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Posts tagged ‘Subordinated debt’

State owns 99.8pc of AIB

AIB Bank Centre, Dublin 4, Ireland

Image via Wikipedia

By Laura Noonan and Donal O’Donovan

Saturday July 02 2011

THE State’s stake in AIB is set to rise to 99.8pc
by the end of the month, it emerged last night, as the financial markets
absorbed an unprecedented number of announcements about Ireland‘s radical
bank restructuring.

The revelations about AIB’s shareholding were revealed in a document
describing the Government’s plans to spend €5bn on new shares at 1c a piece and
pony up any extra money through a “capital contribution”.

The extra money will be the difference between AIB’s €14.8bn capital demand,
less a €1.6bn government loan and whatever money AIB is able to make from doing
deals with bondholders.

The capital contribution won’t dilute down existing shareholders, who would
have seen their collective stake fall to less than 0.01pc if the Government had
put in all the cash via new sales.

AIB also completed its merger with EBS yesterday, and revealed that the
building society’s chief executive Fergus Murphy will be joining the bank’s
newly revamped executive team while four senior AIB directors will join EBS’s
board.

AIB and EBS will remain as separate brands and businesses, but some EBS
departments will have reporting lines into AIB, a statement confirmed. Customers
will be unaffected by the merger.

Yesterday also saw AIB get the green-light to proceed with attempts to buy
back debt from bondholders after a legal challenge by an investor was
settled.

Aurelius Capital had blocked two of AIB’s 18 debt buybacks last month, but
yesterday agreed to abandon its protest after reaching an undisclosed settlement
with the Department of Finance.

A source at AIB said it now expects to move ahead with an offer to buy back
the bonds at a steep discount using a so-called subordinated liabilities order
(SLO) sanctioned by the High Court.

The SLO gives the government sweeping powers to change the terms of AIB’s
subordinated bonds, making buyback offers at any price difficult to resist.

Yesterday’s also saw Anglo Irish
Bank
and Irish Nationwide officially merged into a new entity dubbed IBRC,
or Irish Bank Resolution Corporation, so the duo’s assets can be wound down over
the next decade.

Meanwhile, Irish Life & Permanent yesterday announced that most of its
junior bondholders have taken up an offer to sell back their debt at a discount.
The buyback of one €54m bond was not approved and remains outstanding.

– Laura Noonan and Donal O’Donovan

Irish Independent

source : http://www.independent.ie/business/irish/state-owns-998pc-of-aib-as-banks-revamped-2811522.html

Comment:

All we have here is an attempt to sell the notion that we have completely new banks and all the rot has been taken care of but this is so far from the truth. What about the banks hopeless loss making derivative positions that are still been hidden. These losses run into the billions and are perhaps been kept in “off shore branch’s” in the IFSC the mother of all hot money clearing houses in the world .If you’re a despot dictator of thieving politician this is where you are most likely to be hiding your ill-gotten gains and if you’re are a drug king pin your sure to be hiding your loot here .The Mexican drug lords are sure to be hiding their drug money here as well! The upstanding Irish citizens working in the financial services in the IFSC in the “Funds management business” are
helping drug lords and despot politician from around the world hide their stolen funds and drug money.

Back to AIB .This is still a toxic pig in new clothing
nothing has changed the same gangsters are in charge and are still doing business.
Almost 3 years on not one of them is in front of a judge .But as an ordinary
citizen if you don’t pay your TV licence you will end up in an Irish Jail.

Bring these crooks to justice or else, we the people will
get justice for ourselves!

 

