Vultures have a bad reputation, yet they perform an essential function in the ecosystem. By scavenging nature’s dead bodies, they recycle nutrients and prevent the spread of diseases. In the process, they also grow into some of the world’s largest birds.

The same goes for vulture funds. Once banks and their regulators decide that some of the debt on their books is irrecoverable in the normal course of their business, the vultures begin to circle. From late 2013, Ireland invited them in. The New York-based investment firm Cerberus proved to be the hungriest of all.

The €64 billion bank guarantee offered by the State in 2008 to the then six Irish banks prevented a disorderly collapse during the global financial crisis. When the emergency – and the guarantee – lifted five years later, however, stockpiles of bad debt remained on their books or in Nama.

As regulators urged financial institutions to strengthen their balance sheets, neither aggressive repossessions nor blanket write-offs were palatable to deal with this burden. Going either too hard or too easy on the holders of non-performing loans (NPLs) was certain to cause a backlash among the public.

State-owned Nama and IBRC led the way in an easier direction: Sell the bad loans to faceless US private-equity firms who would deal with the problem without fear for their reputation – in exchange for massive discounts.

“By end-2017, the overall stock of NPLs stood at around €25 billion, down from a peak of €85 billion” in December 2013, a study of the Irish banking crisis published by the Bank of International Settlements found in 2020. While residential mortgages in arrears were largely “cured”, with borrowers able to resume payments as the economy recovered, 90 per cent of problem commercial property-backed loans were dealt with through “exits” such as sales, the study added.

We now have a decade’s worth of data on those deals and the debt that was effectively recouped by its new owners. The Currency has covered the main players, with Goldman Sachs, CarVal, and Bain Capital each amassing hundreds of millions or billions of euros’ worth of Irish non-performing loans and working through most of them within a few years.

Cerberus, however, has operated in a different league, emerging as the single largest purchaser of bad debt in Ireland over a longer period. Much like CarVal, the firm has also expanded its use of Irish-registered companies to grow its vulture fund business overseas.

The Currency has also covered Cerberus’s Irish presence extensively, from its use of tax structures straddling this country and the Netherlands to detailed tracking of its deal footprint. Yet the scale and persistence of the firm’s involvement in the Irish NPL market had resulted in a longer timeline for its returns to emerge – until now.

As detailed in part one of my series of articles looking back on Cerberus’s performance in Ireland last week, every single acquisition of Irish bad loans by Cerberus during the early post-crisis period of fire sales studied by the Bank of International Settlements has now returned a profit to the US vulture fund.

In a further article, I worked out the total cash returns to date from Cerberus subsidiaries pursuing Irish borrowers for repayments at nearly €1 billion. There will be more as the firm continued to buy up Irish NPL portfolios until the end of 2023. It is also worth noting that Cerberus itself borrowed to leverage those deals and paid interest to global banks, led by Deutsche Bank and Bawag, generating comparable gains for them.

These sums are the price that the Irish financial system, comprising private and State-owned institutions, agreed to pay Cerberus to get rid of a pool of bad debt written down to a value of €10 billion. As discussed on our podcast last week, whether this was a good price is a matter of opinion.

The gains were in exchange for the US vulture fund taking the risk away from Irish banks and Nama. As the recovery took hold, it was debatable how much risk remained that borrowers would default on their loans, especially after so much of the attached value was written off in the 50 to 90 per cent discounts applied to the price Cerberus paid for the portfolios.

But this was also the price of compliance, and it allowed those banks that survived the crash to restore their credibility with regulators and money markets.

Another way of looking at these figures is to argue that, had Irish banks and Nama held on to those loans, they could have recovered the multi-billion-euro sum transferred to Cerberus and its banks.

What is clear is that Cerberus has enjoyed its time in Ireland. While early deals were fully managed out of its main European base in the Netherlands, the firm now has a permanent Dublin office. From here, it has expanded its NPL and distressed property acquisition business across Europe.

Unlike deals with Irish financial institutions, this overseas business has kept growing. In the second half of 2024, I identified four new Irish subsidiaries established by Cerberus with no activity yet reported, but in all likelihood targeting deals in continental Europe like their predecessors earlier in the year. Two of them were formed on December 16.

Like it or not, just like CarVal and Bain Capital before, Cerberus has chosen Ireland as a new base for European vulture fund activity. Whenever the next crisis forces Irish banks to shed more non-performing loans, those buyers will be a lot closer to hand.

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Elsewhere this week, Karl Brophy and his wife Deirdre Grant sold the strategic communications firm Red Flag a decade after founding it and growing it into the US, in a deal worth around €45 million. Tom got the full story from Brophy.

Another mover and shaker was former Taoiseach Leo Varadkar, who has just established a new public relations and communications company. He told Alice that the business would manage his speaking, writing and consultancy engagements outside a recently announced collaboration with the Harvard Kennedy School’s Center for Public Leadership in the US.

Michael interviewed one of the initiators of the EU Inc project, which has just handed in a Europe-wide petition promoting a single start-up regime allowing entrepreneurs to raise funds and grow businesses across the bloc. The idea is getting traction and the new commissioner in charge of making the necessary legal changes is Ireland’s Michael McGrath.

Stuart received feedback from many readers after he shared the tips he had collected from entrepreneurs facing mental health and personal challenges. “Most founders end up discovering that they are who they are, the game is addictive and while you can take some time out, you will inevitably end up back where you started, sooner or later,” he wrote. Yet there are ways to manage the resulting pressure on business owners and their families.