Friday 18 August 2017

Noonan to force sale of €8bn in Anglo US assets

Disposal of property portfolio to start 'by Christmas'

DANIEL McCONNELL Chief Reporter

Minister for Finance Michael Noonan has said that Anglo Irish Bank will start to dispose of its €8bn-plus US-based portfolio this year on his insistence.

Speaking to the Sunday Independent this weekend, Mr Noonan said that the top officials in the "wind-down bank" had said that the process could take years -- but he has ordered that the process should start "before Christmas".

The bank, along with Irish Nationwide, was not part of the State's bank stress test process at the end of March, but is likely to need some additional capitalisation from the taxpayer, which to date has already committed in excess of €32bn to it.

Some senior sources close to the Government have said the recap figure for Anglo and Nationwide could top €5bn, but Mr Noonan said he was not aware of any firm figures on that matter yet.

"Anglo and Nationwide were not part of the stress tests as you know, and that process of establishing the pillar banks must take priority. That recapitalisation of €24bn will happen before the end of July," he said.

Anglo earlier this year engaged consultants to carry out a loan-by-loan analysis of all its US assets in a bid to identify how much the $12bn (€8.6bn) portfolio would fetch today and which parts should be sold.

No other part of Anglo Irish Bank's business grew as fast during the boom years as its loans in North America. Photographs of properties in Boston, New York and Chicago, the purchase of which was financed by Anglo, adorn the pages of its annual reports -- from the exclusive Apthorp apartment building on the Upper West Side in New York to a landmark office building on Milk Street in Boston's financial district and the Palmer House Hilton Hotel in Chicago.

According to observers in the US, there is a strong acceptance that Anglo will try to shift the entire $12bn portfolio, as it reduces its operations in preparation for its eventual closure.

It is understood, however, that Anglo management believe it could lose as much as $4bn in value if it embarks on a fire sale of the entire portfolio.

"A decision has not been made to sell the US portfolio," one source said, adding that the review was being carried out so Anglo could make a "considered decision" on the best approach to take.

Anglo is also understood to be carrying out a similar audit of its UK assets, as the wind up its operations continues.

A detailed review of its remaining Irish assets is unlikely to be carried out for several months, given the level of "instability" in the Irish commercial property market.

US consultants Eastdil Secured and HFF have undertaken the review of Anglo's US loan book and completed their work some time ago.

The experts have been asked to value each of the 640 properties in Anglo's US loan book, including prime shopping centres, apartment blocks and hotels.

Eastdil and HFF were also asked to come up with "recommendations" on how Anglo can best proceed with individual assets.

"It's difficult to assess commercial property in a general way, so you really have to look at the particular circumstance for every asset," one source said.

"There could be a fully-performing asset in a city centre, and it might make sense to sell that now. There could be some other loans that should be restructured first."

A plan has been submitted to the European Commission and is awaiting approval, but Anglo Irish Bank is still working on the details of how best it can exit markets like the US and UK.

The bank hopes to have a decision on its US approach at some point in April; the UK audit has not yet begun so a decision will be later.

The US business was set up in 1999 by David Drumm who, five years later, was successor to Sean FitzPatrick as chief executive of the bank. Mr Drumm's ascent to the top job at Anglo guaranteed that the bank's US business grew further under his stewardship.

Sunday Independent

Editor's Choice

Also in Irish News