Irish Section 110 SPV, Vultures, Tax Haven, Orphaning Scam

Why no Irish media - even SBP (who have worked their asses off on this scandal) - is willing to “out” the “creators” of the Section 110 scandal:


Noonan loosing complete control of the Domestic Corporate Tax Base via Section 110.

Two very interesting articles in the Sunday Independent showing how bad the Section 110 scandal is getting:

1. Domestic lenders now using Section 110 to get all their profits tax-free.

INDEPENDENT: Cardinal Capital warns of ‘damage’ by new S110

Domestic lender - Cardinal Capital - has now revealed that it is probably using Section 110 to avoid all Irish taxes on it’s loans to domestic borrowers and re-route profits to an offshore location (where it’s backer, Carlyle Capital, is based).

(I wonder if their lawyer is Matheson, A&L Goodbody or Dillon Eustace - the holy trinity that dominate this area?).

So, while all other Irish domestic lenders - Bank of Ireland, AIB, Ulster Bank, Permanent TSB, KBC etc. - have to lend in structures that incur 12.5% corporation tax (inside the banks) and another 20 % withholding tax (on distribution of profits), Cardinal Capital is indicating that it is living in a 0% existence.

The banks are (in a normal environment), one of the biggest payers of Corporate Tax in any country.

A clear example of the domestic corporate tax base being destroyed by Noonan’s Section 110 scheme.

If Cardinal Capital is using Section 110, then it is almost, a non-brainer case of illegal state aid to a company. And remember, Cardinal Capital could not use a Section 110 vehicle to give loans unless the Revenue has changed the Withholding Tax Anti-Avoidance Rules in April 2016, when it was pointed out that the Vulture’s Section 110s were having difficulty with them.

CASE EXAMPLE: Revenue showing they knew vultures had S110s, AND they fixed anti-avoidance tax rules for them.

Is it time to give Margrethe Vestager (another call).

2. Stephen Donnelly pointing out how Noonan’s amendment is probably the end of Corporate Tax in Ireland.

As things stands, vulture funds could take €10bn to €20bn offshore over the next decade

Good article by Donnelly on why Noonan’s amendment is designed to fail (as we discussed in the link above)

However Donnelly also notes that the exclusion of property assets from Noonan’s amendment, effectively means that there is no further need for non-property related corporates to pay Irish Corporate or Withholding Taxes (or VAT, as S110s are also exempt here). We gave the humorous example of how you could buy and re-develop a dalkey house with S110 (below), but while Noonan has cut off this (amendment blocks property activities), it leaves any other non-property related businesses free.

CASE STUDY: How to use Section 110 on Strawberry Hill House, Vico Road, Dalkey, Co Dublin

Both examples show Noonan’s loss of control of the Section 110s in the domestic economy, is going to see further billions in annual Irish corporate and Irish withholding taxes (and Irish VAT duties) lost. The Limerick ex. school teacher is way out his depth here (as we have seen on our Apple tax posts). The IFSC Dublin law firms are running rings around him.

Split out some posts that interrupted O35 in the thread…


St. Wilbur Ross who unilaterally saved Ireland and made a shed-load and good luck to him.

Established a 500M Mezz financing vehicle with Cardinal Capital as JV partner in 2014. No activity in 2014. S 110 vehicle. PWC the auditors, Maples the solicitors.

The accounts are here, largely uninteresting…

The ownership of the company is noted in the accounts. Would you say it is:

A. Solas - a charitable entity aiming to shine a light on those less privileged in society by highlighting their plight.

B. The Mulally Fund - a charitable entity striving to make a set of headphones for Una with unique sounds that make her happy.

C. Halligan’s Tache - a charitable entity striving to have the guy whacked for being so annoying.

D. The WLR Cardinal Mezzanine Finance Charitable Trust - a charitable entity whose founders seemed desperate to get out of the office and couldn’t give a crap as no-one looks at this shit.

Nice one grumpy !

I love the way that they don’t even bother to hide the Charitable Trust names any more.

However, this is another level of Section 110 Irish tax avoidance again. An ordinary Irish financing business for the Irish domestic market (like Bank of Ireland, AIB etc.) setting themselves up in a nice cosy fully Irish tax free world (no Irish Corp Tax, Irish Withholding Tax or even Irish VAT/Duties) for themselves.

