Anglo Irish investors warned of many risks to bank's future
Published 13/09/2010 | 05:00
POTENTIAL investors in the new Anglo Irish Bank bond have been warned of a litany of risks to the bank's future, including the prospect of having to pay penalties for any errors made when loans are transferred to the state's bad bank.
The risks are detailed in a lengthy prospectus for a covered bond issue launched last week, which could attract as much as €10bn in funding.
Extensive risk factors are typically outlined in all such prospectuses and Anglo's covered bonds have typically gotten AAA ratings from key agencies.
Among the risks to Anglo itself, the bailed-out bank lists that it "may be required to indemnify" NAMA in relation to any liability arising from "any error, omission or mis-statement" concerning any loans transferred over.
The provision to compensate NAMA for any errors is understood to apply to all banks, but has not yet ben invoked by the state-run agency.
Anglo's document also points out the institution "will not have any control" over the valuations ascribed to the €19bn of its loans that have yet to pass to NAMA.
Other NAMA-linked vulnerabilities include the prospect of Anglo being hit with a writedown on some of its riskier NAMA debt securities should the debt agency be wound up at a loss, as well as the prospect of a profit "surcharge" if NAMA loses money.
Anglo also warns it may be hit by "significant" costs for defending ongoing and future legal actions.
On a more general front, Anglo warns that a "prolonged deterioration" in economic conditions in its core markets could result in higher levels of borrower defaults.