Back in the fall when I looked at the impact the current global financial crisis was having on Presbyterian entities I mentioned that the worst hit appeared to be the Presbyterian Mutual Society, an independent financial organization associated with the Presbyterian Church in Ireland.  Well, this week the news about the Society and its future came out as a pretty bad, but not quite worst-case, scenario, if the members agree with the proposed dissolution.

For background, the Presbyterian Mutual Society was founded as a way for individuals to invest their money in a way which would benefit churches.  However, the Society, in addition to the church loans, also got into commercial real estate and with the sharp drop in property values found itself with holdings worth significantly less than the value of the deposits.  As the individuals looked at the situation they decided to take out their money, there was a run on the bank, and the Society essentially collapsed.  An Administrator was appointed to see what could be done.

Yesterday the Administrator of the Society announced that no source of external help could be found to rescue the organization.  As an alternative, the Administrator is proposing an orderly liquidation of the assets.  The statement says:

The Administrator appointed to the Presbyterian Mutual Society has
written to its members with a series of proposals which, if accepted,
would see an orderly run down of its business over time through a
formal arrangement allowed for under insolvency legislation.

This would have the effect of repaying part of the members’ investments
over a period to be agreed. If the proposals are not accepted, the
Society will have to be placed in liquidation with the likelihood of
members receiving less money back than if they proceeded with the
formal arrangement.

and

He said it was unlikely that the Society in its current form could
continue as a going concern. Although its assets “had not disappeared”,
the reality was that the collapse in the UK property market had
significantly reduced the value of the Society’s commercial property
portfolio and the value of the Society’s security over property in its
loan book.

Given current market conditions, the Society’s assets could not be sold
quickly at a fair value and he therefore proposed the business should
be wound down in a managed and orderly way through a formal arrangement
with its members.

It is now up to the members to accept this proposal.

It is no surprise that there has been significant media coverage and political discussion.  This includes calls from the Norther Ireland government for the UK government to cover the deposits, a suggestion for the society members to wait it out and let the property market recover, and questions about the church’s responsibility for the Society and its investments.

UPDATE:  Later today after posting this another news story came out that the Presbyterian Church in Ireland has formed an action group to address the issue.  The group is made up of two past Moderators of the General Assembly and two senior church treasurers.

The members of the Society have until January 30 to return their votes accepting the plan.  We will see what the decision is and if the government steps in to help before than.