Why the €1bn NAMA provision for loan losses is bunkum

by namawinelake |

 May 4, 2011 at 4:17 pm  source URL: http://wp.me/pNlCf-1mA

The Minister for Finance, Michael Noonan gave the green-light this morning for the publication of the report and accounts for NAMA for the quarter ending 31st December, 2010. The outstanding feature of  the accounts is the €1bn provision that NAMA has created for losses on the loans it has acquired from the NAMA Participating Institutions (PIs – AIB, Anglo, Bank of Ireland, EBS and INBS). To summarise, NAMA has acquired loans worth €71bn at face value, paid €29bn for them but now believes the loans are worth €28bn. This entry examines the €1bn provision and argues that it vastly overestimates the current value of the loans that NAMA has acquired.
First up, it should be said that the €1bn provision is an estimate and is unaudited. But that said, NAMA claim that the full accounts for the agency were handed over to the agency’s auditor, the Comptroller and Auditor General, in February, 2011 so you would expect the €1bn provision to be not too far off what will be reported in NAMA’s audited annual accounts in June 2011. Secondly, the provision is prepared in accordance with International Financial Reporting Standards (IFRS) and it is IFRS 9 that will be particularly applicable to the valuation of the €29bn of loans in the annual accounts; and that IFRS will still allow NAMA to value loans in the same optimistic way that banks here have been valuing loans in recent years. Although the IFRS is going through some changes, organisations like NAMA can, until 2013, choose a method of valuing loans which can be divorced from the underlying value of the security.
But if you were to revalue the loans by reference to their underlying value, I believe the loss booked at the end of 2010 should be closer to €3bn. Here’s why:
(1) We don’t have a precise breakdown of the location of NAMA assets but the latest we have from NAMA is that 67% of NAMA loans will be in the State, 6% inNorthern Ireland, 21% in the rest of theUKand 6% in the Rest of World.
(2) NAMA is valuing loans by reference to the 30th November, 2009
(3) Although NAMA has valued the current market values of loans by reference to 30th November, 2009 it had applied an uplift – a long term economic value premium – to help out the banks on the assumption that November 2009 was the bottom of the market. The average uplift applied appears to be 10%.
(4) NAMA is paying for loans with NAMA Bonds (making up 95% of the payment) and NAMA subordinated debt (making up the remaining 5%). The subordinated debt will only be honoured if NAMA makes a profit. So if NAMA makes a loss then these subordinated debt instruments won’t be honoured. NAMA paid roughly €29bn for the loans of which €1.5bn approximately was in subordinated debt.
(5) The breakdown of tranches 1 and 2 shows that 13% of the loans relate to completed residences. In addition 26% relates to development and presumably some will be residential. I assume that residential makes up 20% of all loans acquired in all territories. And commercial makes up the remaining 80%. NAMA has not issued any detailed breakdown of the loans since 23rd August 2010 when it provided details on tranche 2.
(6) Irelandand the UKcomprise the majority of NAMA assets. We keep track on here of the commercial and residential indices for bothIrelandand theUK. See the top of this page for the most up-to-date price movements. As you can seeIrelandhasn’t done so well whereas theUK’s commercial index has performed quite well.
(7) Taking into account the assumed split of NAMA’s loans between Ireland and the UK and the assumed split between residential and commercial and using the indices shown at the top of this page as at 31st December, 2010 and assuming that NAMA on average paid a 10% long term economic value premium but will not need honour its subordinated bonds if the agency makes a loss would point to the €29bn of loans being worth €25bn. NAMA won’t need honour €1.5bn of the €29bn consideration paid, if the agency makes a loss so taking €1.5bn from €29bn gives us NAMA’s consideration in a loss-making scenario, that is €27.5bn and yet the underlying security of the loans is only worth €25bn today. So NAMA should recognize a loss of €2.5bn.
What’s potentially wrong with the above?
(1) It uses a lot of assumptions – based on the best published information, I would argue, but assumptions nonetheless
(2) NAMA says that it found the value of residential property inIrelandto be an average of 50% off peak in November 2009 whereas the official index, the Permanent TSB/ESRI, indicated it was 30% off peak at that point. An implication is that NAMA’s losses on Irish residential property won’t be as great as the official index implies.
(3) NAMA claims, it is reported, that the “majority” of itsUKassets are inLondon. And it seems to be accepted thatLondonhas recovered from the 2007/8 financial crisis quicker than other parts of theUK(Northern Irelandstill seems to be suffering most).
(4) NAMA can claim that the relevant IFRS allows the agency not to value on the basis of underlying security.
And what about the future for NAMA?
NAMA was conceived on the principle that we were close to the bottom in terms of property prices in 2009. Minister Lenihan pointed to record high property yields at the time as indicative of the state of the market. He was wrong, or wrongly advised. The outlook for the residential market is still shaky forIrelandwith the Central Bank ofIrelandindicating in March 2011 that prices were still some 30% off the bottom. The CBI was more upbeat on commercial prices but it acknowledged if the government were to abolish Upward Only Rent Reviews that prices might fall another 20% plus. The outlook for theUKis more positive but there doesn’t appear to be a boom in prospect there – residential seems to be bouncing along more or less flat and commercial generally seems to be modestly increasing (less than 5% per annum). However NAMA is a 10-year project and part of the skill of managing assets will be in optimizing the timing of disposals. It’s a long way of saying that NAMA might see some recovery in prices though it needs also consider the ongoing interest charges on unredeemed NAMA bonds as well as its operating costs.
The agency has not had a good year in 2010. It lost more than €2m per day (based on an inception on 27th of March 2010, being 304 days to 31st December 2010 and a loss of €714m). However, even if prices had stayed flat, NAMA would still have potentially have reported a loss as it was paying a long term economic value premium to the banks. It remains to be seen if NAMA can turn a profit, it would be helpful to get some detail on the €3bn assets which the agency says has been approved for sale. The accounts today however do place NAMA at a disadvantage, just as Minister Noonan is considering the future operation of the agency.

