Some farm loans could be at risk of sale to vulture funds – AIB

Some farm loans from AIB could be on the table for sale to vulture funds, it was confirmed in an Oireachtas meeting last Thursday (March 22).

The head of AIB’s financial solutions group, Jim O’Keeffe, appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to answer questions regarding the proposed sale of ‘Non-Performing Loans’ to private investment funds (vulture funds).

During the meeting, it was revealed that AIB currently has €6.3 billion worth of ‘impaired loans’. While the priority is to restructure loans, loan sales are part of the bank’s overall plan, O’Keefe said.

Committee member Pearse Doherty questioned the AIB representative on an alleged portfolio sale worth €3.75 million – called Project Redwood – of non-performing loans, which O’Keeffe would not comment on.

O’Keeffe stressed to the committee that the focus is on “investment loans outside of family homes”.

“Buy-to-lets will be part of [the portfolio], as will commercial real estate, land and development and property and construction. That is the primary focus of the potential loan sales as we go through the process.

The banker said that AIB has worked “very well on the solutions we have put in place for farmers and we are doing that very actively as we go forward”.

“However, we have some farming loans, or farming connections, which have a much bigger overhang of investment debt than the farming connection itself. They are cross-secured against the farm and vice versa. Those loans, if we do not have them restructured, could form part of a potential sale as we go forward.”

Loan sale

Deputy Michael McGrath criticised AIB for not providing more information, noting that there were reports that there is already a queue of institutions looking into the reported portfolio of non-performing loans allegedly being considered for sale.

McGrath said: “It remains the case that the bank is giving no information whatsoever and yet I can read reports from reputable media organisations which tell us that Goldman Sachs is the front-runner and that Oaktree, Apollo and Deutsche Bank are among the firms assessing the portfolio.

“Yes, the portfolio does not include any family home mortgages, but I presume it includes farm loans.

It includes small business loans for manufacturers, retailers, exporters; yet AIB is not confirming anything.

Senator Kieran O’Donnell also reprimanded the bank, saying: “It is hard to reconcile how the bank can justify bonuses when it could potentially be throwing some of these family businesses, farmers and SMEs – some of whom have been there for years – to the wolves.”

Debt restructuring

Defending the bank’s position, O’Keeffe said: “There are instances of farming businesses and businesses that have taken on investment debt that completely overhangs the business. It is not the predominant issue for farming and SMEs.

“What we are saying is that we are trying to create space, while still achieving the targets that we have to create, in order that we can work with farmers, businesses and family homes. We have put structures in place.

We have resolved a significant proportion of farms. It is critical for us to have an element that has the potential to be included in portfolio sales. Today, we can work with customers to restructure these.

“I cannot rule out that as we go through the process we would not have to look at SMEs or farming but they are not our primary or initial focus.”

Various members of the committee expressed their frustration with the lack of accountability or transparency – particularly over Project Redwood – provided by the bank, including Deputies McGrath, Doherty and the committee Chairman Deputy John McGuinness.