAKE money from the deal).  Much of the retail banking sector was and is insolvent and the guarantee had effectively meant the government (i.e. the Irish taxpayer) had just signed up to shouldering all present and future retail banking losses.  There's no way out now but the NAMA thing just looked like allowing the construction industry to off-load their losses too.  I must say it I experienced guilty pleasure thinking that ACC's actions would force the government and the public to face this stark reality but no... if it were physically possible to both stumble forwards towards doom while keeping your head buried in sand - charitably, that's what this government have been doing for a year.  Uncharitably the whole thing is a con job.


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## darag (30 Jul 2009)

Just to clarify why I think the NAMA plan is likely to become unfeasible if the receiver were called in on Carroll's companies.  No bank will sell its loans to NAMA at true market value.  The market value of a loan depends on a combination of the solvency of the debtor and the value of the collateral securing the loan.  A receiver driven fire sale of Carroll's development land would establish a market value for the latter (which seems in Carroll's case to be somewhere between 25% and perhaps 40% of the value of the loans).  Assuming cash flow problems with the big developers (a reasonable assumption), the market value of the collateral establishes the floor for the market value of the loans.  The banks cannot sell their loans at even 50% of their value as they would quickly become insolvent.  The other option, for NAMA to pay two to three times the market value of the loans is not a runner either given that the entire venture is going to be backed by a massive government bond issue which will have to be reviewed by the EU and the ECB since the purpose is for the bonds to be turned into cash for the banks using repo with the ECB, I simply cannot see how it would be given the green light.

The government''s rush to get NAMA up and going as fast as possible is motivated by a recognition of this danger.


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## Mumha (1 Aug 2009)

darag said:


> Just to clarify why I think the NAMA plan is likely to become unfeasible if the receiver were called in on Carroll's companies. No bank will sell its loans to NAMA at true market value. The market value of a loan depends on a combination of the solvency of the debtor and the value of the collateral securing the loan. A receiver driven fire sale of Carroll's development land would establish a market value for the latter (which seems in Carroll's case to be somewhere between 25% and perhaps 40% of the value of the loans). Assuming cash flow problems with the big developers (a reasonable assumption), the market value of the collateral establishes the floor for the market value of the loans. The banks cannot sell their loans at even 50% of their value as they would quickly become insolvent. The other option, for NAMA to pay two to three times the market value of the loans is not a runner either given that the entire venture is going to be backed by a massive government bond issue which will have to be reviewed by the EU and the ECB since the purpose is for the bonds to be turned into cash for the banks using repo with the ECB, I simply cannot see how it would be given the green light.
> 
> The government''s rush to get NAMA up and going as fast as possible is motivated by a recognition of this danger.


 
In my opinion, Yes AND No.

I believe you are right as to what the Received would mean to the Carroll empire.

I disagree wrt the latter half of your post.

Let's say the Supreme Court do uphold the High Court's decision, I think it could be a tipping point into an Iceland situation very quickly.

If you look baldly at what FF are trying to do, they are engineering (through NAMA) a way that the developers' bad debts will be absorbed by NAMA, allowing the banks to flourish but it means that the taxpayer will have to pay for the difference between the Loan value and the ultimate selling price, plus the interest on that Loan value until it is settled. They can pretty it up all the want but that is the reality.

Lenihan is currently giving us the bullcrap patter about seeing a return, and there is probably a fair percentage of the Irish people who are at least entertaining the idea, BUT if Carroll goes, and the ACC salvage what they can, the mask will have to drop. I don't think they can really allow the banks to fail and at that point they will plough on regardless but the charade will be clear for all to see.

The EU/ECB will not allow Ireland to collapse.

As for the government rushing...the legislation won't be enacted until sometime in September ! If Carroll goes under next week, that could be that. Maybe Lenihan could nationalise ACC over the weekend and stop the court case !


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## darag (1 Aug 2009)

Agreed Mumha, the last thing the EU/ECB would want to see is an Irish collapse.  The ECB in particular has already poured tens of billions of cash into the Irish financial system (admittedly most seems to have gone to the non-retail bank sectors based in the IFSC) and are probably prepared to provide plenty more as it is needed.  However this is not a subsidy since the cash is in the form of a loan (from the ECB) backed by high-grade securities like government bonds.  These actions cover the liquidity issue but do nothing for the solvency issue.

I'm not sure where the latter half of my post begins - the bit you disagree with?  

Do you agree that the valuations for the loans that NAMA are supposed to buy would be have to be heavily discounted if a forced sale of development land established a price for such assets at a level of under 40% of their peak values?

And that at such valuations, the NAMA plan becomes unfeasible if the intension is to pay "market values" for the loans as it would drive the banks into insolvency to sell their commercial property related loans to NAMA?

I think I agree with what you are saying the FF government are trying to do but the tax-payer is caught no matter what the outcome as the government guarantee means that the ultimate difference between the booked value of the loans and their real value has to come out of the public purse anyway.  Whether this is though a straight capital injection into the banks or an indirect one via NAMA is in some ways irrelevant as the government picks up the shortfall either way.  The only selling point of the NAMA plan that I can see is the hope that a dedicated operation would be better at extracting value from the loans than existing bank staff.  There's probably no point in rehashing that old argument though; we are where we are.

The only bit is that you think September is not rushing things?  If Carroll's group is allowed to go into examinership then surely it will give him over 3 months protection before the process leading to a forced sale of land assets could even begin.  Although it would still be a tight schedule it would at least give NAMA a chance to buy the loans before such lower valuations would have been established.


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## onq (1 Aug 2009)

I suppose it hasn't escaped anyone's notice that the Courts are "off" for a while?

Holliers!

So with a bit of luck, Nama might be up and running and I think it may be in such a strong position legally that the Supreme Court will have to have due regard to it.

I think this will play out as a difference between private need [ACC Bank and their ilk looking for their money prrronto!] and the Public Good - Keeping Ireland Inc Afloat.

FWIW

ONQ.


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## z109 (2 Aug 2009)

Justice Kelly seems to take the view that the Commercial court should sit permanently:



> Such is the urgency of the mammoth litigation, Mr Justice Peter Kelly, who is in charge of Ireland's "big business" Commercial Court, has offered to sit during the court's summer holiday to deal with motions relating to the actions.
> "Commerce doesn't stop because lawyers go on holiday," Judge Kelly told the court on Monday.




As I understand it, he will be in court on Tuesday to continue adjudication on the Carroll case.


So we may get no respite!


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## Mumha (2 Aug 2009)

yoganmahew said:


> Justice Kelly seems to take the view that the Commercial court should sit permanently:
> 
> 
> 
> ...


 
If that is the case, it would be wonderful news, for us the taxpayers.


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## Bronte (3 Aug 2009)

No one can have any faith in any value that NAMA will decide. I thought Judge Kelly's decision on the value put by two of the countries largest and presumable most esteemed estate agents was really amusing. He's a great judge.


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