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PERMANENT TSB HAS confirmed that the ‘special purpose vehicle’ that more than 6,000 of its mortgages have been transferred to will be exempt from tax.
Chief executive of PTSB, Jeremy Masding, appeared before the Oireachtas Finance Committee today, along with other executives from his bank and from Pepper in Ireland.
Last week the bank said it had come to a ‘securitisation agreement’ to move these loans to a special purpose vehicle which will be financed on the bond markets. The gross value of the bundle in what has been dubbed Project Glenbeigh is €1.3 billion.
Pepper will service these mortgages – the majority of which are primary dwelling houses – for the vehicle. This means communications and payments will go through Pepper.
Today TDs and Senators sought clarity on how this transaction will work and what it will mean for customers.
Sinn Féin’s Pearse Doherty attempted to confirm with executives that the set-up of the vehicle, also known as a Section 110 company, will operate tax-free. The Oireachtas legislated to close loopholes that had allowed vulture funds to avoid paying tax.
‘Nothing to do with tax’
Doherty said with Project Glenbeigh, Permanent TSB had “found a [completely legal] way round it”.
Because of the fact that you will hold 5% of the beneficial interest in this fund will now exempt you from tax in relation to the interest, it’ll exempt the whole vehicle from tax – is that not the case?
Eamonn Crowley, PTSB’s chief financial officer responded: “No, we’re required under law to hold 5%, deputy, that’s the requirement. It’s nothing to do with tax.”
In an exchange back and forth for several minutes, Doherty continued to ask Crowley whether this company structure allowed the ‘special purpose vehicle’ to avoid paying tax.
Doherty: “Will the fact that you hold 5% of the SPB vehicle, which we don’t have a clue who owns it, exempt them from tax as a section 110 company? Doesn’t it avoid and doesn’t the prospectus [for Project Glenbeigh] specifically mention the legislation that we introduced in this committee to actually close this loophole?”
In the prospectus you have a way around it because of the fact that Permanent TSB, as the originator of these loans, will hold a beneficial interest of 5%. Is that not in the prospectus in black and white? If you don’t want to admit it I can read it out to you if you want.
Crowley: “We’re required as the originator to hold 5% deputy, that is the requirement of being an originator.”
Doherty: “And does that fact allow this vehicle which you will have 5% interest in and whoever else the bondholders are will have the other 95%, avoid them paying tax as a result of Permanent TSB holding 5%?”
Crowley: “As originator we’re required to hold 5%.”
Doherty: “Do you know the answer or are you just going to repeat that point over and over again because I can go and read – I’ll actually read it out if that’s okay.”
He went on to read from the prospectus, which states that PTSB will retain an economic interest in the vehicle for the purpose of securitisation. And that, accordingly, the transaction should be “exempt from the documented deductible restrictions pursuant to Finance Acts 2016 and 2017″.
Doherty: “Is it not the case that this vehicle which permanent TSB will have an interest in – 5% – will be exempt from tax as a result of the structure?”
Crowley: “The reason, as I outlined to the Deputy before for the creation of the securitisation vehicle is that we would try to find a long term investor which would match the requirements of the customer in that regard, ie create the securitisation vehicle and find an investor. It was in no means to do anything with regard to tax issues.”
Doherty: “Are you exempt from tax?”
Crowley: “PSTB are not exempt from tax.”
Doherty: “No, this vehicle which you will have 5% economic interest in.”
Crowley: “It is as I understand a Section 110 company and the regulations would apply to as such, but the core issue with regard to creating the securitisation vehicle is we could, instead of a pure loan sale…”
Doherty cut in here and moved to Cormac Ryan, CEO of Pepper in Ireland. He asked Ryan to acknowledge that in two separate sections of the prospectus it states that the vehicle being set up will be exempt from tax and will avoid the restrictions passed by the Oireachtas.
Ryan said he was not best positioned to answer in terms of the tax status of the vehicle itself.
“This is the difficulty. Yous won’t admit something that is black and white,” Doherty told him.
