Anglo chiefs spurn potential buyers of foreign loan books
Portfolios 'won't be sold' before the establishment of Nama
NO SALE: Anglo Irish executive chairman Donal O'Connor
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APPROACHES to Anglo Irish Bank by potential purchasers of both their UK and US loan books have been turned away by the bank and the Department of Finance in recent months.
According to sources inside the bank, serious approaches have been made for both of Anglo's main overseas loan books, but the Department of Finance and the National Treasury Management Agency (NTMA) are unwilling to dispose of any portfolios prior to the establishment of the National Asset Management Agency (Nama).
In the Nama bill, published by the Government on Thursday, no firm system of valuing assets was spelled out. Neither the Department of Finance nor the NTMA is eager to make a fire sale of assets before any valuation process is agreed.
Anglo, led by executive chairman Donal O'Connor, has a large loan book in both the UK and the US. Both overseas books contain impaired assets which might prove attractive to hedge funds or investors betting on recoveries in US or UK property.
Most recent figures show that Anglo's US book stands at €10.3bn with 300 clients, making up more than 14 per cent of the bank's total book. Its British portfolio is even larger at €18.7bn, making up 26 per cent of the troubled bank's loan book.
Analysts last night expres- sed surprise at the reluctance of Anglo or its masters in the Department of Finance to sell its foreign loan books. Anglo is known to favour becoming a much smaller bank and is believed to be in the process of a gradual wind-down.
The price of the assets in any deal remains the biggest stumbling point for Anglo Irish, just as the size of any discount Nama secures when buying the bankers loan books is its principal problem. In October, valuations are expected to begin on the properties on which these toxic loans are secured. The NTMA, which is charged with setting up Nama, issued a tender for the job this weekend.
Nama is seeking chartered surveyors, rather than estate agents, to value the properties. Valuers will be appointed in different regions, including Leinster and Dublin, Munster, Great Britain and the United States. It will be at least next June before Nama will finish taking over these properties, according to the terms of the tender.
Davy Stockbrokers expects Nama to get a 20 per cent discount on the €30bn worth of AIB loans being transferred across, and a 16 per cent discount on the €17bn worth of Bank of Ireland loans.
Goodbody said it had pencilled in a haircut of 17 per cent for AIB and 13.5 per cent for Bank of Ireland. One senior valuation source said he was "surprised" by these forecasts as he believed the discounts would be higher.
Price drops in the residential market have been more severe than the 20 per cent figure mentioned. Keith Lowe, the managing director of Douglas Newman Good, said property prices had fallen by an average of between 40 to 50 per cent since their peak in early 2006.
"For example, the Beechpark development in Leixlip, Co Kildare, was launched in June 2006 and it featured a mixture of houses and apartments for sale. One-bedroom apartments, which were priced at €250,000, are currently on the market at €135,000 and two-bed apartments, which were priced at €325,000, are now for sale at €175,000 -- a 46 per cent price drop," said Mr Lowe.
Finance Minister Brian Lenihan said last week that he would signal how much Nama would pay for the €90bn toxic loans next month. Nama will value the loans at their "long-term economic value", based on factors including demographics, demand, supply and economic growth, according to draft legislation published last Thursday.
The legislation will be debated in the Dail this September and it could be weeks or months after that before it is passed.
- SHANE ROSS and LOUISE McBRIDE
