On February 28, 2019, shortly after its sixth birthday, Vanguard Property Finance DAC was placed into voluntary liquidation with €122,667 in equal assets and liabilities on its balance sheet, having previously juggled dozens of multi-million loans.

As its name suggests, Vanguard Property Finance had been a pioneer, introducing US vulture fund CarVal Investors to Ireland in 2013, as the banks and Nama were lining up billions of euros in fire sales of non-performing loans. 

In its winding up, too, Vanguard Property Finance prefigured the destiny of many other CarVal special purpose vehicles (SPVs) in this country. Those established between 2013 and 2015 to convey the Minnesota-based firm’s hearty appetite for the first wave of post-financial crisis Irish loan book disposals are now coming to the end of their life. Following on from Vanguard Property Finance’s demise, multiple CarVal SPVs used to pay €1.6 billion for distressed debt here are slated to disappear this year.

Now is a good time to look back at their short existence – what they bought, how they funded it, how much profit they made, and for whom. An investigation of CarVal’s paper presence in Ireland also reveals that the so-called Section 110 tax shelter for securitisation vehicles is alive and well, with more SPVs now reaching well beyond these shores. 

Drawing from more than 150 corporate filings across Ireland, Luxembourg and the US, this is their story.


According to its own corporate literature, “CarVal Investors is an established global alternative investment manager focused on distressed and credit-intensive assets and market inefficiencies”. The firm is headquartered in Minneapolis and has offices in London, Luxembourg, New York and Singapore, but not in Dublin. Yet it controls 21 companies in Ireland engaged in purchasing and collecting debt – so-called Section 110 SPVs, after the part of the Taxes Consolidation Act governing them.

Of these, Vanguard Property Finance has gone into liquidation and two more were due to follow suit last year but have yet to report the appointment of a liquidator. Four reported their intention to “begin termination proceedings in 2020”. All have now disposed of their loan books. One more continues to collect debt but has nearly exhausted the value of its portfolio.

Through these eight SPVs, CarVal paid a combined €1.6 billion for as many loan books offloaded by financial institutions exiting Ireland or forced to get rid of bad debts at huge discounts in efforts to restore their balance sheets after the 2008 financial crisis. Among those transactions where data was available for both the amount of receivables on the loans and the price paid for them, CarVal SPVs obtained discounts ranging from 55 per cent on PTSB’s Project Connacht to 83 per cent on its joint deal with Goldman Sachs for IBRC’s Project Stone.

With the debt in these portfolios now collected or sold on, a picture is emerging of how well CarVal did out of these investments. Overall, the amounts these eight SPVs collected from debtors and from buyers who purchased remaining loan books, added to the residual value of portfolios on their final balance sheets as they prepared to liquidate at the end of 2018, was €318 million higher than they had paid to purchase them. 

Assuming residual sales went as planned, a gross profit of over €300 million over an investment of €1.6 billion in the average four years CarVal SPVs owned these assets would be nothing to be sneezed at – yet not very impressive compared to most stock markets around the world during the same period.

The full picture, however, is more complex. For a start, CarVal never invested €1.6 billion of the funds under its management into these loan books. The acquisitions were heavily leveraged, with cheap overseas bank debt providing most of the funding. While €659 million came from CarVal funds, the firm borrowed another €716 from Credit Suisse to fund deals. 

In one case (the acquisition of the mammoth Project Poseidon from Bank of Scotland’s defunct Irish operation in 2015), a €246 million loan “was received from a private investor,” according to a filing by the SPV Feniton Property Finance. This was later refinanced by Credit Suisse, along with HSBC, which joined in the funding of CarVal debt purchases from 2016.

Bank finance raised by CarVal SPVs was under the form of senior notes, placing them first in line to be repaid if things went wrong. As a result, interest rates were low – typically the benchmark Euribor three-month rate plus 2.75 per cent from Credit Suisse. As Euribor was below zero through the period, most leverage finance came in at 2.75 per cent, despite the risky nature of the debt it ultimately financed. This has translated into €47 million in combined bank interest payments by the eight SPVs over the past seven years, mostly to Credit Suisse.

