Dara Calleary (Mayo, Fianna Fail) | Oireachtas source

I wish to speak to amendments Nos. 2 and 5. The purpose of these amendments is to highlight the serious situation involving private equity interests that purchase loans sold by Irish banks.

I have met a range of company owners, some of whom have had the ability to go to court and win their case, but most do not have that ability. They have described in detail the position their successful businesses were put in after loans with Irish-based and headquartered banks were sold to private equity funds, one backed by Goldman Sachs, but this would not be unique to that organisation.

I wish to quote from correspondence from one firm outlining its experience with a private equity fund:

It has become increasingly apparent that the acquisition of our loan was not done with a view to honouring the facility agreements, but instead with a view - we believe - to enforcing security in respect of our loan, so that the asset itself will become available to the private equity acquirers of our loan. A 'loan to own' strategy.

The purchaser of the loan insisted on a consultant attending board meetings, sought to have an outside consultant appointed at a cost to the company to review the business and engaged in a very aggressive manner in its communications with the business. This is line with what was reported by Tomlinson when he investigated similar practices involving RBS in the UK. His report stated:

1. The bank artificially distresses an otherwise viable business and through their actions puts them on a journey towards administration, receivership and liquidation.

2. Once transferred into the business support division of the bank the business is not supported in a manner consistent with good turnaround practice and this has a catalytic effect on the business’ journey to insolvency.

This has an impact on employment and on SMEs. At the moment, Ulster Bank is involved in an aggressive sale of its loan portfolio, especially of small loans to outside capital companies. These are small companies employing ten, 20 or 30 people with no protection. It is no wonder we are such a target for these US investment funds when there is no protection for the people whose loans they are buying. We need to ensure we have the maximum protection available. It is all very fine for those with the ability and resources to go to the High Court to defend their right. They should not have to in any event. However, most companies do not have that ability and those companies that have the ability want to spend that money on something far more productive that might expand their business and increase employment. At the moment we are forcing them to go the High Court.

I appeal to the Minister to look at the amendment or give some indication that the Government is working on giving protection for those loans that are being sold down the Swanee. We have spoken about the extension of the credit guarantee scheme to allow for this, but that seems to be parked up. Therefore, we are looking for legislative protection to protect business people and, more importantly, their employees.

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