A company used by vulture fund Cerberus to buy property loans from Ulster Bank paid almost €3.5 million to the State last year as new tax rules for such investments kicked in.
Cerberus subsidiary Promontoria Aran paid Ulster Bank more than €1.2 billion in late 2014 for a group of bubble-era property loans dubbed Project Aran, giving the US company the right to demand repayment of the €6 billion due from the borrowers.
According to accounts recently lodged for Promontoria Aran, it paid €3.47 million tax on the gains made on its investment during the year.
Promontoria’s figures show that it paid the bulk of the tax – €2.7 million – between September 6th and the end of year, after the Government axed an incentive used by such companies to minimise their tax bills.
The incentive, found in section 110 of the Taxes Consolidation Act, 1997, allowed companies to write off repayments on loans used to buy property debts from against their taxes.
Promontoria Aran borrowed the cash to buy the loans from another Cerberus company in Holland and from Deutsche Bank. Last year it paid almost €48 million in interest on its debts, which were close to €1.2 billion.
The Government ended the incentive in September 2016 after it emerged that the practice was widespread among the funds that bought property debt from the banks and State in the wake of the recession.
Cerberus used Promontoria Aran to buy loans from Ulster Bank to mainly commercial borrowers that were secured against properties in the Republic, Northern Ireland and Britain.
It collected €430 million in repayments from the loans during 2016 and paid off €325 million of its €780 million loan from Deutsche Bank. The company’s accounts say that borrowers repaid further cash this year.
Promontoria Aran’s accounts also show that it paid almost €81 million less than the originally agreed €1.345 billion purchase price to Ulster Bank after it identified problems with some of the loans’ securities.
The company withheld €252 million while Ulster worked to solve those problems. The lender completed this in February, 2016 and this resulted in Promontoria Aran not paying €80.8 million of the outstanding cash to the bank.
Ulster Bank did not comment. Deferring payments in this way is a common practice in transactions of this size.
The company recently got a €2 million judgement against independent TD Mick Wallace on foot of a loan he originally owed to Ulster Bank, but which Promontoria Aran bought as part of the deal.
Mr Wallace has consistently raised questions in the Dáil over Cerberus’s €1.6 billion purchase of State asset agency Nama’s Northern Ireland loans in 2014. The deal has prompted investigations in the Republic, the North and the US following claims that business figures and politicians were to benefit from it.