For the first two deals in 2013, Pepper Finance, the firm servicing debts for CarVal here, took minority interests worth a total of €5.2 million in portfolio acquisitions. The practice then stopped, indicating that confidence might have grown sufficiently between the two firms for them to keep working together without the debt collector having financial skin in the game.

This is the real return for CarVal from its €659 million investment – about one third, or above 7 per cent annually over the typical four-year period.

So, CarVal Investors funded their eight SPVs to the tune of €659 million. This makes the €318 million margin observed to the end of 2018 more impressive. But we also know there was bank interest to pay, and other costs such as servicing fees. To figure out how much CarVal made for its investors, the annual pre-tax profit of each SPV doesn’t tell us much. They alternatively reported profits and losses, and their combined retained earnings at the end of 2018 were actually negative. They did not pay dividends.

Under Section 110 rules, the real measure of profitability is the interest paid to investors in the SPVs by way of profit-participating notes (PPNs). As their name suggests, these notes do not repay investors along a pre-established coupon or rate. Instead, the noteholders receive interest mirroring the profit made by the SPVs. 

Each year, their corporate filings include a report of the interest paid to PPN holders. This is added to the debt owed to investors – though not necessarily disbursed to them immediately. Sometimes, the interest value can go negative for a year if collections don’t perform as well as expected. The eight mature SPVs have recorded a total of €214 million in favour of PPN holders, including final allocations based on estimates in their accounts to the end of 2018.

This is the real return for CarVal from its €659 million investment – about one third, or above 7 per cent annually over the typical four-year period.

A €5,000 tax bill under Section 110

The eight SPVs considered here have paid a grand total of €5,000 in Irish corporation tax over the four to five years they have been filing accounts, according to their cash flow statements. 

Under Section 110 of the Taxes Consolidation Act, the €214 million they have returned to their investors under the form of interest is a deductible expense rather than taxable profit. Following outcry at the use of Section 110 SPVs by vulture funds, including some in the registered control of nominal charities, the Government introduced changes to the scheme in the budget at the end of 2016.

However, the core attraction of this form of investment vehicle survived and The Currency understands corporate advisors are still recommending it to investors interested in debt securitisation. While extracting tax-free gains through interest on profit-participating notes became more restricted for SPVs invested in debt secured on Irish property, a number of exemptions exist where interest is paid to noteholders taxable elsewhere in the EU. 

All CarVal SPVs have claimed consistent eligibility to Section 110 and have each paid either no corporation tax or €250 every year before and after 2016. Their PPNs were issued to holding companies in Luxembourg. Those only publish abridged balance sheet accounts and it is unclear how much corporation tax they pay there.

After a pause in 2016, CarVal has been establishing new SPVs in Ireland since the end of 2017. Of these, two have filed annual accounts so far, both claiming Section 110 eligibility and declaring no tax payments in their cash flow statements.

When all is counted, CarVal’s final return figure may be slightly different. One SPV, Callington Property Finance, has revealed that the final estimates on its 2018 balance sheet were too optimistic. Its residual loans sold for €8 million less than their final book value. Five others, however, have confirmed exit deals without reporting any loss on their book value.

Launceston, Gulland, Pentire and Feniton Property Finance each reported: “On 29 March 2019, the company completed a transaction whereby it would sell all remaining loans and related securities.” Cheldon Property Finance did the same in April. They did not disclose the buyer. 

Separately, an SPV controlled by Goldman Sachs in Ireland, Kenmare Property Finance, reported: “On 29 March 2019, the company entered into a transaction whereby it acquired a portfolio of loans and related securities.” Another Goldman Sachs Irish vehicle, Ennis Property Finance, declared a transaction on the same date “whereby it would acquire a portfolio of loans and related securities,” indicating completion shortly afterwards.

Both CarVal and Goldman Sachs, which have collaborated on a number of distressed debt deals in recent years, declined to confirm whether their SPVs had made these deals with each other or for how much.


