Meanwhile, In The Dáil

Catherine Murphy in the Dail this evening

During tonight’s debate on the Commission of Investigation into certain IBRC transactions, including the sale of Siteserv to Denis O’Brien…

When I met with the Minister yesterday I highlighted that my main concern would be that the investigation does not end on Prom [Promissory note] night and that it extends into the time when the IBRC was in liquidation.

There are many issues that straddle both time periods and it is vital that the investigation can properly follow these threads.

For example, the purchaser of Siteserv, was already significantly indebted to IBRC. We know that on the 7th of March 2013 – one month post liquidation – that he wrote to the special liquidator seeking to reschedule his outstanding loans over a further 3 year period.

We know that he claims to have been allowed a similar extension by virtue of a verbal agreement he claims he had with the CEO of IBRC (Mike Aynsley).

We also know that, according to IBRC, the credit committee had never approved such a previous agreement yet Mr O’Brien maintains it was in place and he requested that the special liquidator be made to honour that verbal agreement.

I wish the minister to clarify if the assertion of such a verbal agreement will be enough to satisfy the Terms of Reference regarding the ‘contractual obligations’ required in relation to investigating issues that straddle pre & post liquidation.

We know that the credit committee met on the 23rd of May 2013 – two months after Mr O’Brien’s approach to the special liquidator and at that time the outstanding balance owed to IBRC by Mr O’Brien was in the region of €325million.

It is worth, at this point, asking the question as to why someone, so heavily indebted, was allowed to make significant purchases from IBRC rather than being asked to pay down his outstanding loans. Were other bailed-out banks financing this buying exercise? Was he borrowing from Peter to pay Paul?

Interestingly, an article that appeared in the UK edition of the Sunday Times in January 2012 showed that in 2011 & 2012 the IBRC refinanced some of Mr O’Brien’s loans and increased their security stake in some of his investments. It seems illogical that in the same time period they allowed him to purchase Siteserv for example.

The point here is that some of the documents I am referring to relate to the Special Liquidators era hence the need for the period to be covered by the terms of reference.

In recent days, The Chairman of IBRC (Mr Dukes) has made much of the fact that the Central Bank conducted a review, prior to July 2012, and apparently found no problems.

Contradicting that assertion however is a relevant piece from the FOI documents from inside the Department when they said

“We are concerned that the Central Bank report compiled on the transaction vindicates their position. To be clear we are concerned with a number of the decisions taken by the bank in relation to this transaction.”

….Yet It was not until I received an FOI of July 2012 internal Dept memos did we learn that the Department officials were expressing serious concern over the effectiveness of the CEO and the management team and they had serious concerns over the way a number of large transactions, including the Siteserv sale had been handled.

….Another significant issue that raised its head in some of the early reporting of this controversy but has since been replaced by other developments is the share activity in Siteserv prior to its sale.

Various sources of information told me that the Siteserv share activity in November 2011 – the period during which the bidding process was underway – was irregular and that there had been a significant share spike around the time it was sold resulting in a nice windfall for some lucky investors.

Unfortunately it was indicated to me that some of those investors may not have been so much lucky as they were well-informed. Indeed the Chairman of IBRC confirmed in an RTÉ interview that Denis O’Brien for example, had been given advance notice of the sale before it was announced. Did others have similar information?

The unfortunate thing here is that while I know what insider trading is, I don’t yet know how we deal with it here in Ireland. On foot of my information regarding share activity, I wrote to the Irish Stock Exchange who advised me that it was not within their remit and that I should talk to the Central Bank.

I wrote to the Central Bank who told me it was outside of their remit. I then wrote to the Office of the Director of Corporate Enforcement whose reply came back today to tell me that it does not appear to come within the remit of their office.

….In my speech on May 28th I referred to loans held by Mr O’Brien that were due to be repaid in full in 2011 and 2012. We know they were not repaid in that timeframe.

Effectively, once the agreed term expired, those loans were in default and became callable on demand. IBRC’s own terms and conditions allowed them to charge default interest rates yet they chose not to do so in this case.

Many sources have come forward both before and since that speech, to say that they had personal experience of being both performing and non-performing borrowers of IBRC and their experience of their loans being called in, in a ruthless fashion and other defaulting borrowers talk of the punitive interest rates applied to them.

…..The plight of the former Irish Nationwide Mortgage holders and the way in which they have been treated by IBRC compared to the very favourable environment that seems to have been provided to Mr O’Brien for example is perhaps an indication.

Catherine Murphy, Independent TD for Kildare North

Meanwhile….

Sinn Féin finance spokesman Pearse Doherty,

It is important to point out at this juncture that I am not making any allegations of wrongdoing or incompetent governance at IBRC. And I have no wish to pre-empt or pre-judge in any way the findings of the proposed inquiry.

What we do have at the moment are facts.

There are things that we know took place.

The conclusions we may draw from them are for another day.

This is about asking legitimate questions and the facts on the ground serve to inform those questions.

So in this regard, it is important that we know the facts, and that the facts are put on the record in order to help to frame the terms of reference of this investigation.

….If I may I’d like to give some examples as to why managerial decisions and client relationships need to be covered by this inquiry, not just up to 7 February 2013 [the end date of Commission’s investigations] but beyond.

