KPMG Ireland has been appointed as special liquidator over “zombie bank” IBRC to accelerate the wind-up of the bank’s loan book which includes €18.7bn in predominantly non-performing UK and Irish commercial property loans.
Ireland’s parliament the Dáil passed emergency legislation overnight to usher in the appointment of KPMG Ireland, who will replace the Board and management of IBRC, accelerating the previous strategy as to run-down the loan book in an orderly manner by 2020.
IBRC aggregate loan book was €27.53bn, as at 30 June 2012. This is comprised as follows:
- €18.73bn in commercial property loans:
- €10.25bn in Irish CRE exposure
- €7.88bn in UK CRE exposure
- €595m in US CRE exposure
- €1.64bn in residential investment and development property loans:
- €846m in Irish residential exposure
- €488m in UK residential exposure
- €302m in US residential exposure
- €2.837bn in business banking loans (all expect a €4m UK exposure is Irish)
- €1.83bn in Irish residential mortgages
- €2.47bn in miscellaneous lending
IBRC’s commercial property lending, therefore, reflected 68% of the bank’s total loan portfolio and consists of investment and development property lending across all sectors, at 30 June 2012.
Within the commercial real estate loan book, €15.2bn, or 81% of commercial lending, related to the retail, office and leisure sectors. IBRC’s €1.6bn residential lending comprised €0.5bn in residential development lending and €1.1bn in residential investment lending.
All IBRC’s loans and underlying properties, will either be sold at, or above, the valuation set for all assets, which will be determined by a new independent valuation. All unsold assets will be transferred to NAMA, Ireland’s bad bank.
To the extent that there are insufficient assets of IBRC available to repay the debt to NAMA, Ireland’s Finance Ministry will be required to make up the shortfall.
“In the period to mid-2013, the special liquidator will seek to value and sell the secured underlying assets subject to the floating charge,” said NAMA in a statement as reported by NAMAwinelake.
NAMA’s statement continued: “After the sales process conducted by the special liquidator has been completed later in the year, NAMA will acquire the unsold loans in the IBRC loan portfolio in addition to the proceeds of any asset sales conducted by the special liquidator during the sales process.
Frank Daly, chairman of the NAMA Board, said: “NAMA is fully committed to managing the new responsibilities which have been delegated to it by the minister and to realising the maximum possible return for the taxpayer from the portfolio that it is due to acquire later in the year.”
The expectation on here is that NAMA will issue €16bn of new bonds to acquire the after-provision loans at IBRC.
NAMA will employ about 400 of IBRC’s 700 staff, in addition to the 300 staff which already work at the bad bank, according to NAMAwinelake.
In a statement yesterday, the government said: “It makes very little sense at this point to retain two State organisations, NAMA and IBRC, performing broadly similar functions.
“It is therefore appropriate that the remaining assets of IBRC (i.e., those which are not bought by third parties (following an independent valuation exercise) or those that are not retained by the Central Bank) are transferred to NAMA as part of the special liquidators’ winding‐up of IBRC.”
The Irish government said added that its approach will “improve the health of the Irish banking sector by putting in place a longer‐term solution for a significant part of the structural shortfall of bank financing that has emerged through the banking crisis”.