This morning I attended the International Corporate Restructuring Summit 2014 (http://corporaterestructuringsummit.ie/). Coming away from the event and having the afternoon to digest the presentations further, I have had some thoughts.
Buzzword of the day – Liquidity Event, apparently this means getting paid, a windfall, etc. I reckon it took some blue sky thinking to come up with this one. I am not going to name names here, but these people know who they are.
NAMA is/was not a bad thing. Brendan McDonagh’s presentation gave a clear message that NAMA is committed to doing good in Ireland. We are moving on from the portfolio management and disposals stage and NAMA is looks to be committed contributing to resolving the housing crisis. The target is 20000-25000 new residential units this year and NAMA feel they will be instrumental in providing support in any way it can. Furthermore, NAMA seems to be very much aware of its position in society. Its 800 debtors are responsible for 15000 jobs. This is a precarious position to be in and protecting these people has been on the agenda at all times. They don’t just fight with developers. NAMA themselves are struggling with headcount, they have lost 37 people who were all seen as key employees, that number represents 10% of total headcount. How they will tackle this issue remains to be seen, but conversations are being had at the highest levels to incentivise staff where appropriate.
Goldman Sachs like Ireland. The head of their European Special Situations Group, Fabrizio Grena, is following the money and opportunity for yield but not forsaking risk management. He identified that, of course, he is not alone, but they see opportunity here and have made a recent hire in Dublin (or so I have heard). Ireland is a good bet as we are relatively advanced in dealing with our troubles, we operate with transparency and have experienced professional advisors on the ground. This is not the case elsewhere (Greece, Cyrpus and Italy are weaker on these points).
According to Tom McAleese of Alvarez & Marsal, Ireland’s banking market has moved on. BOI and AIB are doing ok, PTSB not so much, but again, they are all heading in the right direction. The stress tests look to be all on the right track. They will be profitable again as Net Interest Margin moves in the right direction but the tracker book hangover will not go away any time soon, or ever most likely. Spain once upon a time had a ridiculous amount of banks, c.50 but nothing compared to modern day Ukraine where you have 180+ banking options. How this is supervised and regulated is probably low down on their list of priorities at present, but an astonishing figure nonetheless.
Private Equity groups, just like NAMA, are not evil. Or at least, that is what Eddie Byrne of Hudson Advisors has to say (he would say that of course). He did present a fairly convincing argument that the acquisition of NPL portfolios by the various funds operating in Ireland at present will have a positive impact on job creation. For every portfolio acquired, further spend is required from the new owner, this varies dependent on the asset type (residential, commercial, retail, hotel, development land, etc.) The rough figures are that a follow on spend of c.€3bn (+/-€300m) will happen as a result of acquisition. The impact of this spend is interesting. For every €1m spent in construction this will create 10 jobs which will in turn create a further 4 directly supporting these roles. The figure of 42000 jobs was mentioned, I have not checked the number of zeroes, but this seems about right.
Receiverships for trading companies have not happened as yet. The Personal Insolvency Act has had minimal impact. There is a storm coming from the tail end of the recession according Tom Kavanagh and John Doddy of Deloitte. Help will be needed by SMEs. The phrase ‘a famine of working capital’ was used. Other phrases were used. Some may have been buzzwords. (Ahem).
The legalistas spoke legalese. Tony O’Grady and Patrick Molloy of Matheson gave us a good run down on where the country stands on the current issues in the courts for receiverships and the potential issues going forward. We have seen revolution rather than evolution in this space in recent years through various new regulations (CPC, CCMA, etc.). This is slightly unusual in the legal realm. The guys at Matheson are very much leading the way at corporate level and what their clients should anticipate when dealing with individuals resulting from portfolio acquisitions.
AIB are all over it, don’t worry about a thing. Brendan O’Connor and his merry men of the FSG are cleaning up the mess, it’s as easy as ABC. They look to have created a fairly straight forward methodology which they adapt based on individual clients. Again, like NAMA, AIB look at the bigger picture, they seem to understand that killing a trading business due to poor debt decisions in the past may not be a good idea. A mid size business in a small town could wipe out more than the individual business. The potential customer base with mortgages, car loans, Visa cards, etc. is on the agenda. AIB look to have learned their lesson and changed ‘rules’ for ‘guidelines’ in dealing with troubled customers. There is no one size fits all way to do things but they want to operate fairly and treat customers the way they should be treated. It was nice to see as they had kicked the can down the road for long enough.
Dan O’Brien wore the Economist and Moderator hats well. He presented facts clearly and probed for further discussion when interesting points were broached. Ireland’s problem remains that when comparing GDP and % of Non Performing Loans, we are not in great shape. Apart from that all is relatively rosy. Job creation is positive and Ireland remains and attractive option for FDI.
I have started at the end and worked my way back in terms of the order of the day. It was an interesting summit, presenters were varied, interesting and engaging. Job creation was forefront on the agendas of most and there is a deep understanding that this engine of the economy is vital for the future. In summing up the Summit, the question of Scotland came up. Potentially there is a large tin of worms here. An independent Scotland will impact negatively upon the Irish economy. It will potentially lead to another English speaking Eurozone country that will compete aggressively for a slice of the FDI pie. Scottish independence will weaken the UK economy in the short term. As our largest trading partner, a weak UK is not a good thing. As a whole, financial stability will make waves, we are geographically close and we will feel the impact.