CarVal’s mature SPVs have met varying fortunes and their final accounts now allow a comparison between the loan books they acquired. While the vulture fund has earned virtually nothing from the portfolios it bought from Nama and Permanent TSB, it has doubled its money on one of its IBRC deals.

CarVal was off to a strong start in February 2013 when Vanguard secured one of the largest discounts on the group’s Irish loan books to date – 72.6 per cent off the value of receivables. The portfolio flogged by the Lloyds group comprised 30 loans made by Bank of Scotland to developers while it was present in Ireland and secured on properties in the Republic, Northern Ireland and Italy.

By the end of 2018, having received over €134 million from debtors, Vanguard reported that collections on the loan book were complete and went into liquidation two months later. It had booked a total of €35.8 million in interest for CarVal notheholders, a return of more than 80 per cent on their investment.

According to the SPV’s final accounts, there appeared to be less cash available for final payments to noteholders than planned, indicating a return of €30 million instead – still a healthy 69 per cent.

At the end of 2013, CarVal bought into debt Nama was disposing of. Project Club was a group of non-performing Irish commercial and personal loans secured on properties in Ireland and taken over by Nama as part of the state’s cleaning up of IBRC and AIB. Callington acquired them at a 70 per cent discount and funded them entirely with CarVal notes. 

After five years, Callington had struggled to collect €39 million from debtors, the smallest amount from any of its Irish loan books. By then, it was hoping to return just €5.7 million to investors. This, however, was based on a valuation of the loans remaining on its books at more than €51 million at the end of 2018. Two months later, they sold for €43 million only. The SPV now looks set to generate a loss of around €4 million for noteholders.

Along the way, it used cash from collections on the Nama portfolio to purchase a small book of Bank of Scotland loans from Lloyds for €1 million in 2014. It also raised a further €3.9 million in PPNs the following year to finance the acquisition of rental investment car park it placed into a subsidiary, Callington Propco. This turned out to be a disastrous deal. “During Q4 2017, rental income ceased and a receiver was then appointed over the debtor. No further rental income was received by the company,” Callington Propco reported. It subsequently sold the car park at a near €1 million loss.

The two Callington companies are due to go into liquidation this year.

In March 2014, CarVal first dabbed directly into the liquidation of IBRC. A few months earlier, Kieran Wallace of KPMG had begun disposing of the former Anglo-Irish Bank and Irish Nationwide’s debt portfolios.

CarVal’s first successful bid was for a book of unsecured consumer loans, which its SPV Stapleford Finance acquired for €59 million. Its face value was undisclosed. CarVal PPNs funded the entire purchase.

At the end of 2018, collections topped €100 million and Stapleford had already generated €36 million in interest for its noteholders. However, it did not intend to stop there. With loans worth €6.3 million still on its balance sheet, “the directors expect that the present level of activity will be sustained in the near future,” they reported in annual accounts. 

Their intention seems to be to expand the SPV’s life beyond the typical four to five years to make as much as possible from its performing loans.

Two months after Stapleford, another CarVal SPV, Launceston, shifted up one gear and won another bid for an IBRC loan book. It was the first time CarVal and Goldman Sachs joined forces to beat large vulture funds such as Cerberus to multi-billion-euro deals. 

IBRC liquidators were selling €3.2 billion worth of commercial property loans secured on Irish and UK assets as part of the Project Stone portfolio. Launceston paid €330 million for its share of the deal, while Goldman Sachs’s SPV Kenmare Property Finance secured the rest for €206 million – indicating an overall discount rate of 83.25 per cent on the loans’ face value. 

This was also CarVal’s first heavily leveraged transaction in Ireland, with nearly €200 million raised from Credit Suisse. The rest came from PPNs loaned by Launceston Property Finance Holdings, an intermediary holding company registered in Ireland apparently for the sole purpose of transferring this investment. CarVal used this two-tier Irish SPV structure on four occasions, all involving outside partners such as Goldman Sachs.

Following the sale of remaining loans valued at €22.6 million on March 29, 2019, Launceston reported that it had fully repaid its bank borrowings and generated nearly €34 million in interest for its noteholders.

