CENTRAL BANK'S HOPES OF RECOVERING IBRC DEBTS HINGE ON LEGAL COST RULING - The special liquidators of IBRC believe that if the bank is beaten in a court case the legal costs awarded to its opponent will go to the top of the queue to be paid from proceeds of its winding up, even moving ahead of the Central Bank that the liquidation was set up to repay. In court papers seen by the Irish Independent, joint special liquidator Kieran Wallace of KMPG argues that the bank does not need to set aside cash to cover the potential adverse legal cost of the award that it might suffer if it loses a legal action that it has taken. Historic claims against the bank rank as unsecured creditors in the liquidation, he said. As a result, they are unlikely to be paid. However, Mr Wallace said any order for costs made against the bank in cases that it has pursued since the liquidation would rank as "priority claims". It means that in cases where the joint liquidators have authorised legal action, any resulting costs order against the bank go straight to the top of the queue for repayment, he said. He was responding to a legal move by Johnny Moran, the former owner of the Holiday Inn hotel in Dublin, who is involved in a series of disputes with IBRC over the bank's decision to put his business into receivership.
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AIB MAY FOLLOW OTHER BANKS AND ALLOW TRANSFER DEALS ON TRACKERS - AIB chief executive David Duffy has confirmed that the bank is considering a tracker mortgage deal for homeowners who wish to move home and retain their low tracker interest rates, writes the Irish Times. Mr Duffy said in Limerick yesterday that the bank was considering following moves by Permanent TSB which is close to signing off on a new deal that would allow families moving to a new home to keep their tracker rate for the rest of the loan period. Earlier this week it was reported that Bank of Ireland will let people moving house keep their trackers for five years if they move. When asked if AIB was planning to offer a similar lifeline to customers with tracker mortgages Mr Duffy said: “We are looking at the same thing. “We are looking at a range of options. We are not rushing into it because we start out with the principle that a tracker is a contractual entitlement. We will not vary or try to adjust or try to manage that in any way. Any offer we have is designed to facilitate flexibility and volume in the marketplace and it can only when designed be implemented in such that it does not disadvantage the customer in anyway,'' he said. AIB could “rush something out for market reasons so people feel better” but it would instead wait to design and test it properly. He said the bank expected to have agreed proposals with the regulator within “the next few months”.
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PERMANENT TSB TO WRIE OFF SOME UNSUSTAINABLE DEBT - Permanent TSB is prepared to write-off certain amounts of unsustainable debt relating to its mortgage customers, the bank’s head said yesterday, reports the Irish Examiner. Addressing shareholders at the bank’s AGM in Dublin, chief executive Jeremy Masding said that some mortgage debt had already been written off, but refused to disclose how much, claiming it was commercially sensitive information. However, he added that the bank will continue to write-off unsustainable mortgage debt, but only on a case-by-case basis. Mr Masding also said that while Permanent TSB is an advocate of the personal insolvency act, and will be a willing participant in the scheme - as it will “protect the most vulnerable” - he has concerns that the act could be viewed, by some, as being a “back door” to debt forgiveness access. Earlier this year, PTSB reported a pre-tax loss of over €920m for 2012; up from a loss of over €500m for the previous year. However, the bank’s impairment charge - to cover bad loans - fell from over €1.4 billion to €891m. Currently, 20,000 of the bank’s mortgage customers are in arrears for a period of 90 days or more.
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RATING AGENCIES UNDER FIRE AGAIN - After coming under fire for their blessing of risky mortgage backed securities in the lead-up to the financial crisis, credit rating agencies are again facing criticism - this time for misjudging the impact of the rebound in the US housing market. The Financial Times says that rising house prices in almost all US cities mean that many mortgage-backed securities once judged close to worthless may now be fit for an investment grade credit rating that would allow traditional investors such as pension or mutual funds to buy them. However a growing number of investors who do not rely on such ratings said that the agencies such as Standard & Poor’s, Moody’s and Fitch Ratings have not kept up with improving fundamentals. “To state the obvious, the rating agencies got their initial ratings of these instruments spectacularly wrong”, said Colin Teichholtz of Pine River, a hedge fund that manages some $14 billion of assets. “They’ve been so unimportant to our deployment of the marginal dollar in this market that they are irrelevant”. One of the best hedge fund trades of the past three years has been sorting through the rubble of bonds backed by subprime mortgages issued in the boom years of 2005 to 2007, before the US housing crash caused valuations to plummet.
