The Irish Independent reports that hundreds of
thousands of homeowners are facing more mortgage pain as interest rates are
AIB, the country's largest bank, is planning a new increase in variable
rates, its chief executive has warned. The move is expected to spark a new round of rises from other lenders,
hitting around 300,000 people with variable home loans.
AIB has around 70,000 customers who have variable rates.
Every 0.25pc rise in rates adds €30 a month to the cost of repayments on
every €200,000 borrowed.
Experts said a new rise in rates would push up the number of residential
customers who are in arrears.
Broker Michael Dowling of Abacus Finance in Dublin said all the lenders were
ready to push up variable rates, but each lender was reluctant to be the first
to move. Once one goes, others will follow, he warned.
He said banks were anxious to see the average variable rate go from around
4.3pc to 5pc. That could add €1,000 a year to the annual repayments on a
Mr Dowling said the Government now has a hands-off approach to mortgage
rates, despite having put pressure on lenders to reduce variable rates.
Last year, AIB pushed through two rises of 0.5pc each. However, speaking
about the imminent rise, AIB boss David Duffy said: "It's not going to be a
whole series of raises."
The revelation of more hikes came as promises by AIB to restructure 33,000
distressed mortgages were dismissed as "spin".
Mr Duffy has said the bank would contact all those in arrears and offer them
a deal to restructure their repayments by the summer.
But David Hall of the Irish Mortgage Holders Association accused Mr Duffy of
engaging in "spin" when the bank said it would do deals with up to 33,000
distressed mortgage holders.
He claimed the bank had offered few, if any, distressed borrowers long-term
restructuring such as split mortgages or mortgage-to-rent options.
Asked how many mortgage holders had been offered deals, an AIB spokeswoman
said she had no figures at the moment.
The bank, which has been given €21.5bn by the State, claims its
variable rate is one of the lowest in the market.
Meanwhile, there was a huge jump in the number of mortgages issued
in the last three months of last year. This was mainly due to buyers
scrambling to avail of mortgage tax relief, which has since been removed.
Some 6,000 mortgages were drawn down in the October to December
period, up from 4,000 in the same three months in 2011.
For all of last year, close to 16,000 mortgages were drawn down,
with a total value of €2.6bn. This is the first annual increase since 2006.
There were almost 14,300 mortgages issued in 2011, with a total
value of €2.46bn, according to the Irish Banking Federation.
Experts are now predicting that €4bn worth of new mortgages will be
issued this year.
Bank of Ireland, AIB and Permanent TSB have committed to ramping up
their home-loan lending.
Dermot O'Leary of Goodbody Stockbrokers said AIB and Bank of
Ireland alone are committed to issuing €2bn each in mortgages this year.
The Irish Independent also reports that
a US bond market wizard named in classic book 'Liar's Poker' is expected to buy
the luxury Ritz Carlton Powerscourt hotel after the Wicklow venue went into
liquidation last night.
The company behind the five-star, 200-room
Ritz-Carlton Powerscourt Hotel was put into liquidation at the High Court after
a 100-day examinership failed to save the business.
Liquidation could threaten almost 300 full-time
and part-time staff at the high-end venue.
However, the Irish Independent understands that
US-based investor Ranieri Partners is in rescue talks to buy the hotel and a
deal could be closed imminently.
Accountant Declan Taite of RSM Farrell Grant
Sparks was appointed as liquidator of Carrylane, the company behind the hotel,
yesterday. He was previously appointed as examiner.
Carrylane went into examinership in November last
year, following the liquidation of its parent company Treasury Holdings –
controlled by Johnny Ronan and Richard Barrett.
The hotel has debts of €47m owed to NAMA.
As well as Treasury's Mr Ronan and Mr Barrett,
the Wicklow hotel was part-owned by as many as 200 investors in tax-driven
schemes that helped finance the development.
Liquidation means all staff have automatically
been made redundant, but they are being kept on on weekly contracts.
The US firm that is understood to be close to
sealing a deal is owned by Wall Street titan Lewis Ranieri. The larger-than-life
bond market guru was a major character in 'Liar's Poker', the book about Wall
Street bankers in the 1980s written by Michael Lewis.
Mr Ranieri is credited with creating the
multi-billion-euro global market for IOUs backed by masses of home loans and
Ironically, some analysts blame overheating of
that market for the global crisis that has led, at least in part, to the
liquidation of the Co Wicklow hotel.