Comment:

So all we have here is yet another spin operation in progress to hide the real losses and guess who is responsible for all of this? the same backroom boys that put this whole fraud together in the first place because they are now working for NAMA

NAMA report and accounts for Q3, 2010 – is there a political reason for the delay in their publication?

By namawinelake

Money and Banking Statistics: December 2010
Well one thing is for sure, the period between NAMA delivering its quarterly report and accounts to the Department of Finance and the DoF publishing said documents is growing larger with the passage of each quarter as illustrated below:
 
QuarterCovering period toDelivered to DoFPublished
131st March, 201030th June, 201013th July, 2010
230th June, 201030th Sept, 20102nd November, 2010
330th Sept, 201031st Dec, 2010Still waiting………

 
There was a detailed entry on here at the start of January, 2011 examining the likely features of the Q3, 2010 report and accounts. From an incumbent party political viewpoint, the sensitive issue with these accounts will be the fact that NAMA has lost some €2bn+ since its incorporation. How? NAMA purchased loans by reference to a valuation date of 30th November, 2009 and although some markets have improved since then, the home market where the assets underpinning two thirds of NAMA’s loans are located has tanked. Also NAMA paid a Long Term Economic Value of an average of 10% above the value of the asset. Now it is true that 5% of NAMA consideration for loans is in the form of subordinated debt which will only be honoured if NAMA breaks even and it is also true that the NAMA Act provides for a levy on the banks proportionate to the value of loans absorbed (so Anglo and INBS will need cough up more than 50% of any ultimate loss which is of course ridiculous but practically speaking it is also ridiculous for AIB and EBS which are effectively State-owned, Bank of Ireland faces a challenging future). Taking all of this into account
 
So it may be the case that the Department of Finance (prop: Brian Lenihan, minister) may try to delay the publication of the accounts which remember are already four months out of date as they relate to the quarter ending 30th September, 2010. And remember also, the role of the DoF is not to change the accounts so arguably they should be generally published simultaneously with their delivery to the DoF. And even if the accounts are published, they are unlikely to show a loss because NAMA is unlikely to revalue tens of billions of euros of loans each quarter. But I think it will be perfectly reasonable to ask NAMA for a ballpark of the loss in value of the loans compared with their acquisition value (the answer should be €2bn +).

source:http://wp.me/pNlCf-11i

Roman Abramovich



Remember this?

DUBLINAnglo Irish Bank announced Thursday it will make its junior bondholders absorb heavy losses on their euro3.5 billion ($4.9 billion) investments — the first loan defaults in Ireland since the nation’s banking crisis began two years ago.

The nationalized Dublin lender, the most debt-crippled bank from Ireland’s burst property bubble, said the two lowest tiers of bondholders would be offered payouts equivalent to 20 percent and 5 percent of their original investments, respectively.

The move represents the first concrete effort by Ireland to cut its losses from a euro45 billion bill for bailing out five banks, chiefly Anglo. The bailout cost is driving Ireland’s deficit this year to a modern European record of 32 percent of GDP.

Anglo said it would offer holders of euro1.575 billion of bonds expiring in 2014, 2016 and 2017 new government-guaranteed, interest-bearing bonds that will be repaid in December 2011 — but for just a fifth of that figure, euro315 million.