You won’t admit it, because you know why? Because the public are outraged at what Permanent TSB has done and this is a double outrage, the fact that you’re now offloading these mortgages to a vehicle you will benefit from as the CEO of a bank, to a vehicle that has circumvented our tax codes. Legally, but it’s done that way and you won’t admit it.
PTSB’s chief executive then stepped up to the plate, telling Doherty that the bank was legally obliged to take 5% interest and that the tax status of the vehicle “comes with the design of the structure”.
It’s in the prospectus as you say, let’s not repeat what’s in the prospectus.
When challenged again by Doherty, he told him: “I’ve just acknowledged that what you say in the prospectus are the facts.”
He was later thanked by a visibly frustrated Doherty for giving him an answer to the question he had asked nine times to three people.
Thanks for actually giving me an answer in terms of that it will be tax-free. This really pisses a lot of people off because there’s investors there, multi billion euro investors. 95% of the profit made from this securitisation vehicle will be tax-free – it will all be tax-free, but they’re the ones benefiting from it.
‘An attractive proposition’
In his opening statement, Masding told committee members that the portfolio is made up exclusively of borrowers whose loans are”non-performing”, but who are currently meeting the terms of restructuring arrangements.
“The customers are engaging, have a proven record of meeting the terms of restructuring agreements and generate a steady stream of cashflow.”
He said that by focusing on loans that are adhering to agreements, producing consistent predictable cash flow, they had made the securitisation vehicle “an attractive proposition for long term investors”.
Cormac Ryan of Pepper sought to assure customers impacted by the transfer that their rights have not changed. He said if a borrower’s circumstances do not change and customers engage in a review process, there is a legal obligation to continue with the restructuring arrangement.
“Every case is different and Pepper is known for taking an individual and personal approach to working with customers, based on a deep understanding of their circumstances.”
He said it is his hope that customers in the portfolio “will come to view their engagement with us as a positive experience and that we have treated them in a fair and transparent way.”
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No fan of Pearse Doherty but he did a fine job in his persistence to get an answer
@peterw: I’d have a lot more faith in Pearse Doherty than I’d have in virtually any of the Ministers or TD’s in Fine Gael or Fianna Fáil
@ObsidianShine: Agree. FFG break everything they touch. How can people continuously vote for parties who have proven themselves to be inept over a party that hasn’t had the chance to prove otherwise? Oh yeah, Jarry this, SF/IRA that!
@European Bob: Because most people are “brand”sheep…FF or FG…brainwashed by years of bull…so much so,that if you tell them not to vote for the two parties mentioned,they’d vote for them just to spite you..
@peterw: Why ? He is as hard working and robust TD as is in that cesspool
@Emmet Doyle: He may be harding working and robust but I do not agree with some of his ideas in relation to multinationals / taxes and nationalism. He’s very quick to point fingers in spite of his own flawed views.
Saying that, he did a commendable job to PTSB today.
@ObsidianShine: Pearse is the only one on that oireachtas committee who ever stands up and tells these CEOs to cut the bull and admit what they have done. A credit to Sinn Fein and he will most definitely be a worthy party leader in the future.
@peterw: So you’re no fan of some of his ideas.
I personally agree with maybe half of his ideas beliefs or policies but think he is a fine politician and would be a big fan of his. He genuinely seems to stand up and tackle on behalf of the tax payer.
Incidentally about half of the ideas beliefs or polices of the right of centre mainstream parties would work for me too. If the left ever carry the day here you would find there ideals would subside towards the centre. Bit like labour and the workers party before them
Tax is for the little people!
@Sean: What height do you need to be to avoid tax?
@Stephen: brilliant very funny only it the truth
@Stephen: Ask Mickey d.
Nothing has changed, could you imagine the reaction of the French to the bailout we were laded with. The fighting Irish is all but myth now.
@John Mc Grath: I thinks that refers to drink related fighting, but I agree we don’t protest enough.
@John Mc Grath:
I wonder how much tax the government could have brought into its coffers on a sale of €1.3bn?
Not that the nation needs any more money to pay for its infrastructure or anything.
