State will end up owning lender
Chief executive: Gerry McGinn
Capital required: €2.6bn
Loans going to NAMA: €8.5bn
Discount on first NAMA loans: 58pc
IRISH Nationwide Building Society does not have any future as a standalone entity, Finance Minister Brian Lenihan said yesterday.
The building society will initially transfer €670m of loans to the National Asset Management Agency (NAMA), which represents a 58pc writedown in the value of this tranche of loans.
Mr Lenihan said the loss in value of the loans given out by the building society was so great that it would need €2.6bn put into it to shore it up.
The State will effectively end up owning Irish Nationwide by putting €100m into it in "special investment shares".
In effect, the special shares give Mr Lenihan almost unlimited powers to control the building society.
Another €2.6bn will be pumped into Irish Nationwide in a special bond. This bond will not have to be paid back for up to 15 years.
Mr Lenihan said this would reduce the impact on the Exchequer this year of having to put up so much money to save the building society.
In all, some €9bn in Irish Nationwide loans are to be transferred to NAMA. This will leave the society with a small residential mortgage book of around €2bn, the minister said.
"In such circumstances the institution does not have a future as an independent stand-alone entity," Mr Lenihan said.
He added that the Government's priority would be to secure a swift sale of Irish Nationwide or its integration with another entity.
In a statement last night, Irish Nationwide chief executive Gerry McGinn thanked the Government for making a financial commitment to the society.
He said a restructuring plan would be submitted to the European Union by the end of June.