CarVal had one last bite at the liquidation of IBRC in December 2014, again through a joint bid with Goldman Sachs. Together, they bought Project Quartz, a portfolio of commercial loans secured on Irish investment properties with €1 billion in receivables. CarVal’s SPV Gulland paid €142 million for its share of the deal. 

The fund cranked up bank leverage, establishing the level that it would replicate in subsequent transactions: Credit Suisse funded twice as much of the acquisition as CarVal’s own investors. Gulland even went back for more borrowings mid-way through, in 2017.

In less than four years, the SPV doubled its noteholders’ money, declaring a total €40.7 million interest. To this date, IBRC’s Project Quartz has returned the highest interest rate to CarVal noteholders in Ireland and the second largest volume of interest in euro terms. It is due to go into liquidation this year, mission accomplished.

Instead of going on their Christmas holidays, CarVal and Goldman Sachs dealmakers immediately moved on to another transaction. Together, they successfully bid for the former Bank of Scotland’s €2 billion face value Project Parasol, made up of Irish commercial real estate loans. 

CarVal’s SPV for this acquisition was Pentire Property Finance, which shelled out €348 million for its share of the portfolio. The deal closed on December 29. In two weeks, the Minneapolis firm had spent half a billion on Irish non-performing loans.

2016 saw CarVal’s first Irish fundraise from HSBC, which refinanced half of the bank debt remaining from the initial €243 million leverage for the Project Parasol acquisition.

From the start, the loans failed to perform as planned. Pentire’s first year in operation left noteholders in the red by over €10 million. It then took more than one year to return their interest account to positive territory.

By the end of 2018, the SPV still owed the banks €24 million, and yet had booked only €2.9 million in interest for its noteholders. It had already started to dispose of some residual loans, selling a sub-portfolio for €11 million on May 1, 2018 – the same day Goldman Sachs’s vehicle Ennis Property Finance also made a partial sale, both to undisclosed buyers.

When Pentire threw in the towel in March 2019 after four years, it was set to return less than €3 million on its noteholders’ €112.4 million investment. Its directors intended to liquidate it last year, but have yet to notify this.

On October 14, 2015, CarVal made its first and only deal with PTSB. The way it turned out might suggest why there were no other ones. 

The €481 million face value Project Connacht book of Irish commercial property loans initially cost the Cheldon SPV €215 million, one of the smallest discounts achieved by CarVal in this country. 

By the end of 2016, it had not been able to pay any interest to its noteholders. Instead, “an impairment charge of €23,839,213 was recognised in the financial year which was caused by a change in certain expected future cashflows,” its directors reported.

The following year, Cheldon booked negative interest for its investors as half of all collections were swallowed up by bank repayments. The SPV finally reported a €5.4 million interest for its PPN holders in 2018 as it began to sell off some of the loans on its books. Its final accounts showed a negative return for its investors.

Cheldon disposed of its last loan assets in April 2019 and the language in its filing suggests that there might not have been enough left for PPN holders to break even: “The funds raised from the sale were used to repay amounts owing to any remaining creditors, with any remaining funds being used to settle the profit participatory notes.” The SPV is now due to go into liquidation this year.

Last but not least, CarVal and Goldman Sachs returned to battle side by side to win Project Poseidon, a gigantic €3.7 billion Irish commercial property loan book originated by Bank of Scotland (Bank of Ireland bought the small proportion of performing loans in this portfolio through a separate deal).

CarVal’s slice had a face value of €1.1 billion. Its SPV Feniton acquired it for a third of that. Two thirds of the deal were financed by an unnamed “private investor” making a senior loan to Feniton. Credit Suisse and HSBC refinanced that debt in 2017.

In 2018, Feniton began to dispose of loans in preparation for winding up, bringing in €27.2 million through asset sales. At the end of that year, it had booked a total of €62.3 million in interest for its PPN holders – though most of this had yet to be paid out, dependent on the sale of residual loans valued at €68.3 million still on its books. 

The SPV later reported completing that sale on March 29, 2019 and is now due to liquidate this year.


