Archive for October, 2014

Record numbers taking drastic action to manage their debt… source- Belfast Telegraph

A record number of people in Northern Ireland are having to take drastic action to manage their debt, with almost 11 individuals per day declaring insolvency over the last three months.


There were 975 individual insolvencies, which includes bankruptcy, between July and September showing the province is still struggling to recover from the recession.

This is up more than a third (36%) on the third quarter last year. In contrast, individual insolvencies in England and Wales fell by less than 5%.

Ian Finnegan, director at ASM Accountants in Newry, said: “The numbers show that individual insolvencies for quarter three were the highest they have ever been.”

Stephen Cave, partner in PwC’s Northern Ireland business recovery service team, speculated that the rise may be down to the record low interest rates: “There’s been a lot of speculation that interest rates are not going to sit much longer at their rock-bottom 0.5% low, so some people may be taking the view that addressing their debt problems now is better than waiting till interest rates drive up the size of their debts or impacts on their disposable income.”

The number of individual voluntary arrangements (IVAs) has rocketed by 68% in the third quarter of 2014, with 549 people taking this option to manage their debt. That is up nearly 70% on the same quarter last year.

Individual bankruptcies also went up by 20% year-on-year, with 303 debtors declared bankrupt.

Northern Ireland has a greater problem dealing with debt than the rest of the UK, with 27% of the population over indebted, compared the UK average of 18%, according to Money Advice Service.

Citizens Advice dealt with 33,000 individual debt issues in Northern Ireland across their bureaux in 2013/2014.

In a warning for what’s to come, Kathy McKenna, money advice programme co-ordinator at Citizens Advice, said: “We expect to helping many more clients deal with debt over the next number of years.

“Citizens Advice are experiencing an increasing number of clients presenting for advice with debt, not only from clients who have experienced a change of circumstances such as redundancy, but also those who have been struggling over the last number of years.”

Angela McGowan, chief economist at Danske Bank, said individual bankruptcy has traditionally been associated with females aged 25-40 who have typically overspent on credit cards but since 2007 there has been an increase from people who are self-employed.



RBS upsizes Project Aran to €6bn with retained three finalists- Source Costar Finance

Royal Bank of Scotland has upsized its Irish non-performing real estate loan portfolio, Project Aran, by €4.3bn to approximately €6.0bn, with the same three-strong finalists now to bid across the enlarged NPL.

RBS took the decision almost two weeks ago to capitalise on the scale of appetite among the larger private equity funds, aligned with the broader recovery in Ireland’s economy and commercial property asset values which is enabling shallower discounts and a faster resolution of Ulster Bank’s non-core assets.

Project Aran, derived from RBS’ subsidiary Ulster Bank’s loan book, launched at the turn of September initially with a nominal balance of €1.6bn, secured by 411 borrower connections and 315 properties, which was quickly increased by around €100m to €1.7bn. 

The increase to approximately €6.0bn was taken prior to selection of the three finalists, which CoStar News revealed on Tuesday.

They are: Lone Star, Cerberus and a consortium comprised of CarVal Investors, Goldman Sachs’ special situations fund and Apollo Global Management.

Final, binding bids are expected by early December.

Project Aran’s skinnier €1.7bn-sized NPL priced between €500m and €600m in the first round, reflecting a circa 65% to 70% discount.

A blended discount at the same range on the enlarged €6.0bn Project Aran would imply a purchase price of between €1.8bn and €2.1bn, although there is no certainly at this stage the pricing would be consistent.

The sale of Project Aran to Lone Star, Cerberus or CarVal’s consortium would dispose of the bulk of Ulster Bank’s remaining commercial real estate exposure.

According to RBS’ half year interim results, the bank’s bad bank internal subsidiary, RBS Capital Management, has £11bn (€13.9bn) in commercial real estate, split £4.5bn in investment loans and £6.5bn in development loans.  Against this RBS had provisions of £2.7bn and £5.8bn, respectively.  

This combined £8.5bn (€10.8bn) in marked down Ulster Bank exposure, of predominantly Irish CRE secured loans, does not include the sale of Project Achill, which has a nominal balance of €1.2bn.

When, and if, the sales of the €6bn Project Aran (£4.7bn) and the €1.2bn Project Achill (£0.95bn) complete, this would reduce RBS’ non-core Ulster Bank CRE loan book by an additional €7.2bn (£5.7bn), which would  decrease Ulster Bank’s remaining CRE loan book to €3.6bn (£2.8bn).

Additionally, this reduction could fall further if the €844m Project Button portfolio trades were finalised in the third quarter and as yet not reflected in RBS’ segment reporting for the half year period.

