Vultures Circle Europe’s Debt Mountain | Financial Times
Vultures Circle Europe’s Debt Mountain | Financial Times
As grip of austerity tightens further making Ireland more hellish for ordinary working people living here, it’s also fast becoming a paradise for vulture hedge funds.
‘Ireland may not be the worst hit country of the eurozone’s periphery, but for many distressed debt funds the Emerald Isle is fertile turf for profitable investment opportunities.
The combination of severe financial stress, a hard-nosed government, conducive restructuring laws and favourable underlying economic factors have enticed an array of big hitters from the distressed investment industry. Some say the number of hedge fund and private equity firm executives turning up means five-star hotel rooms in Dublin are now hard to book for an extended time.
‘The Irish government has carved out assets worth a nominal €72bn ($99bn), including property and land, from its nationalised banks for the National Asset Management Agency, a government-run “bad bank”, gradually to sell off. Nama’s sales have yet to start fully, but distressed debt investors are already heavily involved in some of the most high-profile businesses in the country - such as Eircom, the telecommunications company, Quinn Group, a private conglomerate, and Bank of Ireland.
‘Bank of Ireland was recently saved from full state ownership as investors including Fidelity Investments, Fairfax Financial Holdings and Wilbur Ross’s WL Ross & Co took a combined 35 per cent stake through rights issues run by the government. Mr Ross estimates that he and his partners picked up the holding at a 40 per cent discount to nominal book value and professes to be “quite excited about it”.
‘”Ireland is going to be the first European country to emerge from the sovereign debt crisis,” he says. “Until its banks got out of control it was in good shape, and Ireland’s strong economic fundamentals are still present.”
‘Strategic Value Partners, one of the longest-established US distressed debt firms in Europe, has meanwhile bought a chunk of Quinn Group’s €1.3bn loans, according to people familiar with the matter, and is poised to become a big shareholder.
Eircom is still in restructuring talks with its lenders but debt industry insiders say funds have taken over large parts of its €3.75bn debt pile, hoping either to take stakes in a reorganised entity or to profit otherwise from the process.
“Eircom is hedge fund heaven,” one industry expert observes.‘Industry executives argue that Ireland will benefit from its pragmatic approach to distressed debt investors, as these could play a vital role in restoring the roar of the former “Celtic tiger” economy.
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