CarVal was started by the US-based privately-held global agricultural commodities trader Cargill in 1987, to reap benefits from the credit crises that were then becoming a regular feature of international markets. It is a purpose-built vulture fund. Its name is short for “Cargill Value Investment”.

Last year, Cargill sold this business as a limited company to its senior team in a management buy-out. CarVal Investors is now a limited partnership – a secretive corporate form it cultivates at all levels of its structure. In Ireland, its central holding entity is the Constantine Limited Partnership, which, like all SPVs, is located at the offices of their corporate facilitator Intertrust on the bank of Dublin’s Grand Canal.

CarVal SPVs have their address at Intertrust’s Dublin office. Photo: Thomas Hubert

There is only one document available from the Companies Registration Office for Constantine – its original registration form. As records for limited partnerships are not computerised, the only way to obtain a copy is to request it by post. Individual SPVs run by CarVal in Ireland, however, are limited or designated activity companies and they regularly file detailed accounts.

CarVal is a hedge fund manager with $9 billion in assets under management across 25 funds, 12 of which have invested in Irish SPVs. It does not cater to retail investors – the entry price for these funds is between $5 and 10 million. “The underlying investors in CarVal’s funds and other investment vehicles are typically institutional investors (e.g. trusts, endowments, foundations, corporations, banks, insurance companies, public and private pension plans, private fund-of-funds, etc.) and high net worth investors,” the firm reported to the US Securities and Exchange Commission in March.

The 12 funds backing Irish SPVs had a gross asset value (after leverage) of over $10 billion. They had a mix of US and overseas investors, with CarVal itself taking a minority interest of between one and seven per cent in a small number of them. Only one, the Carval Global Credit Fund (GCF), was still open to investors. 

While it is not possible to calculate from public filings how much of CarVal’s overall assets under management are routed through Irish SPVs at a given point in time, it is clearly significant: the firm’s flow of payments for debt purchases through vehicles based here has totalled around €3 billion over the past seven years and growing, compared with a gross asset value under its management of $15.9 billion this year.

CarVal map
Click on the image to navigate the corporate map.

CarVal channels investments in each hedge fund to a master limited partnership in the US state of Delaware or in the Cayman Islands. Further holding structures trickle down through Cayman and Luxembourg to a “Lux Master” limited company acting as the front-line investor in Europe for each fund. These are the ones holding stakes in Irish SPVs – either directly or through the Constantine Limited Partnership – and providing them with finance through profit-participating notes.

CarVal maintains additional companies at various levels to perform technical functions. For example, each hedge fund owns a “Lux Finance” and a “Lux Securities Trading” company in Luxembourg in parallel to its “Lux Master”.

All these structures relate exclusively to property debt securitisation and do not cover CarVal’s other interests in Ireland, such as its 2014 purchase of Denis O’Brien’s aircraft leasing business Aergo.


Five years ago, Dianthus Finance, one of CarVal’s Irish SPVs, performed a niche transaction. It acquired €10 million worth of commercial debt secured on residential property in Australia, sold by the local Commonwealth Bank. According to Dianthus’s latest accounts to the end of June 2019, its directors intended to liquidate the company within 12 months. The value of its loan book has now been taken off its balance sheet through a series of international transactions combining mezzanine finance, share dealings, profit participating notes and commercial debt.

This was the first time CarVal used an Irish SPV to hold debt overseas. The experience must have proved convincing, as the vulture fund rushed to base more international distressed debt acquisitions in Ireland as soon as the uncertainty over Section 110 rules was lifted in Budget 2017. As previously reported in the cases of Goldman Sachs and Cerberus, CarVal turned its attention to the Mediterranean.

In 2016, Norwegian vulture fund Lindorff had used an Irish SPV to acquire a portion of Project Far, a Spanish portfolio of unsecured consumer and small business loans portfolio sold by Caixabank. The €10 million deal was funded by CarVal investors through PPNs issued to its Luxembourg subsidiaries. 

Lindorff later merged with Intrum, a Swedish vulture fund that would become a regular partner of CarVal in raids on distressed debt in southern Europe. By 2018, CarVal had taken control of Far Red No2, one of the Irish SPVs used in the Caixabank transaction. On March 25, 2019, it repaid all existing notes to CarVal vehicles and issued new ones to Intrum instead.

