The Convention Centre Dublin again played host to the International Corporate Restructuring Summit, an event I have attended and enjoyed previously but this year’s was likely the last in its current guise. Having lost the guts of a decade to our recent economic doldrums, it seems we are finally turning a corner. What that corner is turning into, who knows, but one thing is for certain, the level of NPL sales in Ireland in the past two years will never be seen again.
The event played out in the form of panel discussions chaired by the ever bullish Danny McCoy of IBEC. His opening statement alone gave many reasons to be cheerful; net population increase of 300000 throughout the crisis in Ireland, year on year record growth of exports and economic growth challenging that of China in 2015 likely to continue to 2017, this made a pleasant start to the day.
Pat Gaynor of Bank of Ireland Corporate Banking followed Danny with interesting points on what his organisation is seeing at the coal face. Lessons have certainly been learned with a renewed focus on more prudent cash-flow focused business lending rather than real estate values driving credit decisions. Pat talked through a number of case studies highlighting BOI wins in recent years with a number of customers coming through difficult periods and re-emerging as strong enterprises. Surprisingly his area of the bank has not seen a new restructure in 12 months.
Up next we had a brief run through of some of the legal issues being seen by Matheson. Tony O’Grady and Patrick Molloy, both Partners at Matheson, are seeing the courts look to find flaws in enforcement processes wherever possible. Ultimately many cases are landing in Appeals courts with a change in decision likely. This points to flaws in the system also with the legal process taking longer than it really should. Having said that it is good to see the courts pushing and testing banks and receivers. There are clear indications of secondary transactions in the pipeline.
Tom Kavanagh and John Doddy of Deloitte brought the morning session to a close. Tom Kavanagh having rode the recession wave better than most in professional services will likely be sad to see the end of the ‘bad times’. Corporate insolvencies and receiverships are down 14% and 13% respectively, and although slipping in numbers, the numbers are still historically high, which indicates there is still life in this particular space. The era of the ‘mega receivership’ looks to have passed and the next step is the more granular cases as a result of recent portfolio sales such as Parasol and Poseidon, both containing large numbers of smaller exposure loans. Tom Kavanagh feels there are 2-3 more years of workout to be done before business as usual returns. With this wave of normality on the horizon, perhaps complacency is likely. John Doddy is of the opinion, which was echoed by others that global risks remain and we are likely still sensitive to these shocks, something to be kept in mind when taking on new capital structures for any business.
Following an early morning of cautious optimism, the pre-lunch session with Michael Lee of ISIF, David Cullen of Broadhaven and Frank Daly of NAMA promised to bring some interesting discussion around business funding.
ISIF is an entity I had been aware of but not overly familiar with. Not to be confused with ISIS, I had it chalked down as yet another conservative and slightly stale government group. Michael Lee, the Head of Investment Origination and Co-Investor Development, provided us with a high level view of the fund, how it works and what it looks to achieve. Importantly and interestingly for a government body, it is a highly commercial entity with a focus on financial return as well as economic impact, with the former seeming to take precedence although not explicitly stated. This is definitely a good news story; €7.5bn to spend with no expiry date on the fund, open to debt and equity positions and no regulated capital requirements, ISIF is a blank canvas and with the right minds involved will be responsible for driving the growth of the Irish economy in years to come. Already ISIF has been responsible for the creation of 8362 jobs through direct and indirect employment. They are open for business and keen to see opportunities but with the scale of the team remaining small it is likely any position sub €10m will not be a runner, so not quite the boost the SME credit market badly needs.
Potentially answering that particular cause is Broadhaven Credit Partners, a JV between Dermot Desmond and Sankaty Advisors (a division of Bain Capital). Broadhaven’s David Cullen was keen to emphasise the breath of interests for the business; property/development/corporates/SMEs. He pointed out that the traditional providers of credit in Ireland (high street banks) would be the less likely source of funding in other markets, such as US, where they represent c.10% of the lending market. Again, Broadhaven look to be cautiously optimistic about Ireland in the coming years. Their partners internationally feel Ireland has come a long way but questions remained on how the economy can absorb the high level of NPL trades, cumbersome legal infrastructure and whether or not IBs and investment funds are done with Ireland due to concentration risk. There is no question that some will remain but many will take their profits and move on.
Following from two speakers with a different agenda to what we are used to at this event was something a bit more familiar; Frank Daly of NAMA. Frank would be the first to admit he is getting up there in years but remains sprightly as ever continuing to relish the challenge of driving the NAMA mandate with continued success. Frank took the opportunity to further defend NAMA and its actions following weeks of bad press around Project Eagle and other transactions. From a mandate perspective NAMA has achieved its goals and beyond; 4 years in a row of profitability, delivering 4500 new residential units by the end of 2016 and driving Dublin Docklands development. Regarding the level of withdrawals from the Project Arrow process the NAMA position is that this is due to the granular nature of the portfolio, not the appetite of investment groups for Ireland. Following his presentation Frank fielded questions from the floor, one question arose around Longboat Quay and development standards for new units. NAMA will look to contribute its fair share and beyond for remedial works as it is in possession of a number of units in this development. The question will always remain whether NAMA was the right move by the government but there is no doubt that as an Agency it is fulfilling its mandate.
So what next for this annual event? This year it was quiet, the break times were not the usual heaving mass of people chatting away. Notable was the number of people representing servicers such as Capita and Pepper but a distinct lack of investors like Goldman Sachs who featured heavily last year. There is no doubt the event will have a different focus next year, likely something focused on traditional and alternative credit and lending.
You can find more information on the event here.