Friday 13 December 2019

Brussels will rule on Anglo Irish rescue plan by summer

Anglo will transfer about €33bn of loans to NAMA. Photo: Getty Images
Anglo will transfer about €33bn of loans to NAMA. Photo: Getty Images

Joe Brennan

The Government should know by the end of June whether its rescue plan for nationalised Anglo Irish Bank will wash with Brussels, the Irish Independent has learnt.

This comes as Anglo's new auditors, Deloitte, and management team prepare to take a charge against most of the group's expected €10bn-€11.5bn National Asset Management Agency (NAMA) writedowns, as it reports figures within the next three weeks.

The group is set to transfer about €33bn of loans to the 'bad bank' during 2010. NAMA got the official green light from the EU on Friday.

Anglo is said to be taking a "thorough and realistic, bottom-up" view of its €40bn non-NAMA loan book, suggesting it will also be subject to a multi-billion euro writedown in the upcoming results. The figures will cover 15 months to the end of December.

The timing of their release could not be worse for the two main banks, as they prepare to go cap-in-hand to investors during the coming months to raise billions of euro to shore up their own balance sheets. Bank of Ireland (BoI) and AIB expect Brussels to decide on their respective restructuring plans within the next month or so.

Potential investors in AIB and BoI will be keen to see how Anglo's non-NAMA portfolio is faring. All three will be left with a significant amount of property loans that fall below the €5m NAMA threshold.

Anglo filed a restructuring plan with the EU last November on foot of its €4bn bailout during the summer. Its new management team, headed by Australian Mike Aynsley, hopes to split the group into a 'bad' and 'good' bank in an effort to minimise the cost to taxpayers as the majority of the business is wound down over the course of a decade.

People familiar with the plan told the Irish Independent in January it was expected to cost the State between €8bn-€10bn -- including the €4bn already injected into the lender last summer. They said estimates for a wind-down of the group over five to 10 years would run between €20bn and €30bn.

A central part of the rescue plan is to put Anglo's riskier bondholders into the 'bad bank' and make them absorb a large amount of the losses coming down the tracks.

The Department of Finance, Anglo and a coterie of advisers are working closely with the EU Commission on an updated version of a restructuring plan, which answers scores of requests from Brussels for extra information. It is set to be filed at the end of April.

Anglo faces a tough task demonstrating that it can repay taxpayers' money after five years, as required by EU state-aid rules.

It is understood that global consultancy firm Bain & Co, which has an office in Brussels, has also been drafted in to advise Anglo.

The Government has brought in EU competition expert Cristina Caffarra, of consultants Charles River Associates, to help it navigate the complex plan through the commission.

Sources say Brussels expects to return a verdict by the end of June, which is much sooner than most observers had been predicting. A similar good bank/bad bank restructuring plan filed in March 2008 by Northern Rock took more than 18 months to go through the commission's corridors.

Irish Independent

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