Cerberus Capital Management: Purchase of Distressed Assets

Albert Owen Excerpts

Wednesday 22nd February 2017 Westminster Hall

[George Kerevan (East Lothian) (SNP)]

It is a pleasure to speak under your chairmanship again, Mr Owen. This is a very complex issue. I shall try to cover it as briefly—

[Albert Owen (in the Chair)]

Order. The hon. Gentleman needs to move the motion.

[George Kerevan]

Indeed. I shall move the motion that we are to consider—actually, I do not have the official piece of paper with me; forgive me, Mr Owen.

As I said, this is a very complex issue. I want to be as fair as possible to everyone, including Cerberus itself. I will take interventions, but I ask hon. Members to delay introducing any individual cases until I have developed, as rapidly as possible, the—

[Albert Owen (in the Chair)]

Order. Will the hon. Gentleman take his seat? I want to start doing this properly; we have already had two debates in which the Member did not move the motion. If the hon. Gentleman just reads from the Order Paper, his motion will be in order.

[George Kerevan]

I beg to move,

That this House has considered the purchase of distressed assets by Cerberus Capital Management.

Cerberus Capital Management is an American private equity firm that specialises in distressed investing—purchasing so-called distressed or non-performing loans. Few people in the UK have heard of Cerberus, but it is the biggest purchaser of distressed assets in the world. Since 2010, Cerberus has acquired more than 1.2 million distressed or non-performing loans, worth more than $80 billion. Simply put, Cerberus is the world’s largest debt collector.

Let me begin by saying that so-called distressed loans are often anything but. Since the banking crisis of 2008, we have seen a sorry catalogue of thousands of instances in which banks have forced legitimate borrowers into distress or even insolvency through no fault of their own. The so-called distress that we are discussing is largely manufactured. That has come about for a variety of reasons: interest rate swap mis-selling, the infamous Royal Bank of Scotland global restructuring group’s dash for cash, and outright criminal fraud such as occurred at HBOS Reading.

Even where such egregious or criminal behaviour has not taken place, there are too many instances of banks deciding that they no longer wish to support small and medium-sized enterprise customers in sectors that the lender now considers non-core to its shrinking loan book. As a result, thousands of legitimate customers find themselves being sold on to firms such as Cerberus without their knowledge or against their wishes. Because loans to SMEs are unregulated, those customers have little or no redress. My intention today is to put on record the plight of those badly served bank customers and to expose the exploitative and often inadequate business model used by Cerberus—a model that is also bad for the British taxpayer.

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[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

rose—

[Albert Owen (in the Chair)]

Order. While Mr Mullin takes his seat on the Front Bench, let me say that the debate will finish at 5.44 pm, so Members have plenty of time, but they should leave at least 10 minutes for the Minister to respond to the debate and two minutes for Mr Kerevan to wind up.

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[Roger Mullin]

I agree entirely. Perhaps the Minister will give a more detailed response to that point than I can, because it dumbfounds me that such secrecy has surrounded so much of this.

Yesterday I spoke on the Criminal Finances Bill, so I feel particularly at ease speaking about this matter a day later. As we have heard from a number of Members, much of what has happened has involved what ordinary members of the public would call criminal activity. Indeed, some legal actions are under way; obviously I cannot speak about them in detail, but the fact that they are being pursued speaks for itself. I am not sure what the correct term is, but if there were ever an example of a company that operates to standards that are the very reverse—[Interruption.]

[Albert Owen (in the Chair)]

Order. The Minister and his Parliamentary Private Secretary may pass notes to each other but not speak. There should be only one speaker at a time.

[Roger Mullin]

If the messages that are being passed are going to answer some of my questions, I will not object too severely.

As I was saying, Cerberus is an example of a company that operates to standards that are the very reverse of a duty of care towards small businesses in our country. Surely we can expect the Government to be concerned about the effect on the good people who have suffered at its hands. In my constituency, a perfectly good trading company of many years’ standing was completely destroyed by the actions of Cerberus, in a similar way to another company mentioned earlier. It was willing to repay the loan, but the additional fees that it was stuck with and the way in which Cerberus operated drove it to bankruptcy. I will not name the company, because like other hon. Members I do not want to embarrass anyone who may be listening, but I am genuinely concerned about the health of the family who were treated in that way.

Let me comment on some points made by other hon. Members. My hon. Friend the Member for Ayr, Carrick and Cumnock (Corri Wilson) said in an intervention how difficult it has been to get a conversation between Cerberus and those affected by its actions. It seems that it is unwilling to speak except in the remarkable case that the hon. Member for East Antrim (Sammy Wilson) mentioned, when it sought to buy assets in Northern Ireland and was only too happy to make promises such as adopting a long-term strategy—that would be a novel thing for it to do.

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[Danny Kinahan (South Antrim) (UUP)]

Will the hon. Gentleman give way?

[Albert Owen (in the Chair)]

Order. The hon. Gentleman has finished speaking. I will call the Minister, who may want to give way to you.

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[Roger Mullin]

Minister, you have been talking for some considerable time. Am I being unfair in saying that the gist of your argument is that you do not consider that Cerberus has acted in any way unfairly—

[Albert Owen (in the Chair)]

Order. I know that the hon. Gentleman was referring to the Minister, not to me, but the Minister must respond now.

[Simon Kirby]

It is important that the Government attract good competition and secure a good price, but at the same time safeguard the rights of existing customers. It is not just our assessment that that happened but the conclusion of the independent National Audit Office. The Public Accounts Committee also concluded that the sale had been well executed. There is still work to be done in returning to the private sector assets that we acquired in the financial crisis. We will continue to do all we can to meet the same high standards and keep delivering the highest possible value to the British taxpayer.

[Albert Owen (in the Chair)]

Mr Kerevan has a minute to wind up the debate.