NI Presbyterian mutual society, Short of funds for withdrawal?

MSE_Jenny

Hi folks

BBC Northern Ireland have been in touch with us – they are doing a bit of research into the Presbyterian Mutual Society.

They are keen to talk to people who have been affected. If you’d like to get involved, please email Aisling Strong at [EMAIL="aisling.strong@bbc.co.uk"]aisling.strong@bbc.co.uk[/EMAIL]

joylikes2shop

Many thanks to Jenny at Money Saving Expert.com for replying to my email and for posting the contact details for Aisling at the BBC.(I've still to hear anything from local government officials !!)I spoke with Aisling myself earlier this evening and would suggest that anyone affected by the current PMS situation drops Aisling an email (ASAP) because the BBC are considering doing a programme on the topic next week and are not only interested to hear from those affected, but are looking for individuals to be interviewed and to appear on T.V.

I was interested to read the responces to the letters which appeared in the Belfast Telegraph recently, but was utterly amazed that some horrible comments had been left too.I do not attend any church-my elderly,widowed mother is the one with her life savings 'stuck' in the PMS,but the nasty coments from just a few (in my opinion) bitter, twisted and nasty individuals have made me realise that unless PMS investors keep this story in the spotlight,with true stories of hardship and worry, there are some unsympathetic people who will continue to gloat at the situation many unfortunate local people are now in- through no fault of their own.

www.belfasttelegraph.co.uk/news/local-national/financial-crisis-hits-presbyterian-savings-14057728.html?startindex=0

www.belfasttelegraph.co.uk/opinion/letters/mutual-appreciation-14067325.html

Mark789

Like others, my elderly parents have a significant proportion of their retirement savings invested in the Presbyterian Mutual.
I have been doing daily searches to try to keep up with the situation and, although my (amateur) analysis of the figures doesn't cause me too much concern, I should really appreciate more regular updates from the society and, once initial analysis has been completed, by the administrator.
I firmly believe that administration was the right path to follow as it really should "maximise" the final return to investors - my reading of the various sources of information prior to administration suggests that a selfish individual investor could have forced a fire sale of assets that could have resulted in significant losses to all investors.
My one concern over administration is the potential costs. Administrators are not cheap! Please keep it simple and for goodness sake NOBODY consider legal action - that would be the fastest way possible to enrich lawyers and impoverish investors.

I also have done a few back of an envelope calculations and think that the society is probably generating around £35m cash per annum and that the administrator should be able to start returning some money to investors within a year.
The £35m is based on the following:
I seem to remember reading that the property portfolio generates rental income of around £8m.
If we assume an average interest rate of 5%, the loan book of £180m should generate around £9m.
Another society report noted that loans are for periods of between 2 and 15 years. I have assumed that they are on a repayment basis and that the loan book has been growing, i.e. the bulk of longer term loans are at an early stage with a higher interest/lower repayment profile, so a guess that 10% of the loan book will be repayed per year - £18m.

I'm not sure how regulations will impact repayment (do investor loans have to be repaid before anything can be paid on shares?), but in my view the fair way to deal with this would be to use the cash to repay the same percentage to all investors. This would avoid favouring the larger investors and provide an income to those who are relying on their investments in the society to enhance their income in retirement.

ballyblack

Excellent post Mark789

36square

Investors who demanded withdrawals even though they didn't require the cash urgently should be ashamed of themselves. Since this is a mutual society and one based presumably on a common religous belief, their actions are deeply selfish and un-Christian.
There should be no deficit for PMS members if it can avoid liquidating its property assets. Since it was able to pay a decent dividend, these assets must have been generating a reasonable yield. There would be no justification for disposing of them in current market conditions unless they were failing to produce income because they can't attract a tenants.
The Presbyterian church should point out to PMS members their moral responsibility in these circumstances.

eldivo

Mark789 wrote: »

My one concern over administration is the potential costs. Administrators are not cheap! Please keep it simple and for goodness sake NOBODY consider legal action - that would be the fastest way possible to enrich lawyers and impoverish investors.

Have to Agree 100% - Howerver I noticed in Arelene Forsters statement that several writs had been issued though, and I'm sure there will be plenty of laywers crawling over this.

Mark789 wrote: »

I also have done a few back of an envelope calculations and think that the society is probably generating around £35m cash per annum and that the administrator should be able to start returning some money to investors within a year.
The £35m is based on the following:
I seem to remember reading that the property portfolio generates rental income of around £8m.
If we assume an average interest rate of 5%, the loan book of £180m should generate around £9m.
.

I'm not sure about this. If the Society is insolvent, doesnt the administrator have a duty to wind it up? I suppose that its only technicaly insolvent if it cant cover the loans, not the Shareholders.

Also your £35M a year doesnt take account of the fact that in the second year there will be less interest coming in because there will be £18M less loans. Also I'm failry sure a good percentage of these are going to default. I also cant see commercial property rents remaining at their current level.

Did anyone keep a copy of the accounts that were sent out to share holders, without seeing them again there is no way of telling what the situation is.