Lloyds sells 4,000 Irish mortgages to Lone Star

UK lender Lloyds has offloaded a € 1.1 billion portfolio of 4,000 Irish non-perfroming residential mortgages to US private equity fund Lone Star.

Lloyds, which operated in Ireland under the Bank of Scotland/Halifax brands, is understood to have sold the “Project Paris” loan book at a discount, but the scale of the write-down is not clear.

Lloyds withdrew from the Irish market in 2010, and has run down its non-core Irish loan book from about €16 billion in 2009 to €13.4 billion as of June 2014.

In a statement, Lloyds said that the transaction is in line with its strategy of deleveraging its balance sheet and reducing its non-core assets.

“Whilst we will not comment on individual transactions where there is no obligation to formally announce to the stock market, we can state that – in general – our non-core asset disposals involve assets where we have already largely provisioned for impairments and we continue to expect non-core reductions in aggregate to be capital accretive,” the bank said.

The move follows Lone Star’s acquisition of €677 in distressed Irish mortgages from Investec in September. Its acquisition of Start Mortgages also gave the US fund an Irish lending license and could see the fund make a move into mortgage lending.

Ciaran Callaghan, senior credit analyst with Merrion Capital, said that while Lone Star is likely to initially focus on Start’s existing loan portfolio, he says it may use the platform to move into the new mortgage lending market over coming periods.

“Due to its low capital intensity and high margin business, new mortgage Irish lending generates significantly more attractive returns than compared to other forms of lending.”

Source- https://www.irishtimes.com/business/financial-services/lloyds-sells-4-000-irish-mortgages-to-lone-star-1.1965834

BBC News… Share prices slide as ‘perfect storm’ threatens markets

US shares ended largely flat on Thursday, after tracking losses on European and Asian stock markets.

Better-than-expected company earnings and a raft of positive economic data mitigated continuing concerns about global economic growth and the Ebola crisis.

Wall Street’s Dow JonesS&P 500 and Nasdaq indexes declined earlier.

The Dow Jones pared a 206 point decline to end down 24 points, or 0.15%.

The S&P 500 and the Nasdaq both ended slightly up for the day.

Markets welcomed economic data, as well as comments by a US Federal Reserve official, James Bullard, indicating that he believed the US central bank should re-evaluate its decision to end its extraordinary stimulus measures at the end of the month.

The Fed has been buying bonds in an effort to keep long-term interest rates low in a process known as quantitative easing, but that programme is set to end after Fed officials deemed the US economy was no longer in need of extraordinary support.

However, some analysts are hoping the Fed will re-think that decision when it meets later this month, from 28-29 October in Washington, DC.

Most observers, however, noted that Mr Bullard is not a member of the Fed’s rate-setting committee and that a move to continue stimulus measures seemed unlikely.

Increased costs

Meanwhile, the borrowing costs for Greece and Italy rose, and investors looking for a haven pushed gold higher.

In Europe, London’s FTSE 100 closed down 0.25% and the Cac 40 in Paris finished down 0.54%. Frankfurt’s Dax index bucked the trend to edge up 0.13%.

On Wednesday, the FTSE saw its heaviest one-day fall in 16 months. The S&P is down about 8% from a record closing high on 18 September.

Analysts said that a raft of disappointing economic and corporate news had panicked investors.

Recent poor data from China, Germany and the US have heightened worries that the global economic recovery could go into reverse.

SOURCE- http://www.bbc.co.uk/news/business-29644214

Paddy is easy pickings for the foreign vultures

“We are having an Irish boom without the Irish, and the best qualification for entry into the Irish recovery is not to be Irish.

The banks that are exiting Ireland are offering up their portfolios of loans to foreign vulture funds that have no interest in staying in this country.

Here’s what’s happening. European interest rates are going to zero because Europe’s economy is a mess. I know this isn’t a technical term, but bear with me. This slumping EU economy is causing the euro to plummet against the dollar.”

Source- http://www.davidmcwilliams.ie/paddy-is-easy-pickings-for-the-foreign-vultures/

‘Extra £150 a month ‘too much for half of home owners’ Says Telegraph

Mortgage borrowers will be ‘caught off-guard’ by rising rates, the Government’s advice body warns.

Half of all mortgages borrowers would be unable to afford a £150 rise in monthly bills if interest rates rose, the Government’s advice arm said today as the Bank of England called for emergency powers to block dangerous loans.

Interest rates are expected to start rising from their record lows next spring, putting pressure on millions of families struggling with the rising cost of living.

The Money Advice Service, which was set up by the Government and is independent, said 56 per cent of mortgage borrowers had “no contingency plan”.

Source- http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11137167/Extra-150-a-month-too-much-for-half-of-home-owners.html


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