Friday, 27 January 2017 12:54

Vultures Circle Debtors in Ireland’s Courts

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Irish courts are experiencing sharp spike in the number of cases linked to international debt collection. A recent flurry of media coverage has brought attention to the operations of so-called ‘vulture funds’ as they apparently step up debt recovery in Ireland.

Vulture funds are financial organisations such as investment trusts, private equity firms and hedge funds which look for opportunities to make a profit from debt collection. They buy up debts at a discounted rate from organisations which no longer wish to be liable for them and then seek to recover more than they paid.

In Ireland, the foreign funds began to circle after the financial crisis 2010, when the Irish government sought a bailout from the IMF and EU to prop up its failing banks. When property values plummeted following the 2008 global crash, Irish banks suffered huge numbers of defaults on property investment loans.

In the intervening years, mainly US based organisations such as Goldman Sachs, Cerberus and CarVal have gradually been accumulating B2B debts from Ireland’s banks and the National Asset Management Agency (NAMA). They are estimated to have bought up to $30bn in loans from Ireland’s financial institutions, many of them considered bad debts, but at discounts of up to 80 per cent of their value.

50 cent coin

Debt for Profit

Now they have built up their portfolios, the investment funds are turning their attention to debt recovery. Whilst the overall number of enforcement actions dipped, international debt collection cases in Ireland’s courts rose sharply in 2016, driven by big name investment funds.

Between them, Goldman Sachs, Cerberus and CarVal brought 120 cases last year, double the number of international debt recovery cases handled the previous year. Of those, CarVal launched 52 cases in Ireland’s High Court, all linked to $3.7bn worth of commercial debts it bought from Lloyd’s bank in 2014.

With court judgments behind them, the foreign funds are seeking to profit from debt recovery. Methods include forcing the original borrower to refinance the loan at a premium, handing the investment firm a cash profit, or even seizing property from the debtors.

A Swifter Solution

Whilst big name financial firms might be happy to play the game this way, this is hardly the quickest and most efficient way to go about debt recovery in Ireland. Ireland’s court system, like many around the world, is slow to process cases and can hold up debt collection for months, if not years.

For most creditors seeking to recover debts in Ireland, or in any other overseas jurisdiction for that matter, court should be seen as a last resort. International debt collection follows the same patterns as domestic recovery, with the added complications of having to deal with unfamiliar legal systems.

It is far better to follow the same advice as you would receive when pursuing debt at home - in the first instance, seek professional assistance from a recognised and respected debt collection agency, which is best positioned to recover your assets swiftly and amicably. Our agent in Ireland offers swift and effective debt recovery services with the same no collection = no commission guarantee.

Safe Collections has built up a network of relationships with trusted debt recovery professionals all over the world. So if you need assistance with international debt collection in Ireland or elsewhere in the world, contact us as your first port of call and we will work with our partners overseas to get the best resolution for you.

Image: Irish 50 Cent Coin by David Dennis shared under the Creative Commons License 2.0