Michael O'Flynn: Surplus to requirements ?


#1

Looks like Blackstone have concluded that at least one of the golden circle is no longer needed to develop his brainchildren…

rte.ie/news/2014/0729/633876-o-flynn/

Given that there are no barriers to entry in property development, I always wondered how these guys were going to justify their existence once their judgement came into question for being overleveraged.


#2

I find the move by Blackstone perplexing. All O’Flynn’s load book was performing, or so we’re told.

What do Blackstone gain by this examinership?


#3

I wondered if it was an exercise to shut the company as a legal entity, thus avoiding any tax and legal liabilities, and rise the company from the ashes, a la Thomas Crosbie


#4

Seems bizarre alright. Why an examinership and not receiverships for the assets? Although this mornings article in the Times says that receivers and an examiner were appointed, which makes a bit more sense. This will be interesting.


#5

A little bit of maths …

So NAMA bought loans at an average of 47%.
Theoretically, €1.8bn was bought for €846m.

NAMA then sold this for €1.2bn, crystallising a profit of €354m.
Yay profit !

But if this is one of the ***performing ***loans, is that the best deal out there ?
Blackstone are buying a performing asset at 33.33% discount.
What the hell are the non-performings going to go for ?

Or is a performing loan more of a ‘‘performing’’ :wink: loan ?


#6

It’s the clever move. You appoint receivers to the property companies with no staff. You stop him putting in an examiner on the companies with staff and trade creditors by doing it yourself.

As for whether the loans are “performing” if they really were then why the big haircut on what black stone bought them for


#7

But what does performing mean? Interest only or interest and capital?


#8

I don’t see how a creditor(Blackstone - they only bought the loans) can put a business into examiner ship if the loans are performing.


#9

it’s more than a little maths you need to come to any sort of credible conclusion to your theory.

If nama bought loans at an average of 47% … quite possibly Flynn’s loans could have been bought for anything from 1% - 99.999999% … unless you have access to the actual paperwork you are guessing.

Personally i’d say that a ‘performing’ loan would have been purchased at above the average … probably well above the average so …


#10

Times article
irishtimes.com/business/sect … -1.1881985


#11

Pat Kenny was quite outraged about this.

Apparently the interest on the “loans” (which may actually be bonds) is being paid, but there is no hope of the principle being repaid, with the first tranche due at the end of this year.


#12

Shouldn’t they have to wait until the expected default event occurs at the end of the year before taking action?


#13

Yay profit!

Except for the inconvenient truth that the “profit” was artificially created in the initial transfer of these loans from one state agency (a bank) to another (NAMA).


#14

The loans are probably in breach of a a minimum loan to value condition, so not withstanding payments been made, the laon is in default.


#15

From the IT

It’s not the main debt, it seems they think they can call in the lot if one goes bad.

I’d guess they’re worried he’ll find some way to avoid it. Blackstone don’t want the loans, they want the assets so they can make money on their investment as soon as possible. You’ll be waiting a long time before O’Flynn can finally sell a 2m apartment in Cork and pay off his loans.


#16

The article also says court papers mentioned failure to supply audited accounts, which probably means a covenant breach.


#17

The most important thing about this is watching how the US private equity/hedge funds operate.

Buy asset & get out - taking a wedge of profit with you.
They are short-term operators.
Speed is of the essence.

Now think of all the private equity/hedge funds who have bought (or will buy) mortgage loan books.

For O’Flynn, the can has had it’s final kick.
Who’s next ?


#18

O’Flynn Group succeeds in removing interim examiner and receivers

rte.ie/news/2014/0813/636827-oflynn-group/


#19

Cork 1 - 0 Teenage investment banker in London


#20

Interesting move. I presume this will give rise to some interesting meetings over the next couple of weeks.

Seems to mainly be procedural, i.e. it’s now a race to see if Blackstone can dot the Is faster than O’Flynn can move the assets and/or round up refinancing (doubtful).