Saturday 20 January 2018

IL&P's core rating slashed by Moody's

Laura Noonan

Laura Noonan

IRISH Life & Permanent's core credit rating has been cut to the second-worst notch used by ratings agency Moody's -- putting the ailing bancassurer's grade just marginally above that of Irish Bank Resolution Corporation (formerly Anglo).

Moody's this week downgraded IL&P to E+, noting that the institution was "very likely to require ongoing support to remain viable" in light of its "large loss-making tracker mortgage portfolio" and the pending demerger of its life insurance business.

The downgrade was applied only to IL&P's 'bank financial strength rating', a measure that Moody's describes as its "opinions on the intrinsic safety and soundness of a bank enterprise ... (which) addresses the susceptibility of a particular institution to financial distress".

Separate ratings for the institution's senior debt and bank deposits were placed "under review for possible downgrade" and will be assessed again in light of IL&P's ultimate restructuring.

The report comes after the Government announced that a €1.3bn capital injection for IL&P was to be delayed until the end of June pending the outcome of a strategic review of the group's future structure.

Moody's said the Government was "likely to" acquire Irish Life from IL&P, leaving the group with Permanent TSB, which would face a "challenge" in achieving profitability "as a consequence of its large loss-making tracker mortgage portfolio".

Those two factors meant that the bank "currently is very likely to require ongoing support to remain viable", the ratings agency said.

The Government and the EC/ECB/IMF troika are currently considering restructuring plans for Permanent TSB that could see the bank merged into AIB or freed of its tracker mortgages so it can be viable as an independent entity.

The Irish Independent understands that no clear direction has yet emerged on what path will lead to the best outcome for competition in the banking market and minimising the cost to the taxpayer.

Moody's noted this potential restructuring, and said that the position of bondholders would be "key". If the restructuring is "credit positive", Moody's suggested IL&P's rating could move back up to D- and the bank's debt ratings would be affirmed.

AIB's core Moody's rating is D-, while Bank of Ireland enjoys one notch higher at D.

Irish Independent

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