In December 2017, CarVal’s Irish SPV Naranja Finance and Intrum successfully bid together for Project Escullos, a portfolio of 1,456 secured and unsecured business loans in Spain sold by Grupo Cooperativo Cajamar with a face value of €176 million.

In June 2018, again alongside Intrum, another CarVal SPV in Ireland called Alpheus Hellas paid just €58 million for its share of Project Earth, a €2 billion book of unsecured consumer and enterprise loans flogged by National Bank of Greece. Intrum, too, based its interest in the Greek portfolio here through a company called Intrum Hellas. The two Irish SPVs have mutualised risk through a derivative contract.

The following month, CarVal was back in Spain, this time carving up Banco de Sabadell’s €2.3 billion Project Makalu with Deutsche Bank. The Irish SPVs holding CarVal’s interest, Sandi Assets and Pera Assets, have yet to file accounts. Another subsidiary established at the same time and also named after a Spanish word for a type of fruit, Manzana Funding, is likely to have been involved in the transaction.

“The consideration of the transaction amounts to more than 9 per cent of the principal portfolio amount.”

National Bank of Greece

Last August, the National Bank of Greece disposed of another massive loan book, Project Mirror, with €1.2 billion in receivables across credit cards, consumer and small and medium business loans. The Greek lender disclosed that it had sold it to CarVal, adding: “The consideration of the transaction amounts to more than 9 per cent of the principal portfolio amount.” In other words, the discount applied was over 90 per cent. A few days earlier, CarVal had registered a new Irish SPV, Aether Hellas.

CarVal’s increasing use of Irish SPVs to acquire debt around the Mediterranean does not mean that it has stopped using them here. After more than two years without a deal in Ireland, CarVal was back in action with its ally Goldman Sachs in April 2019. They picked up former ACC loans with a face value of €2.3 billion sold by Rabobank under the codename Project Omni. 

This was the secured portion of the old Agricultural Credit Corporation’s portfolio, while unsecured debt went to Cabot Financial. Otterham, the CarVal SPV created for the occasion, paid €800 million for its slice of the loan book.

In its latest reported deal to date, CarVal purchased 2,800 owner-occupier and 375 buy-to-let mortgages from Ulster Bank last October. The so-called Deenish portfolio had €800 million in receivables and the SPV used, Dennett Property Finance II, has yet to file accounts showing the discount applied.

China the next frontier

Since 2013, CarVal has taken part in deals covering €17.7 billion in debt receivables through 17 Irish SPVs. Of this, €12 billion were Irish loan books. The vulture fund from Minnesota went it alone on deals worth around €5 billion. The rest was shared through joint bids with partners, most often Goldman Sachs.

After Ireland and Europe, a new frontier is opening for CarVal’s Irish SPVs in China. According to Deloitte’s “Deleveraging Asia” report last September, Chinese government policy since 2018 has been to encourage banks to reduce their exposure to non-performing loans, which were estimated to approach $300 billion at the time. 

“Lone Star, Oaktree, Goldman Sachs, Blackstone, CarVal, and Bain Capital have all been involved in trades in the country during 2018 with overall interest and deal volume increasing,” Deloitte noted. “Some investors are establishing their own in‑house teams, whereas others have chosen to develop local partnerships, such as CarVal with Wensheng AMC.”

CarVal carries its interest in Wensheng through its Luxembourg subsidiary Bohai Investment Holdings. Between June and September 2018, Bohai established its first two wholly-owned subsidiaries in Ireland: Sanggan Property Finance and Jinsha Property Finance. These SPVs have yet to report details of their activities. 

Further reading

How Covid-19 scuppered the grand exit plans of vulture funds

Cerberus uncovered: How the hound of hell uses Dutch co-ops to guard Irish profits against tax

Mapping Goldman Sachs’ €8bn Irish debt maze: the structures, the litigation, the people and the profits

Nama, cuckoos and vultures: How decade-old decisions on the property market have shaped Sinn Féin’s political surge