Tough questions for AIB over loans to developers
Monday August 03 2009
ALLIED Irish Banks faces tough questions as it unveils interim results this week on its exposure to a handful of major developers after it emerged that troubled developer Liam Carroll owes the bank over €1bn.
The country's biggest lender, which has €23bn of property development loans on its books, faces losing hundreds of millions of euro as the future of Mr Carroll's property empire hangs on a special sitting of the Supreme Court tomorrow.
The High Court refused to appoint an examiner to six companies within Mr Carroll's Zoe Group on Friday, describing a rescue plan for the group as "lacking in reality". If the Supreme Court does not overturn this decision tomorrow, up to half a dozen of the tycoon's lenders will be forced to appoint receivers to the companies.
Dutch-owned ACC Bank has led the charge on Zoe, even as other lenders were reluctant to move on the embattled tycoon.
AIB is the single largest creditor to the six companies, being owned €480m. ACC is owed €136m. AIB is reported to have over €1.1bn out on loan to Mr Carroll's wider web of companies. The bank declined to comment yesterday.
There had been speculation in legal circles in recent weeks that Mr Carroll's other lenders, including AIB, Bank of Scotland (Ireland) and Bank of Ireland, might try and take over ACC's debt to prevent his companies going into liquidation.
Tactic
ACC, a unit of Utrecht-based Rabobank, is understood to have indicated it would like for this to happen. However, banking sources insisted last night that there had been no talks to take ACC out of the picture.
The other banks fear that such a move would lead to other foreign-owned banks employing ACC's tactic.
AIB's outgoing chief executive Eugene Sheehy said earlier this year that "four to five" of the bank's developer clients each owe more than €500m, while 30-40 customers accounted for more than half its development loan book. The concentration of AIB's book is way less than that of nationalised Anglo Irish Bank, where the top 15 clients had each borrowed in excess of €500m.
But AIB's massive exposure to Mr Carroll leaves it facing enormous losses on its loans if a liquidator is appointed and his assets are sold at firesale prices.
Government sources say AIB still faces huge writedowns on its exposure to Mr Carroll even if his group is protected by the court and the loans come under the control of the National Asset Management Agency (NAMA).
Meanwhile, analysts at stockbrokers Davy expect AIB to reveal on Wednesday how it swung into a pre-tax loss of €1.58bn for the first six months of the year, compared to a €574m profit for the same period in 2008.
See Business: Page 30
- Joe Brennan