Only last week, in IBRC board minutes released by the Minister’s department, we saw that Richard Woodhouse, who managed Mr. O’Brien’s loans with IBRC, was present at a meeting where the sale of Siteserv was discussed. The former chairman of IBRC said that Mr. Woodhouse played no part in the decision-making process around the sale of Siteserv.

In recent days, a series of documents have come into my possession which help to give a more complete assessment of issues relating to IBRC, Siteserv and related matters.

Back in 2012, the eventual owner of Siteserv had an agreement with IBRC whereby the bank “would receive 92.02% of all Digicel dividends in excess of $50 million as part of a loan repayment agreement.

There was a once-off dividend distribution of $300 million dollars in 2012. The bank received a scheduled payment of 150 million euro, which equated to 65% of the dividend distribution.

The balance was then used by the owner of Siteserv to pay down a Bank of Ireland facility which had been used to fund the Siteserv deal. This was all approved by the IBRC’s Group Credit Committee.

In other words, we seem to have the terms of a loan agreement with IBRC being used to pay down a loan related to Siteserv but with another bank.

And there are other documents I have seen which lead me to ask legitimate questions of the way that IBRC was being run in the public interest.

For example, in the documents I have seen I have seen letters and documents which outline details of this individual’s loans with IBRC, with four different proposals.

In a letter dated 7th March 2013, this individual requested approval for a proposal to repay his facilities over a 3 year period with scheduled capital repayments.

The request was discussed by the Case Team with Special Liquidators of IBRC. On 17th March, an email was sent to this individual which advised that facilities could only be extended for up to 12 months, and only then if it was considered beneficial to do so in the context of asset protection and enhancement.

This was rejection No. 1 for the borrower.

On 26th April 2013, this individual requested a formal approval to extend his facilities for 12 months to 30th June 2014 with no capital repayments.

On 20th May, the Group Credit Committee approved a 12 month extension subject to a €100 million capital repayment on or before 30th November 2013.

This was a de facto second rejection of the individual’s proposals.

On 21st June, the individual in question responded with a proposal for a one year extension on his loans with a capital repayment of €100 million in November 2013.

This was rejected outright by the Group Credit Committee on 4 July 2013.

Rejection No. 3. The loan facility was expired at this stage.

With no new agreement in place, and with his loan facility expired since 30th June 2013, it appears that this individual faced the possibility of having his loan sold to a third party.

In August, the individual met with the Case Team and at this meeting the documents say he made it clear that he had a verbal agreement with Richard Woodhouse and Michael Aynsley which pre-dated the liquidation of IBRC.

The individual said that this verbal agreement allowed him to repay his loans over a three-year period beginning in 2012.

It was his view, and the view of his lawyers, that this verbal agreement still stood, even though the bank was now in liquidation.

In September, the individual and his advisor met with the Special Liquidators at which they made it clear they would not commit to any capital repayment for a 12 month extension.

Although it is not clear from the documents I have seen as to the exact date of the following, the documents also say that the individual made it known through his “advisors that he was not prepared to enter the process of having his loans sold on with an expired loan facility and so was likely to issue protective legal proceedings seeking an order for specific performance which would require the Bank to honour the alleged 3 year term on his facilities.”

The individual made a fourth proposal to IBRC on 10th October 2013 for a 12 month extension with no capital repayments which was according to the document I have, it was approved on the 14th November 2013.

This was for a loan of in excess of €315 million with a margin interest rate of 3%, amounting to €10 million per annum.

The bank and special liquidators concluded that it was regrettable that it was not able to achieve consensual agreement from the borrower to maintain the expected repayment schedule by delivery of a further €100 million capital repayment given the impending loan sale and the Bank’s inability to extend facilities beyond 12 months.

How does a bank in liquidation create what is essentially a new €315 million loan which its group credit committee had rejected just a number of months earlier?

Why didn’t IBRC place a call on the now expired loan?

How did the verbal agreements between certain managers prior to liquidation outweigh the decision of the Group Credit Committee?

From documents I have seen it appears that IBRC’s former chief executive, Mike Aynsley, along with Richard Woodhouse, made a verbal agreement with Denis O’Brien to give him an additional three years to pay off his loans with the bank.

This is the same Richard Woodhouse who was present during the discussion of Siteserv.

It is clear from the documents I have seen that Mr. O’Brien did not want his loans to be sold on to a third party but instead wanted a 12-month extension in order to work out the loan himself.

All of this apart from Siteserv took place after 7 February 2013 and because of this would not be covered by the terms of reference as presented this evening to the House.

Minister, this is just one example why the terms of reference need to be expanded in to the timeframe of the liquidation and KPMG.

This is a €315 million that is extended and is the same as issuing a new loan being issued on the basis of an apparent verbal agreement despite its rejection on three separate occasions by the Group Credit Committee of a version of the same proposal?

How is this not relevant to the inquiry?

Pearse Doherty, Sinn Fein TD for Donegal South West

Anyone?

RUN!

Related posts:

‘The Best Deal For The State’ Siteserv And The Bank That Liked To Say Yes She Wouldn’t Let It Lie ‘Nothing Sinister’