"I'm not looking to panic, but I think we need to ... soothe the market"
Transcript of conversation between John Bowe, Head of Capital Markets, Anglo Irish Bank and Declan Quilligan, chief executive of operations in the United Kingdom, Anglo Irish Bank in November 2007.
10 months before the bank guarantee, Bowe and Quilligan are discussing the Anglo Irish Bank‛s financial position and the market attitude towards the bank.
QUILLIGAN: "Yet we know the facts are f***ing grand, so don't think we need to pull any emergency things unless, unless the, eh, thing is just going to f***ing completely eh…I think there are things that we need to do, but not emergency things."
BOWE: "Em, well, I think, I think what we need to do is kind of gently push back because if we push back too hard at the moment it will look like we're frightened."
BOWE: "So we've got to be kind of giving a message is 'look lads I don't know what all this is about but we are fine', you know, that kind of a way?"
BOWE: "But it's…"
QUILLIGAN: "Are we top of the, are we top of the credit default spreads now, are we?"
BOWE: "Eh only Northern Rock is higher than us."
BOWE: "Our spreads on our tier one are now 550 which is 550 basis points which is where Northern Rock was when it was in the shits."
BOWE: "And that's actually saying, if you want to put a number on that, that's saying that there's a 20 per cent chance of default on the bonds. So, the markets are very negative on our paper at the moment. Now they…"
Later in the conversation…..
BOWE: "Sorry, just a…we're going to do a big piece of CP (Corporate Placement) and it breaches a rating agency limit but we're just going to do it anyway, you know, we'll talk to DBRS later."
QUILLIGAN: "How much is that?"
BOWE: "It's 500 million of three months CP."
QUILLIGAN: "From who?"
BOWE: "Oh we don't know who the investor is; it's in the US market."
QUILLIGAN: "And what breaches….is it the extent of it?"
BOWE: "Normally we wouldn't allow, we wouldn't allow as much as that to settle in one day."
QUILLIGAN: "But it gets you out three months."
BOWE: "But look, as far as I am concerned that's a deal we should do and worry about that later. We will talk to the (DBRS) and say look we took this and we're happy to, we're happy to, you know maybe in the days coming up to that, we position dollars."
QUILLIGAN: "Ok we'll explain to them later…
BOWE: "Yeah, exactly."
QUILLIGAN: "And what price is that coming at?"
BOWE: "That came about two basis points higher than we would normally pay."
QUILLIGAN: "Right…well that's not too bad."
BOWE: "Yeah, yeah, so….and you can legitimise that by saying 'look it's a large number so we took it'."
QUILLIGAN: "You legitimise it by saying: 'Lads there was f***in' misinformation in the f***in' market and we took it kind off when it was available and now that there's information in the market, the market is calm again.'"
Later in the conversation...
BOWE: "We might get to a stage early next week Declan, where we say 'now, we actually need to put out something' because this is running away from us."
QUILLIGAN: "It does yeah…em…it sounds, it sounds like you're stamping out fires kind of that you know, eventually people will f***ing see so many little fires being lit that they will just say f***in' we'll just keep going, you know….we're winning here, the equity markets will f***in have a field day and then it just all joins up….hmm…."
Followed by a long pause between the callers
BOWE: "So, look I was just em…the other thing I think we need to, we need to talk to the Regulator to say that, you know, our liquidity is fine, our funding is fine, but there is aggressive behaviour from London – based hedge funds which is impacting on our share price and the prices of our debt and could impact on our ability to fund."
QUILLIGAN: "Yeah… and what does that do then?"
BOWE: "It tells them that, well it's saying to them 'look we're doing everything we can, we're sound but there's shit out there which we do not like and you should be aware of."