Business Irish

Tuesday 24 October 2017

New Anglo bonds risk 'junk' status label

Emmet Oliver and Fionnan Sheahan

Bonds in the new Asset Recovery Bank, which will replace Anglo Irish Bank in time, could be reduced to 'junk' status if the Government does not give bondholders specific guarantees, Moody's has warned.

Meanwhile, the wind-down of this recovery bank is going to take between seven to eight years, political sources indicated last night.

Moody's said "significant uncertainties'' remained about the plan to split the bank into an Asset Recovery Bank and a savings bank, known as the Funding Bank. The agency said unless government guarantees were provided for senior bonds, a downgrade could result, to even sub-investment level, otherwise known as 'junk'.

Its analyst Ross Abercromby noted that the blanket guarantee of all senior debt expires at the end of the month, although many issues are covered under a separate arrangement known as the Eligible Liabilities Guarantee. Equally, if guarantees are given, an upgrade is possible.

The agency said there were two key uncertainties facing the new entity -- whether its assets will deteriorate further and, secondly, will it gain European Commission approval. It said Anglo had "poor standalone fundamentals" and would likely need further capital.

Announcing the break-up of Anglo this week, the Government was unable to say how much the plan would cost the taxpayer or how long it would take to implement an "orderly workout" of the bank's loans.

Pressed on a timeframe for the wind-down, Mr Lenihan said it would be "difficult to see it going beyond 15 years".

But government sources said last night it was estimated that it would take "seven to eight years" to work out the loans.

Under the plan the €36bn worth of business loans held by Anglo will go into the Asset Recovery Bank and the €46bn worth of deposits will go into a Funding Bank. Already, €36bn worth of loans has been transferred to the National Asset Management Agency.

Irish Independent

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