A while ago we decided to document some of the things we encounter as debt managers in order to give a taste of the experience from within the process. This is more than anecdotal but nowhere near outright empirical proof of how things are going for everybody else in the process.
The most recent meeting involved a site in rural Ireland. The borrower was a former developer who now lives abroad. Like many property deals he wasn’t the only one on it but he happens to be engaging and when that happens the idea of ‘severable liability’ is about all the bank can hope for.
The developer made an offer of a 30% recovery, this was rejected at the start of the year. Given that the site is worth about 20% of what it went for (at best) this would have been a decent outcome, frankly I’m surprised the developer even made one so high given that in this instance they have the bank over a proverbial barrel.
The loan is in deep arrears, but what’s worse is that the planning on the site (which is where the real value of the site lies) is going to expire and the application for it was in the name of (and managed by) the joint borrower who isn’t part of the process at present. This leaves the first borrower we are representing hog tied. They can’t renew the planning to keep value there and if something doesn’t give the bank will be the ones who watch the value go over the cliff edge.
If this happens I don’t believe there is a salvageable solution. In particular when delay to date, an absence of repossession, rejection of an above market offer and soon to lapse planning are all involved.
Yeats perhaps said it best, ‘things fall apart, the centre cannot hold’. How on earth is this loan going to come good? When somebody is in a non EU jurisdiction with easily transportable job skills you can’t really chase them down legally.
Try going legal in Ireland you’ll experience a headache, do it against a part outside of the EU and you’ll experience a migraine. Then when you finally do serve papers they move to another town or another country and you have to start again. The only thing the bank has going for them is the threat that this person won’t get a loan here again – but given the state of this persons credit to date that outcome has already been baked into the cake.
What the bank won’t give any guidance on is what this borrower stands to gain from playing ball. Even if they pay off the whole loan another person will have a 50% claim on it, they won’t clarify whether a transfer and release is possible (which would put only this borrower on the deeds so that they own it if they pay for it).
The message from the lender is clear, there is a single serving solution: pay back all the money.
My client said I have one shot at this, and in this fog we’ll have to revise the solution downwards to get the client to agree to it as they realise there is little recourse, but revise it upwards to get the bank to sign off on it.
Indeed, things fall apart…