Having just two final bidders in the mix for €2.2 billion of non-performing loans (NPL) was probably not what Permanent TSB (PTSB) chief executive Jeremy Masding would have wanted.
While any corporate financier would tell you that it's best to have three parties in the final shake-out to keep everyone honest, PTSB has to make do with US private equity firm Lone Star and hedge fund Elliott Management submitting binding final bids by a deadline on Wednesday evening. (Elliot's involvement was first reported by the Irish Independent on Wednesday.)
However, it’s a wonder there are any buyers left out there, as it is becoming increasingly difficult for lenders to enforce security on mortgages deep in default. While there are many hard cases among the 30,000 owner-occupier loans that are 720 days behind in repayments in Ireland, there is also a sizeable amount of borrowers who have consistently refused to engage with their lender.
The latest proposed piece of legislation putting the frighteners on so-called vulture funds eyeing distressed Irish debt is a Bill that Minister for Justice Charlie Flanagan got Cabinet approval in late May to start drafting.
The Courts and Land and Conveyancing Law Reform Bill 2018, in seeking to enhance protections for home owners in mortgage difficulties, will force judges to look at a number of factors when considering an application for a repossession order in cases where a borrower is unable to avail of a personal insolvency remedy.
These include the circumstance of people resident in the home, the “proportionality” of the repossession application, as well as the amount a buyer paid for of a distressed loan if it had transferred from the original lender.
While it remains to be seen whether the actual Bill will ever be delivered, let alone make it through the Oireachtas, sources say this is enough to put off many potential NPL buyers even as banks come under increasing regulatory pressure to lower their levels of soured debt. With the majority of PTSB and AIB still in the hands of the State, taxpayers will ultimately pay the price.