The Irish Times reports that
US lawyers for the National Asset Management Agency have claimed a challenge by
former property tycoon Seán Dunne and his wife Gayle Killilea to dismiss its
lawsuit was an attempt to make a “complex web” of fraudulent transactions look
“very innocuous and mundane”.
The couple are seeking to have the State agency’s
lawsuit against them in the Superior Court of Connecticut thrown out, arguing
that Nama has no jurisdiction to take an action in the US court to overturn the
transfer of a half-share in an apartment in Geneva, Switzerland from Mr Dunne to
In the third court appearance in an increasingly
bitter dispute, Judge Barbara Brazzel-Massaro directed that Nama chief executive
Brendan McDonagh swear a statement and be questioned by lawyers acting for the
couple at a private deposition.
Sitting in the superior court in Stamford, the
judge left it up to both sides to decide a date for Mr McDonagh’s deposition.
She directed that another Nama manager, John Coleman, be questioned by the
couple’s lawyers under oath at an eight-hour sitting next month.
One of the agency’s top 50 debtors, Mr Dunne, who
personally owes Nama €185 million, and his wife, who now live in nearby
Greenwich, Connecticut, are seeking information from Mr McDonagh about the
agency’s view of Mr Dunne’s business plan and its decision to take enforcement
action against him.
The court heard that Nama would seek details of
further property deals – in Rye, New York, which it believes was also
fraudulently transferred, and in Ireland – in addition to the transaction in
Switzerland and three property deals in Connecticut at the centre of its lawsuit
taken in July 2012.
Before the hearing, Ms Killilea’s attorney Philip
Russell told reporters she was considering legal action, in Ireland or the US,
over what he claimed was “vexatious” litigation against his client.
Entitled to details
He said Nama’s lawyers had told them one of its
former managers, Kevin Nowlan, would be most familiar with Mr Dunne’s dealings
with the agency. But when he was questioned by the couple’s lawyers under oath
last Friday, he didn’t know of any fact to support a claim against Ms Killilea.
Nama’s lawyers told the court they should be
entitled to the details of any agreement between Mr Dunne and his wife over
money transfers and that the Geneva transfer was “one piece of the puzzle”.
Attorney Thomas Rechin, for Nama, said the State
agency should be able to discover details of property transfers in Connecticut,
Switzerland and other deals in New York and Ireland to prove its case that Mr
Dunne was “hiding assets” from creditors by transferring properties and money to
his wife and family members.
Nama is entitled to know where Ms Killilea “got
her money from”, he said.
“We have got to chase the money; we have got to
follow the stream of cash,” he told the judge.
In a dispute over the discovery of documents, Mr
Rechin said Nama had been “completely stonewalled” by the Dunnes and that the
couple’s attempts to depose Mr McDonagh and two other Nama executives rather
than to seek detailed discovery was a “shot in the dark”.
On the couple’s challenge to the US court’s
jurisdiction, Mr Rechin claimed their application was intended to break the case
down into “itty-bitty pieces” by forcing Nama to take separate legal actions in
each country where transfers took place to make the action “much less
troublesome for them”.
Peter Nollin, Mr Dunne’s lawyer, argued in court
that he didn’t know under what common law jurisdiction Nama was pursuing its
case: “Switzerland, Ireland, Sesame Street – I am not sure where.”
The Irish Times also reports that
staff at Independent Newspapers will have their pension benefit almost halved
under management proposals to address a €155 million funding shortfall.
The plan is part of a dramatic ongoing
restructuring of the business over recent months. Management say its success
depends on workers realising the “weakness of their legal position” and a
possible alternative scenario that could see the “failure” of the group.
INM is also understood to be seeking approval
from scheme trustees to purchase sovereign annuities to meet the cost of
pensions, a move that would leave retired workers exposed to any future default
by the State on its debt.
The company concedes it is asking members to take
a “severe” cut in their entitlements. “Specifically, a 64-year-old on a salary
of €60,000 will have his pension reduced from €40,000 per annum to €21,600 – a
cut of 46 per cent,” they concede in a document outlining the proposals.
They acknowledge that such swingeing cuts “will
be difficult to accept, particularly as active members have been contributing
9.5 per cent of the salary to the DB scheme promise”.
Getting workers and pensioners to accept the
changes will require that “they understand the weakness of their legal position
and that they recognise the consequences of wind-up and/or INM failure”.