Couple of points re your investigation above:

  1. This would be another illegal EU state aid case (like Apple) to Cardinal Capital (unless the Revenue is willing to allow all Irish lenders and Banks use Section 110 to avoid all their Irish taxes).

  2. Cardinal Capital would not have been able to use the Section 110 structure if it wasn’t for the fact that the Revenue removed its Withholding Tax Anti-Avoidance for Section 110.

Irish Revenue amending Irish Witholding Tax Anti-Avoidance Laws to fit Section 110s into Domestic Economy

  1. While post Noonan’s Amendment, Cardinal can’t do this for property related mezz loans, but they can do for all other non-property related loans (i.e. Business Loans etc.). Non-property lending in Ireland, is now a zero Irish tax (and Irish VAT) activity.

The real scandal of Cerberus €1.6bn Project Eagle Deal - you paid for it, and how Noonan’s amendment protects Cerberus.

The Irish Media seems to have swallowed the line that Noonan’s proposed amendment will close the vulture fund loophole. Some of the articles even imply that the vulture funds have taken a massive tax hit from this amendment (oh the horror).

IRISH INDEPENDENT: Vulture Funds reeling as new tax slashes massive profits

Fear not vulture, as my in-box continues to be crammed with Big 4 (and non-Big 4) emails explaining why, with appropriate advice and structuring (which will cost you), all of the future Irish tax avoidance that the existing vulture was expecting, can be preserved (understandable, given Big 4 wrote amendment).

Discussed in more detail here:

It is amazing that we have a full media attack on Project Eagle, CA&G Report, and all-party consensus in the Dail, that an investigation - and a statutory one - is needed into the €1.6bn sale to Cerberus.

IRISH EXAMINER: High cost of NAMA failings in CA&G Report

RTE: Watchdog Audit finds NAMA incurred £190m Loss on Project Eagle

However, PIN readers of this (long) thread, can inspect the Cerberus Promontoria Eagle 2015 Accounts (the link to the SCRIBD file in via this PIN thread half-way down to Vulture #5) to see where the real scandal is:

Of course, before we get into the real scandal, what you find first, is that the Cerberus vehicle that bought the Project Eagle portfolio from NAMA is, of course, a Section 110, designed by the “usual Dublin advisor team” of A&L Goodbody (2nd only to Matheson in Section 110 Irish tax avoidance schemes), SFM Ireland (Irish anti-avoidance tax rules don’t allow the Directors of Cerberus to be Directors of their own Irish tax avoidance vehicle; don’t laugh), and PWC (who, with KPMG, are likely the main authors of Noonan’s “cosmetic” amendment to Section 110, which is designed to preserve the tax schemes of Cerberus, and all the other Section 110 of the vulture funds.).

All profiled here: Putting it together, the Vultures + Vehicles + Dublin Lawyers + Dublin Accountants + Irish Charities

So, in crude numbers (I am deliberately simplifying / rounding a lot, for fuller clarity here):


  1. Project Eagle portfolio bought for c £1.2bn

  2. Cerberus used c £780m of “non-recourse” Debt mostly from Nomura Japan @ L+3.5% @ €27m p.a. cost

  3. Interest income on portfolio of c £111m

So, this portfolio was almost a decade old when sold to Cerberus. This means that it is “seasoned” in the distressed debt vernacular (i.e. the interest income is likely now very solid having been paid for c 10 years though the GFC; distressed debt heaven).

Cerberus therefore bought Project Eagle at an un-levered yield of over 9.25% (8-9% yield was standard in 2013 from NAMA)

Net of the Nomura loan, Cerberus put c €420m of their own money into the deal, on which the STARTING INCOME YIELD (i.e. ignore capital gains) was exactly 20% (€111m in income less €27m in interest, divided by €420m in equity).

If Cerberus hold Project Eagle for 10 years (standard distressed debt hold period), they will convert their €420m into €1,260,000 (€420m x 20% x 10 + €420m). Without a Section 110, Cerberus would incur Irish taxes over almost €250m on this gain alone (*)

(note: see this post re tax calcs:

