Examples of Debt Restructuring
Every situation is different and each person will have different requirements depending on their age profile, amount of debt, type of debt, and who their main creditors are. We tailor our solutions around your specific needs. We have deep experience debt restructuring in the Irish market both at a personal and corporate level.
Here are some typical examples of debt restructuring solutions we have negotiated on behalf of our clients.
Debt Buy-Back
A publican with a premises in North Dublin whose debt was €3m which he raised in 2006 to buy out his siblings. Interest on the loan was set at 6.9%.
Due to the downturn he was unable to meet his repayments and worked through many different debt restructures with his creditors.
His debt was eventually sold to an international fund who acquired the debt at an open market value of €900,000. The fund were seeking repayments on the outstanding €3m loan note.
As he was unable to repay this money the publican approached the principals of Beacon Capital with a view to negotiating a debt restructure.
Following extensive negotiations the fund agreed to sell the loan including the related personal guarantees for €1.25m.
Due to a recent asset sale the debtor was in a position to contribute €250,000 with the balance of €1m coming from a funding syndicate Beacon Capital arranged.
Benefits to the debtor included:
- A 58% debt write down of €1.75m.
- Personal guarantees of €3m were written off.
- Annual interest reduced from €207,000 to €100,000.
The debtor aims to refinance out the funding syndicate in the near future with cheaper senior debt once his credit rating has improved.
Informal Debt Restructure
A couple from Cork in their late 50’s had borrowed €6m to buy a property investment portfolio during the boom years of the Celtic Tiger years.
Once very successful retailers, their business ran into financial difficulties in 2009 which was compounded by the bank’s withdrawal of credit facilities.
The debtors had all their lending with one bank and in 2012 their branch manager who had been very accommodating left the bank. The business eventually ceased trading in 2014. This prolonged stressful situation created mental and physical health issues for the couple.
The debtors made contact with the principals of Beacon Capital to help find them find a solution. At that point their assets were valued at €1.5m including the family home which was valued at €400,000. Their total loans to the bank were close to €6m including a mortgage of €850,000 on the family home.
A successful restructure was negotiated with the bank as follows:
- A voluntary surrender of all business assets given to the bank with asset value of €1.1m.
- There were some complex legal issues around titles being transferred to family members. The debtors agreed to make good all titles involved in the business assets being surrendered.
- A lump sum of €600,000 given to the bank from a combination of crystallising a pension for €450,000 and a contribution from a family member of €150,000.
- All outstanding debt to the bank and personal guarantees waived.
- The couple were allowed to retain their family home mortgage free.
Formal Arrangement
A company director based in Munster had debts made up as follows:
- The debtor purchased a family home in 2005 with a mortgage of €750,000. The property was sold for €285,000 crystallising a negative equity shortfall of €465,000 with Bank 1.
- In 2007 he also purchased an apartment and a house as investments. These loans were also with Bank 1. The outstanding debt on theses properties was €644,000 and after receiving an offer for them at €310,000 he would crystallise further negative equity of €334,000 if the bank was to agree to the sale.
- The debtors only creditor was the Credit Union where he held an unsecured loan of €50,000.
- Total outstanding debt was €849,000
The principals of Beacon Capital negotiated a Personal Insolvency Arrangement (PIA) for the debtor as follows:
- The debtor offered a lump sum payment of €200,000 to the arrangement in full and final settlement of all debt.
- He also agreed to sign all necessary conveyance documentation for the sale of his buy-to-let investment properties.
- The debtor was able to raise this money from the sale of an unencumbered foreign property and by taking money from a pension.
The debtor exited the arrangement in three months once the paperwork was finalised, with debts of €649,000 written off as part of the PIA.
To discuss your property funding requirements please call us on +353-1-685 6708
