IBRC Liquidation

Questions (159)

Pearse Doherty

Question:

159. Deputy Pearse Doherty asked the Minister for Finance the valuation process to be undertaken in respect of Irish Bank Resolution Corporation's legacy loan book that will be offered for sale; if he will provide the par value and post provision book value of the IBRC loan book at 6 February 2013; and if he will provide an estimate of the time needed to value the IBRC loan book. [11341/13]

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Written answers (Question to Finance)

I am advised that the Special Liquidators are in the process of obtaining suitable independent professional advisers who shall employ standard valuation methodologies appropriate to each class of asset of IBRC. As previously stated, detailed information in relation to the Bank’s financial performance, including information on provisioning is published semi-annually in the Bank’s interim report and annual report and accounts. Additional information will not be published as it is commercially sensitive financial information which could potentially have a detrimental impact on asset recovery from the impending sale process. The Special Liquidators anticipate having the valuations of the loan books completed by the end of June 2013.

IBRC Loans

Questions (160)

Pearse Doherty

Question:

160. Deputy Pearse Doherty asked the Minister for Finance if he will confirm that Irish Bank Resolution Corporation is this week, week ending 27 February 2013, writing to borrowers regarding the disposal of their loans, the process to be adopted by the special liquidator KPMG to ensure that any sale is transparent, that potential buyers have access to adequate information and sufficient time to arrange financing and that the interests of the taxpayer will in general be protected and the sale price maximised. [11344/13]

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Written answers (Question to Finance)

I am advised by the Special Liquidators that the reports in the Sunday newspaper referred to are incorrect. The Special Liquidators are still in the process of devising and implementing the sales process in respect of IBRC’s assets. Therefore, they are not in a position to write to borrowers with regard to the disposal of their loans. The Special Liquidators are in the process of obtaining suitable independent professional advisers who shall employ standard valuation methodologies appropriate to each class of asset of IBRC. Following that independent valuation process, the Special Liquidators will sell the assets of IBRC, which are subject to the floating charge. Borrowers, third parties and other financial institutions will be given the opportunity to bid for specific portfolios - or component parts thereof - as part of an open and transparent process at or above their independent valuation and failing that, the Special Liquidators will sell the assets to NAMA at their valuation price.

NAMA Portfolio

Questions (161)

Pearse Doherty

Question:

161. Deputy Pearse Doherty asked the Minister for Finance if he will confirm that the National Asset Management Agency is to demolish half a dozen ghost estates here, if he will confirm the approach taken by NAMA in making a demolition decision; the overall cost of demolishing such estates; if the estates have already been identified; and if so, if he will provide their addresses and provide a reassurance that NAMA will first attempt to dispose of ghost estates prior to demolition in order to minimise the cost of NAMA to the taxpayer. [11345/13]

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Written answers (Question to Finance)

I refer the Deputy to my response to Parliamentary Question No. 92 of 28 February 2013 in which I set out the following facts. NAMA advises that it does not take a decision to demolish any development lightly but that this may be considered as a means of reaching resolution on properties where the development is, for economic, structural and safety reasons, not viable. Decisions are made on a case by case basis as part of the Site Resolution Plan process agreed with each relevant local authority. NAMA advises that the only previous instance of it sanctioning the demolition of residential property securing its loans was in the case of a County Longford apartment block. In that instance, Longford County Council, in detailing Category 4 remediation works to be taken as part of the agreed Site Resolution Plan in respect of a residential development, sought the demolition on health and safety grounds of an unsafe apartment block containing 12 apartments. The demolition of this block was undertaken in 2012. NAMA advises that demolition and site remediation costs were of the order of €150,000.

NAMA Operations

Questions (162)

Pearse Doherty

Question:

162. Deputy Pearse Doherty asked the Minister for Finance further to the announcement by the National Asset Management Agency that it is sponsoring a two year study at the Economic and Social Research Institute, if he will confirm the object of the study; the cost of the study and the contribution to that cost by NAMA; the deliverables to be provided by the study and when they will be delivered; and if they will be published and the consideration NAMA gave to using other research bodies for the study. [11347/13]

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Written answers (Question to Finance)

I am advised by NAMA that the overall objective for the proposed research work is to produce practical market insights that will facilitate informed decision-making by all market participants, including potential purchasers, investors and the construction industry. NAMA advises that the research work will cover a number of relevant issues, including the likely pattern of economic recovery over short to medium-term horizons and the related impact on the housing market. Research work will be overseen by a Steering Committee, on which NAMA will be represented, which will agree priorities and review outputs. Editorial control and responsibility for the research will rest with the ESRI. NAMA advises that its contribution to the cost of the research work has not yet been finalised and that the ESRI is also in discussion with other possible sponsors. I am advised that the original proposal was received by NAMA from the ESRI and that the NAMA Board considered and decided to support the proposal based on the ESRI’s experience, expertise, capacity and credibility in the area of primary economic research. I understand that the ESRI plans to publish its reports. The Deputy may also wish to note the commitment in the Action Plan on Jobs 2013 which states that better cross–Government co-ordination of action on the property market will be progressed under the active leadership of my Department. The important work now being undertaken by NAMA and the ESRI will complement that process.

Sale of State Assets

Questions (163, 164)

Pearse Doherty

Question:

163. Deputy Pearse Doherty asked the Minister for Finance further to his announcement of the sale of Irish Life to Great West Life for €1.3 billion, if he will confirm the price earnings ratio implied by the sale; and if he will provide a comparison with price earnings ratios of comparable companies. [11348/13]

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Pearse Doherty

Question:

164. Deputy Pearse Doherty asked the Minister for Finance further to his announcement of the sale of Irish Life to Great West Life for €1.3bn, the reason he was unable to achieve a premium on the sale price reported in December 2011, in view of improving economic sentiment in the State and in the eurozone. [11349/13]

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Written answers (Question to Finance)

I propose to take Questions Nos. 163 and 164 together.