Existing defined benefit pension schemes at INM’s
Irish business will close to future contributions under the planned
restructuring. The age at which members could draw down on the scheme will also
rise to 68.
Management is reported to see its options as
either “walking away” from its pension liabilities by winding up the pension
scheme “with likely major industrial disruption” or secure approval from the
pensions regulator under a section 50 restructuring proposal by the end of June
The funding shortfall of €155 million compares
with a current market capitalisation for INM of about €19 million.
Management argues that tackling the shortfall
will “significantly increase the value of its Irish business”.
Under the restructure, younger staff would have
the option of transferring out of the scheme, but that would effectively mean
accrued benefits slashed to roughly one-third of their current value.
If the scheme were wound up, it is likely that
staff and those made redundant in recent years would receive little or no
pension from the group.
The proposal is dependent in part on a special
once-off payment of €20 million. Sources close to the company say they have yet
to tie down where the money would come from, given the heavily indebted state of
INM. It had been expected that a successful sale of the South African interests
could release cash for such projects but the group’s lenders are reluctant to
sanction the diverting of those funds.
The lenders’ stance could also undermine plans
for a further round of voluntary redundancies at the newspapers. Staff were told
last year that such a programme would be funded by the sale of the South African
INM warns that shareholders will be reluctant to
invest further without a resolution of the pensions gap. However, there is also
a recognition that shareholder approval of the South African deal could be
jeopardised if lenders oppose using some of the proceeds to address the pension
There are more than 1,000 members in the INM
pension schemes. About 250 are active members – that is, still working for the
The Irish Examiner reports that
the sale of Irish Life to Canadian insurance giant Great-West Lifeco is expected
to result in the loss of some 250 jobs from its enlarged status over the coming
The well-flagged €1.3bn sale of Irish Life — which
still requires competition and financial regulatory approval, and should take
until July to conclude — was confirmed yesterday. It will ultimately see the
company subsume Canada Life’s Irish operations under the Irish Life brand, with
the enlarged business being housed at the latter’s existing Abbey St
An additional €40m dividend — payable to the State prior to completion — gives
the Government a marginal profit on the €1.3bn it paid for Irish Life last year,
as part of the bailout of the then Irish Life & Permanent business.
Canada Life has had an Irish presence since 1903 and has a 5% share of the
country’s life and pensions market. The mix of it and sector leader Irish Life
is expected to contribute around 10% of Great-West Lifeco’s annual revenues.
Great-West CEO Allen Loney said the deal “affirms our long-term commitment to
Ireland” and represents “a good culture fit“.
Irish Life chief Kevin Murphy called it “a great day for Irish Life” and “a
significant day and a huge endorsement for the wider life and pensions industry
Mr Loney said Great-West “is here to create jobs, not destroy them”, but
admitted there would be voluntary redundancies and natural attrition in the
While he didn’t confirm any numbers, it is understood that around 250 positions
will go as the enlarged company seeks cost reductions of €40m within its first
18 months of consolidation. He said redundancies would fall fairly between both
Irish Life and Canada Life staff.
Mr Loney added that the Canadians’ failure to land Irish Life last year was less
to do with the quality of the asset and more to do with the economic downturn
and eurozone debt crisis, adding that the change in Europe, and particularly
Ireland, has been transformational and that he foresees good growth prospects.
He added that Ireland is a key strategic market for Great-West.
Finance Minister Michael Noonan hailed the sale of Irish Life as “a very good
deal” and “a historic transaction”, in that it marks the first nationalised
institution to be resold by the Government into private hands. He said Irish
Life had attracted around 50 initial expressions of interests
He added that the Government does not have a firm timetable regarding the sale
of more banking assets — most notably, AIB and its minority shareholding in Bank
of Ireland — but that further tranche sales will be looked at during the year.
Asked about the potential to hold out for an even better deal on Irish Life, Mr
Noonan said it was a “very opportune” time to sell and it would not have been
responsible of the Government to “hang around and take a punt on a price”.
He reiterated that it is not government policy to hold onto its bank stakes,
saying that “as soon as we get value, we get out”.
This deal, he noted, shows that full recovery — on behalf of the taxpayer — can
Meanwhile, PIBA — the country’s largest financial brokerage representative —
welcomed the deal, saying it counted as “a strong vote of confidence” in the
life and pensions market here.
Check out our
, at a low annual charge of €25 - - if
you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to
support the service.