SF front and centre as usual. The usual gimps will be on to tell us that SF will wreck the economy. The economy is wrecked with legal scams like this. FFG continue to create lots of loopholes for their friends.
@Frankie Mangan: They will.
@Frankie Mangan: You were right, see above.
@Dot Com: Calling me a gimp…. tough break for me.
@peterw: I Don’t know, Don’t knock till you try it I say.
@peterw: Well the coalition of blueshirts and the baby blueshirts F.F. are making a fantastic job of wrecking the economy. Except for conglomerates, landlords, business men especially a media mogul. F.F. in government always left the country broke. Replaced by the blueshirts who made matters worse
The circus continues.
Well done Pearse Doherty. Sure what’s €1.3 billion anyway? Leo says they get up early in the morning so it’s ok, nothing to see here, no telephone number to grass up your bank exec neighbour in Killiney.
@European Bob: All the DOBBIE radio stations and independent newspaper columnists will try and distract from this by suggesting it is only SF grandstanding. Don’t forget DOBBIE has a vested interest in ensuring the Irish tax payer always lines his and his cronies pockets.
Well can’t wait for Tubridy to fawn over Leo bet he wont be as aggressive as with Casey and bet gbe studio will be full of hand picked cheerleaders
@Martin Brennan: Of course, wouldn’t expect anything less from our state tv. The north Koreans are in the halpenny place in comparison. All hail the leader.
@Martin Brennan: I wonder what kind of socks Leo will wear. Isn’t he great gas all the same?
I mean if you can’t even trust a bank executive, who can you trust!?
@Dan Bradley: Politicians?
The banks have zero respect for this Mickey Mouse government. If anything they’re laughing at them. Remember when Enda Kenny went to “sort them out” and they told him to sling his hook.
Why is it legal, was not the “loophole” to be closed in the bill of 2016 approved by the government of Varadkar, hello, Mr Finance Minister ??
@wattsed56: What the government says and what the government does are two different things. FG lie, it’s what they do best.
It sounds to my lay-ears that they made it very easy to avoid tax if all it took was for the bank to maintain a 5% stake a stake they were obliged to maintain.
@Emachine: oh those lovable rascals, with their little wink in their legislation. Sorry, but the language filter would melt if I wrote what I’d like to say.
We see a dearth of the usual government fans here on this article. The ones who cry “free houses” “free money”, fraudsters, want everything for nothing. Those who tell us all the country’s problem start and end with the poor, the unemployed, those on social welfare.
The country’s problems start and finish with Corporate Welfare that robs the country blind. Legislated for by FFG.
Nobody who makes decisions reads these comments. Write to your TD and the Minister for finance .
Short and sweet….like
“. Minister can you ask Pearse Doherty to come and write some legislation to stop this happening since it’s now more clear than ever that you lack the will or the ability to do that. “.
For the love of God… If you did this out of the back of your van, you’d be closed down and thrown in prison!!!
Doherty on the ball as always, nice!
Not a fan of Sinn Fein, but in fairness they have highlighted the depths that some organisations will go to, just to avoid paying taxes. Typical Irish Gombeenism…
@Rob67: Sometimes you need a group of shady fu*kers to go after a group of shady fu*kers…
David Duckingfield is and always will be a wankbag
The French are the butt of a lot of jokes in relation to surrender and running from trouble. They are in fact not a people that run or surrender easily. Well it’s about time we took a leaf from their book and took to the streets. We the people have been trodden into the ground by this and previous governments for years and most of the time we shrug our shoulders and go, “Oh well”. Enough is enough! F**k the government and F**k the bankers! They work for us, not the other way round.
@Sea Graham: will we be able to do about it
Why is this loophole still there
@Mary Oflaherty: He’s overweight,has funny hair, a camp accent and a fondness for warm islands
@Cathal: He who cannot be named is not happy with your response. Who paid the Ireland football manager, his deputy and the senior FAI staff 3 times their normal salary to get a positive spin on the National airwaves for years?
@Cathal: who Leo?
Move along pixieheads! Nothing to see here.
