Tuesday 17 October 2017

Further aid to Anglo may exceed €10bn, warns S&P

Agency keeps lender's rating stable despite growing concern over state bailout

Anglo chairman Alan Dukes, chief financial officer Maarten Van Eden, and chief executive Mike Aynsley
Anglo chairman Alan Dukes, chief financial officer Maarten Van Eden, and chief executive Mike Aynsley
Laura Noonan

Laura Noonan

RATINGS agency Standard & Poor's has warned that Anglo Irish Bank's need for further state cash may exceed the €10bn mooted by the Department of Finance.

The commentary comes amid growing concern about the mounting costs of Anglo's state bailout. Finance Minister Brian Lenihan is poised to announce another multi-billion euro transfer to the bank shortly.

At the end of March, Mr Lenihan said the amount needed by the bank "could be in the order of a further €10bn".

Anglo has already been bailed out to the tune of €14bn.

Noting Mr Lenihan's March comments, Standard & Poor's (S&P) yesterday described the further €10bn as "an amount which we consider may be exceeded".

Discounts

The ratings agency said the expectation of higher demands from Anglo reflected the higher-than-expected discounts Anglo was taking on its transfers to the National Asset Management Agency (Nama).

Back in March, Anglo expected to take a haircut of about 50pc on its €36bn of debt transferring to Nama.

The first €9.2bn of debt has been transferred at a discount of 55pc, with discounts as high as 60pc mooted for the second €8bn pile of debt.

Despite commenting on Anglo's potential need for higher levels of state cash, S&P kept the bank's long-term rating stable at BBB, a level two notches above so-called 'junk' status.

The bank remains on "Credit Watch with negative implications".

"We plan to resolve the CreditWatch placement following the outcome of the European Commission review of Anglo's restructuring plan," S&P analyst Claire Curtin said.

She added that the status "reflects our view that a restructured good bank may not, in a reasonable timeframe, develop a financial and business profile sufficient to support a BBB rating".

Reports at the weekend suggested that Mr Lenihan was preparing to announce another one-off contribution for Anglo "shortly", having held intense discussions with the bank's management.

The announcement is expected to be made before the European Commission gives its Anglo decision in September.

Irish Independent

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