(*) note: as we saw in the Mars Capital Ireland case study (see link below), there is a common mistake commentators make about the sustainability of this income. Project Eagle’s loans had a par value of €4.6bn, so Cerberus paid 27p in the £1 for them. On average, where a borrower repays a loan early (and Cerberus loose future 20% p.a. income), Cerberus will make an even bigger gain on full par recovery of the loan. So powerful is this dynamic that Cerberus, in specific cases, will be willing to take even 50p in the £1 from the borrower, and will be no worse off then taking the 20% for the 10 years. Ireland was distressed debt heaven for vultures in 2013-2015, as it had a rare combination of factors not found elsewhere:
(1) well seasoned loans (most over 10 years old, and have been through the “fire” of 2010-2012, so their income was solid).
(2) deep discount to par value (underpins income yield and gives even bigger capital gain windfall where loans repaid early).
(3) unleveraged acquisition running yields close to 10% (leveraged yields closer to 20%, per Project Eagle).
(4) complex bankruptcy laws (very hard for borrower to “walk away” like in US, underpins interest income).
(5) Section 110 structure - free of all Irish taxes, Irish VAT and Irish Duties (unlike the US or other PIIGs in Europe).

However, those who knew Project Eagle know, with any decent recovery, Project Eagle is worth AT LEAST 50% of its original loan value. That is another €1,000m to Cerberus, or €2,260m on their €420m equity. That is over €500m in Irish taxes avoided.

**Like we saw in the Mars Capital Ireland / OakTree Case Study, Cerberus is going to avoid Irish taxes (+€500m) that are at least as big as Cerberus’s actual equity investment (+€420m).

As with Mars Capital Ireland, the Irish Taxpayer has paid for ALL of Cerberus’ Projecg Eagle investment.**


So while the media gets into a fluff over Cerberus getting a £190m bonus because poor practice (or worse), remember that our Government of ex. school teachers, have given Cerberus (and all other vultures) an even bigger deal.

Remember also that NAMA knew it was selling to Section 110 (and Frank Daly was at presentations on S110)

Now read the post on the “sham” of Noonan’s Section 110 “loophole closure” Amendment:

(i) Next year, the Cerberus Promontoria Eagle Accounts show a revaluation of the assets on 5th September 2016 to €2.6bn, to shelter all capital gains at 0% (with Irish bond yields going negative, PWC will produce a 100 page report supporting it).

(ii) Next year, the “internal” €420m of Cerberus Promontoria Eagle Loan Notes (how Cerberus structured their “equity”; all owned by a Cerberus Luxembourg company) will have had their interest-rate confirmed by PWC as being an “arms length” rate.

Why Noonan’s Section 110 Amendment is Built to Fail

Of course, it is likely that Cerberus will wrap their Project Eagle Section 110 inside an “Orphaned Super QIF” so that media / public cannot download their accounts and see what Irish taxes they are paying (or not paying, more likely). This is what the Big 4 are now recommending to their vulture clients, along with structures to neutralise Noonan’s amendment.

Orphaned Super QIFs are discussed here.

All the IBRC are paid back and almost all the NAMA financing is paid back (i.e. no rush with remaining NAMA assets, better to wait).

Unlike Apple, Vultures don’t supply any jobs etc. (the Apple arguments don’t apply)

Why is Noonan protecting Cerberus’ (and all other Vultures) avoidance of +€500m in Irish Taxes?


Stephen Donnelly article on Cerberus 2015 Project Eagle Accounts shows that the interest income has risen to £165m and that Cerberus’ income yield (ex Capital Gains) is now running at over 30%. The profits are now so vast that Cerberus has been forced to re-structure half of Project Eagle’s assets out of its Section 110 SPV into a new tax avoidance vehicle.

IRISH INDEPENDENT: Time to tax ‘vultures’ like the rest of us.

Well done Observer35. However I have to hover over the latest posts button on this thread as this whole thing makes me sad and angry for about 5 minutes after I’ve read the latest update.

Same here. There’s a certain dread feeling of “this is going to be upsetting again, isn’t it?” before I click on the link.

Why not, he just wants to say NAMA is closed off and successful, relying on the short memory of the Public.
He will move to the backbenches when Kenny is no longer PrimeMinister so he has nothing to worry about. He has nothing to loose and is too long compromised as a politician to have any idea any more of what is in the public interest and what is contrary to the public interest with a degree of isolation where nobody who matters ever calls him on any of his decisions so he thinks he has a bigger picture of the issue than the general public. He is an example of why career politicians become ineffective as they progress through their career.

I encourage you to read the Apple link for an uplift:

Apple, Ireland, EU, Tax Avoidance, Margrethe Vestager, CCCTB

You will see that despite the stupidity of our ex. school teachers, the EU is going to ensure that:

  1. We are getting the €19bn, and

  2. We are getting higher taxes going forward (unless Noonan creates another Section 110 type option for MNCs)

Could Irish politics get more surreal
(i.e. what happens when your Government + Opposition are mostly ex. school teachers).