Well done Pierse Doherty. Keep doing what you are doing.
What is galling is that Irish customers are paying the highest interest rates in the eurozone to support these banks. Typically investors are paying 5% interest rates and have difficulty to make these loans perform by paying capital plus interest.
If the interest rates were fair and equitable, there wouldn’t be such a non-performing loan issue. To my mind, any property in negative equity needs mortgage interest relief to help pay it down.
But politicians never dream to help the little man and instead slap the tag “moral hazard ” onto their investment decisions. All the while giving tax free loopholes to the wealthiest elite in society.
@Don:
Now we’ve seen the banks dump non performing loans,which the banks say are responsible for the highest rates .can we expect to finally see Euro average rates..can we f###
Check out Gemma O’ Dohertys YouTube channel, live-streams every week going deep into the rabbit hole regarding the frightening level of corruption in this banana republic.
FFG continue to allow and facilitate the rape of the average working taxpayer by these financial institutions.
Keep voting for the status quo plebs!
Not a Sinn Fein fan but fair play to Doherty for his persistence, could do with more like him when it comes to stuff like this
Ireland. The most corrupt country on the planet.
@David Corrigan: This corruption is brought to you on behalf of the FF and FG parties. Keeping the corruption going.
@European Bob: It’s frightening.
In the interest of transparency, if you are setting legislation and policy for banking in Ireland, all your loans and mortgages should be open for scrutiny. Also , there are way too many ‘Charities’ in Ireland , plenty dosh sloshing around, with less scrutiny on accounts. Enda said we would be a great country to do business. It has to be legit.
FG frape room is very quiet tonight. Obviously no way they can twist this positively for Leo and his spoofers and negatively for SF.
So legally, PTSB had to take a 5% slice of the vehicle, and by doing so this created the tax exempt entity. Isn’t the real issue here the legislation or am I missing something? Did PTSB have a choice when creating it?
So what’s new???? sure doesn’t the banks have to look after themselves, not only will they be able to look after themselves sure won’t the current Government help them out. Both the bankers and the Government must stay up all night to help Leo out. I didn’t here Owen Murphy ask any questions about were he’s going to put the 60000 people who will become homeless what and how hell looks after them. Why because he doesn’t know. A joke a total joke. Ion
The problem here is it doesn’t matter FG and FF will make sure they are protected and this video only shows how their arrogance was in full flow if it was in any other Country they would be in Jail
So what’s new???? sure doesn’t the banks have to look after themselves, not only will they be able to look after themselves sure won’t the current Government help them out. Both the bankers and the Government must stay up all night to help Leo out. I didn’t here Owen Murphy ask any questions about were he’s going to put the 60000 people who will become homeless what and how hell looks after them. Why because he doesn’t know. A joke a total joke.
6 k, Kathleen, not 60 k
And article confirms that while original loans are “non performing” each household in Q are meeting terms of a fresh loan restructure agrmts negotiated with PTSB pre sale of that Loan Book to SPV.
All boils down to SPV having to wait a much longer period to work out mortgage book and householder family benefiting from manageable loan repayments, a roof over their heads for as long as they meet reduced monthly obligations. An admirable measure by Gov not to add to current misery in Housing Market, and a tax break for Investors putting up cash to make it all happen.
Plus, PTSB now with its tidier Bal Sheet can watch it’s share price grow to recover big taxpayers investment following crash. Win Win! But amidst hysterical rhetoric, these nuanced points all lost.
Apart from the “NO TAX ” issue which is difficult enough to swallow, the more pressing issue for people is that the bank breached the code of The Central Bank of Ireland which clearly states that they needed the permission of the mortgage holder in order to sell it on. They had no such permission yet the Central Bank have chosen to ignore the breach of their own code. Strange how they are all singing from the one hymn book ! How does that serve the people who have lost their homes as a result of the unfettered actions of Vultures.
“Vive La France”
The french would tear up every pavement in Paris if they were humiliated in this manner.
Robbed of of houses, relet and the profits tax free. A nation of donkeys are we not.
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