I can inform the Deputy that the price earnings ratio implied by the sale of Irish Life is 12x, based on expected 2012 earnings. I have been informed that no listed companies in Ireland are comparable to Irish Life. I am advised by Goldman Sachs, which acted as adviser to the State in the sale of Irish Life, that the price earnings ratio of the listed UK companies that are most comparable to Irish Life - Aviva, Old Mutual, Legal & General, Standard Life and Resolution - ranges from 8.6x to 16.1x and that the average P/E multiple of this peer group is 11x. It should be noted that the comparable companies cited operate in very different markets to Ireland, where the life assurance market is challenged. The implied ratio implied by the Irish Life sale compares favourably with the valuation of this peer group. I can advise the Deputy that the price achieved represents a 30% premium to the net assets of Irish Life.

I can inform the Deputy that the €1.3 billion consideration agreed for the sale of Irish Life is a 30% premium to the price that was achievable when the previous bid process was suspended in November 2011. As the Deputy is aware, since November 2011 valuation multiples in the life insurance sector have improved, as has sentiment towards Ireland and the Eurozone, while the underlying life assurance industry in Ireland has remained challenging. These circumstances allowed the State to recoup in full the investment made by the taxpayer in Irish Life and at a price which was significantly better than could have been achieved in November 2011 . A fair value opinion which supported the decision taken by the State was received from our advisors Goldman Sachs. I believe the price achieved for Irish Life represents a very good deal for the Irish taxpayer.

Banks Recapitalisation

Questions (165)

Pearse Doherty

Question:

165. Deputy Pearse Doherty asked the Minister for Finance if he will provide an assessment of the benefits of replacing the promissory notes extant at the Educational Building Society, part of the Allied Irish Banks group, with long term government bonds. [11350/13]

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Written answers (Question to Finance)

The Deputy will be aware that the State injected €875m of capital into the EBS Building Society (EBS) in order for it to meet regulatory requirements. Of this total amount, €625 million was by way of two separate subscriptions for Special Investment Shares, while €250 million was provided by means of a Promissory Note. The terms of the EBS Promissory Note provide, inter alia, that ten per cent of the amount outstanding as at the end of 2010 shall be paid each year until the note is paid off in full. This equates to €25 million per annum, with the next annual payment to be made on 17 June 2013.

Given that the EBS Building Society was acquired by Allied Irish Banks (AIB) which is a systemically important bank to the Irish economy, compared to the wind-down situation at IBRC, the Government is not currently considering a restructuring of the EBS Promissory Note. As the Deputy is aware, the annual repayments of the EBS Promissory Notes are made up of capital and interest elements. Any changes to the repayment scheduling of the capital balance will have an impact on the interest payments as would any assumptions around how the funding was replaced, interest rate changes and other funding considerations. Differing assumptions around these metrics can have a material impact on the ultimate valuation and it is subject to a wide range of possible outcomes. As detailed above, the Deputy will be aware that the EBS Promissory Notes are significantly smaller in scale that the previous Promissory Note arrangement for IBRC.

Credit Availability

Questions (166)

Pearse Doherty

Question:

166. Deputy Pearse Doherty asked the Minister for Finance if he or his Department have investigated the use of personal guarantees for commercial lending in the State; if he has compared practice in this area with other jurisdictions; and if personal guarantees are a deterrent to economic development. [11351/13]

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Written answers (Question to Finance)

The Red C survey of SME credit demand for the period April – September 2012 showed that 41% of SMEs which were approved or partially approved for credit were subject to a personal guarantee. This was the second most common condition with the need to provide regular management accounts/debtors & creditors listing to the bank being the most common requirement at 57%. This survey covered over 1,500 SMEs. The Eurostat 2007-10 survey on access to finance asked about the need for guarantees in obtaining loan finance. The results showed Ireland at 39% in 2010, almost exactly at the average figure. The Irish figure had reduced slightly from 40% in 2007, which was slightly above the average then of 38%.

The Central Bank’s Code of Conduct for Business Lending to Small and Medium Enterprises provides that a regulated entity must not impose unreasonable personal guarantee requirements on borrowers. In addition, where a regulated entity seeks collateral or a personal guarantee to support a lending proposition it must explain clearly the possible implications for the guarantor of giving such collateral or personal guarantee. Any enforcement of a personal guarantee over a principal private residence must be in accordance with the Code of Conduct on Mortgage Arrears. A SME is entitled to apply for a review by the Credit Review Office where the borrowers considers that the terms or conditions attached to a credit facility or its price are so onerous as to amount to a constructive refusal. This could include unreasonable personal guarantees. Personal guarantees make the guarantor liable in the event of the SME being unable to meet its liabilities and may make the guarantor personally liable for the debts of a limited company. I would strongly advise SMEs to ensure they have independent expert advice on the possible consequences of giving personal guarantees.

NAMA Operations

Questions (167)

Pearse Doherty

Question:

167. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 285 of 19 February 2013, the reason he did not publish the directions issued to the National Asset Management Agency on or around 6 February 2013 at that time; the reason NAMA has not itself published the directions; and the reason he failed to publish the directions last week as stated in his reply. [11352/13]

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Written answers (Question to Finance)

I can advise that the directions to which the Deputy is referring were laid before the Houses of the Oireachtas by me on Monday, 4 March 2013. I am advised that, following this, NAMA also published the directions on Monday, 4 March 2013.