1. Apple Tax (€19bn lost Irish taxes)

  • link on PIN
  • no inquiry.
  • comprehensive EU report withheld (by Government, not the EU).
  • rushed Dail vote, two months before actual appeal deadline.
  • €19bn in lost Irish taxes at risk.

2. Section 110 (€20bn in lost Irish taxes)

  • link on PIN
  • no inquiry.
  • clear examples of Revenue colluding with Vultures to avoid all Irish taxes, VAT and duties.
  • initial denial that (1) it was wrong, that (2) NAMA knew about it, or that (3) Revenue knew about it.
  • eventual agreement that (1) it was wrong, that (2) NAMA did know about it, that (3) Revenue did know about it.
  • €20bn in lost Irish taxes at risk (which will disappear if Noonan’s amendment is not changed)

3. Project Eagle (€220m in loss to the Irish taxpayer)

IRISH INDEPENDENT: Kenny bows to pressure for [statutory] independent inquiry into sale of loan book

Michael Noonan was heavily involved in the first two:

(As shown in Apple thread, 90% of the €19bn Apple figure is from Noonan’s tenure)
(Also shown in the Apple thread, how Noonan covered up Apple’s “Leprechaun Economics” moment costing Ireland €7bn)

(As shown in Section 110 thread, 100% of the €20bn Section 110 figure is from Noonan’s tenure)
(Also shown in Section 110 thread, how Noonan’s Amendment is designed to protect the Vulture’s €20bn tax avoidance scheme)

He is not involved in the third.

Brilliant posts Observer35! Mind boggling. What a racket. We are being played liked fools.

Played? We are looking on helplessly. The only reason the last of those deals is being investigated is because somebody else “official” has authority to comment on it; C&AG and their findings alone should be sufficient for heads to roll without setting up an investigation to defuse the situation and put some distance between the actors and their actions.

I just meant it’s a precarious economic model to base a country on but it’s the one they have chosen, in the end ordinary people will suffer the consequences.

If you were to be cynical, you could think that there is focus and pursuit of the 220m from the NAMA deal (which we can’t get), because it takes the heat out of the 20Bn (which we could get if we wanted to) vulture fund biggest scandal of our generation.

There’s a sense that the public will respond as follows:

“Did you see they are pursuing that NAMA deal for the hundreds of millions?”

“What one’s that?”

“Ah, you know, them vulture funds - one of the funds bought it cheap off NAMA.”

“That’s awful.”

“Ah, but they have them now (wink, nudge, wink) those fat cats at NAMA will get what’s coming to them. Fair play.”

“That’ll show the vulture funds not to mess with us.”

“Shurely t’will.”

“… did you hear we can’t bring down the USC cos we don’t have enough money this year?”

“Shur’ it can’t be helped - the country’s still struggling.”

Did the Brazilians find that Pat Hickey was using a Section 110 to re-route his ticket touting cash?

IRISH INDEPENDENT: Ireland appears on tax havens ‘blacklist’ with Panama, Monaco

Anyone else think this whole Project Eagle nonsense (Who would have thought that NAMA would be a giant fuckup eh?!) is just a way to bury the bigger Apple related news

Seems unlikely. The Apple news is much more of an issue internationally than nationally but the Project Eagle story is much more of an internal distraction.

I’m not sure it’s deliberate. Quality of journalists out there is generally atrocious , numbers not being their strong point either!

Also the public can be far behind on understanding of economic issues,although to be fair the average Irish citizen is or ably well versed in
Banking and bonds compared to others by now!

Well done observer. It all here in black and red.

We want our 20 billion euro taxes back on those sold off NAMA assets!

Derbhail McDonald showing she lacks the math skills to be an effective business reporter.

**DMcD’s legal roots showing here. She just doesn’t have math to see why Noonan’s Section 110 Amendment achieves little (and why it ENSURES that the Irish pax payer will ultimately pay for Cerberus’ acquisition of Project Eagle).
IRISH INDEPENDENT: Finance, no ‘watering down’ of new vulture fund law

If she did, she would understand this post (and might help save her readers €20bn):

Irish Media miss the real scandal of Project Eagle - you paid for it (and how Noonan’s amendment protects Cerberus)