I am advised by the Special Liquidators (SLs) that the valuation of the residential mortgage assets and/or the prices obtained in their sale will not be disclosed as this information is considered commercially sensitive financial information.
It is also important to note that the Department of Finance is not in possession of such information. In order to protect the confidentiality of customer data, the integrity of the sales processes and the liquidation more generally, the Department of Finance and NAMA were not made aware of nor did they receive the independent valuations of the loan assets at either a portfolio or a loan level, nor have they been made aware of the sales prices achieved for any individual mortgage sold as part of the liquidation.
The SLs were appointed over Irish Bank Resolution Corporation Limited ("IBRC") in February 2013 pursuant to Section 4 of the Irish Bank Resolution Corporation Act, 2013 (IBRC Act). The SLs instructions and obligations provide for the winding up of IBRC in an orderly and efficient manner in the public interest and in order to maximise the return for the creditors of IBRC. The passing of the IBRC Act and the appointment of the SLs was part of the promissory note transaction which yielded significant benefits for the State.
On the appointment of the SLs, I instructed them to arrange for and complete the independent valuation of IBRC s loan assets by no later than 30 November 2013. In this respect, the SLs appointed PwC as independent advisors to value the residential mortgage portfolio and to provide advice in developing a strategy for the sale of the residential mortgage portfolio which would ensure that maximum value was obtained for all creditors of IBRC. I further instructed the SLs to ensure that the sale of all loan assets was agreed or completed by no later than 31 December 2013 or as soon as practicable thereafter.
Per my instruction, the assets of IBRC could only be sold at a price equal to or in excess of the independent valuations obtained. Should a bid not be received in excess of the independent valuation obtained, the loan asset was to transfer to NAMA at the independent valuation price.
In total there were 11,825 individual residential mortgage customers in IBRC (comprising 12,702 mortgages with a par value of €1.8 billion). Following receipt of legal advice, the SLs corresponded with all residential mortgage holders and provided them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid for loan assets. The SLs reviewed and considered each and every representation. The representations were also considered by PwC in providing their sales strategy advice.
Following the receipt and review of borrower representations and the independent advice provided by PwC, it was decided that the mortgage portfolio (i.e. the Sand portfolio) be sub-divided into four portfolio tranches with a view to maximising market interest and return within the timelines set out in the Ministerial Instruction.
The SLs did consider the concept of selling individual mortgages but a number of issues impacted on the decision, including:
- cost;
- timing;
- independent advice received from PwC;
- borrower only bids;
- confidentiality of personal information;
- delivering best results for the creditors including the taxpayer; and
- execution risk.
The valuation of the Sand portfolio completed on 11 November 2013 and the sales process commenced on 14 October 2013
On 1 April 2014, the Special Liquidators announced that 64% of the mortgage portfolio (with a par value of €1.8 billion) had been sold to two buyers, namely Lone Star and Oaktree Capital Management L.P.
Following my instruction in April 2014, NAMA were no longer obliged to purchase the unsold IBRC assets at their independent valuation as previously envisaged due to the fact that the expected proceeds from the sale of the IBRC loan assets was sufficient to fully repay the IBRC debt to NAMA. The SLs therefore devised a further sales process in respect of the unsold loan assets to maximise the return to all remaining creditors of IBRC, including the State.The SLs again corresponded with all those remaining residential mortgage holders whose loan assets were not sold in the first sales process providing them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid for loan assets. Consideration was given to these Borrower representations and the SLs responded to these Borrower representations.
Following representations received from borrowers and the independent advice received, the unsold residential mortgage loan assets, which were now known as the Pearl portfolio were split into two tranches. The sale of the Pearl portfolio tranches were contracted prior to 31 December 2014 and completed in February 2015.