I'm sorry to be a pessimist here, but if we were going to see all of our money back the Society should have been able to take out a loan from a bank against the Assets

Mark789

eldivo

wrt lawyers and writs (strong caveat - I'm not a lawyer, just an individual with a "common sense" opinion): if this is true I really hope the folks who issued the writs have thought this through. I struggle to see how any individual would have a greater claim against the society than any other investor: therefore, if an individual issues a writ they will pay their own legal fees and the administrators' (i.e. the sociaty members/investors) will have to pay more lawyers to defend the writ. This will reduce the funds available to all investors, including those who have issued writs, so those who issue writs will be double losers in having to pay their own legal fees and having their share of the pot reduced by the society's legal fees.

I must admit I find the increasing Americanisation (sorry for the Bushism) of our society, where there must always be somebody to blame, very frustrating. The bottom line here is that the society was (is) solvent, just not liquid, until people panicked and started withdrawing money. If people want to take action against anybody they should get a list of those who took their money out of the society and go for them. The alternative would be the governments of the UK and Ireland, who instigated the run by guaranteeing alternative savings options - as somebody who has suffered from the Equitable Life debacle I can only suggest that this would be throwing good money after bad.

On your comments wrt my estimates of the society's cash generation:

Firstly, they were very much guestimates but, for the purpose of argument, I'll assume they are accurate.

On the loans/mortgages front, you are right but for the wrong reasons. If they are repayment mortgages then the mortgagor's repayments typically will be level (subject to interest rate fluctuations) for the period of the mortgage. In the early years the interest component will be higher than the rapayment component; in the later years the repayment will be higher than the interest. The important thing is that the society's cash generation from active mortgages will be level. What will impact/reduce the cash generation will be maturing mortgages.

Defaults are much more interesting. My understanding is that loans were issued only to Presbyterian Churches and Congregations, not individuals, and that all loans were secured, i.e. mortgages on property. So, if a mortgagor defaults it is likely that the administrators will be forced to reposess the property against which the loan was secured (the society may have had some flexiblility, but I doubt the administrators will have). This means that the administrators of the Presbyterian Mutual Society will be reposessing Presbyterian Churches - won't that be fun! The General Assembly has made it very clear that the society is a separate legal entity and therefore quite entitled to take the Church to court over arrears or reposess its property. Looks as if a combination of the Credit Crunch and some selfish Presbyterians may be able to achieve what various paramilitary groups failed to achieve in decades of terrorist activity - the demise of the Presbyterian Church in Ireland. I don't see this happening.

The commercial property is a challenge, but I'm reasonably positive. The only specific property that I am aware of is a building in Manchester that is let to Royal Bank of Scotland. If they default on their rent we're all in much bigger trouble than we think. The Government already is funding them, so I don't see this happening. When leases expire I have no doubt that tenants will either press for reduced rents or move out, but I believe most commercial leases are over several years and rent review clauses typically are upwards only, much to the chagrin of tenants. All we can do is hope (I was tempted to say pray but feel it is inappropriate given how many more appropriate things there are to pray for) that all tenants are as secure as RBSG and that the financial situation will have improved when leases expire.

Patience is the keyword. Wait and you will (should) receive; get greedy/go legal and you'll only reduce what everybody receives. I realise there will be cases of real hardship but this is where the Presbyterian Church should step up to the mark and help without wasting money on lawyers. "Pastoral care" is all very well, but it won't pay the rent or put food on the table for those who rely on their investments in the society to pay the bills.

I think we're in broad agreement here with me having a slightly more positive outlook so I hope this response doesn't come across as argumentative.

eldivo

Mark789,
No Argument here! Nice to get some one elses perspective on things.
A couple of points for anyone following the tread though.

Mark789 wrote: »

Defaults are much more interesting. My understanding is that loans were issued only to Presbyterian Churches and Congregations, not individuals,

I know of at least one individual who borrowed, but yes he was a member of the Congregation and yes it was secured against land.

Mark789 wrote: »

the administrators of the Presbyterian Mutual Society will be reposessing Presbyterian Churches - won't that be fun!

When will we drawing straws to see who gets which one :-)

Mark789 wrote: »

The only specific property that I am aware of is a building in Manchester that is let to Royal Bank of Scotland.

I seem remember reading in the accounts they had bought something (a shopping center?) in Carlisle a couple of years back- Does anyone know anything about this.

In Defense of the Scociety I dont know what they could have done differently. For comparision an M&G Index Tracker over the last year has dropped in value by around 35% - I'm expecting more than 65p/£1.

eldivo

Sorry, Had to Add this, from the Facts for borrows of the PMS site

"
What is the rate of interest charged by the Society.
The rate of interest charged is based on a formula of 2% above the Bank of England Base Rate. As this rate may vary up or down the implementing of any such change, as it effects the Society's Mortgages, will be at the discretion of the Society. "

That word discretion cheers me up - those Churchs will be ours soon!

joylikes2shop

BBC N.I 'SPOTLIGHT' programme this Tuesday 25th November at 10.35pm is about the Presbyterian Mutual Society

http://www.bbc.co.uk/northernireland/tv/programmes/spotlight/