Analysts said Anglo’s junior bondholders — in many cases foreign hedge funds that have struggled to sell the bank’s shattered securities on the open market — would leap at the chance to get something back and escape. Ireland’s government had offered a guarantee on Irish banks’ subordinated bonds until Oct. 1.

“The stuff’s been trading at such a major discount anyway, the bondholders should be willing to break your hand off to get this money,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin.

McQuaid said bond markets might respond negatively, at least initially, to Anglo’s punitive debt swap with its subordinated bondholders. But he said the move was “not a major surprise, it’s been flagged for weeks,” and foreign investors eventually would embrace it as “a logical move for Ireland.”

Anglo said the lowest rung of bondholders, who own undated bonds with face values totaling euro1.2 billion and 650 million British pounds (euro732 million, $1.02 billion), would be offered final payouts equivalent to just 5 percent of their investment, or approximately euro97 million ($135 million).

Together the two concessions would shave more than euro3 billion from Ireland’s securities-repayment bill at Anglo. However, the government has never clarified whether its estimated total bailout cost at Anglo — euro29.3 billion — factored in the likelihood of substantial defaults on the bank’s subordinated securities.

Irish Finance Minister Brian Lenihan has emphasized this week that no holders of Irish senior bonds — chiefly foreign banks that Ireland relies on to finance its own mounting national debt — will suffer any losses.

Anglo’s announcement to junior bondholders left them with little choice but to sue or accept. The bottom-tier Anglo bonds have been tough to sell, even at heavy discounts, even before Ireland nationalized the bank in early 2009 to prevent its collapse.

Those who refuse the swap will be repaid just euro1 for every euro100,000, or 0.001 percent, of the money they originally invested in Anglo.

Analysts said the only other Irish bank likely to dump losses on subordinated bondholders is the nationalized Irish Nationwide Building Society, which is midway into an estimated euro5.4 billion state bailout.

Like Anglo, Irish Nationwide borrowed aggressively from foreign banks and shelled out billions to the nation’s top property developers. Many of them face bankruptcy in Ireland or have fled the country.

Russian billionaire Roman Abramovich, whose asset management agency Millhouse bought Irish Nationwide subordinated bonds in August 2009 that paid an exceptional 13 percent rate of interest, has threatened to sue Ireland if his investment is not repaid in full. Abramovich has declined to specify the size of his Irish Nationwide holding.

And This

Oct 1 (Reuters) – Russian billionaire Roman Abramovich may take legal action against the Irish government over its decision to make subordinated bondholders in Irish Nationwide (INBS) [IRNBS.UL] pay part of the bill for dealing with the building society’s huge property losses.

“We urge Irish authorities to re-consider their position on INBS subordinated bonds and come out with a detailed plan on what is going to happen to this institution,” a statement from Abramovich’s investment vehicle Millhouse said in a statement.

“In the meantime, we are fully prepared to vigorously defend our position using all possible legal means.”

Ireland said on Thursday it expected bondholders in INBS and nationalised lender Anglo Irish Bank [ANGIB.UL] to make “a significant contribution” towards meeting the cost of a bill of up to 40 billion euros for cleaning up their years of reckless lending.

Both bonds are trading at significant discounts in the secondary market.

Anglo Irish, which has 2.4 billion euros in subordinated bonds, accounts for over two thirds of Ireland’s “worst case” bank bill of 50 billion euros. Irish Nationwide will cost taxpayers 5.4 billion euros. [ID:nLDE68T04M]

Abramovich’s investment vehicle said making Nationwide’s subordinated bondholders accept losses on their investments was both unfair and possibly illegal.

“We fail to see how we can “significantly contribute” to the cost of survival of the Irish Nationwide Building Society given that even if the entire lower tier 2 debt is wiped out this would only save a meagre 2.3 percent of the total cost of (the) bailout of INBS.”

A spokesman for Ireland’s Department of Finance said it was working with the country’s Attorney General on the issue of burden-sharing by subordinated bondholders in Anglo Irish and INBS.

Abramovich, who owns Chelsea football club in London, is Russia’s fourth richest with an estimated worth of $11.2 billion.

http://www.reuters.com/article/idUSLDE69024P20101001

Comment:

Bottom line here is

Cowen and lenihan have pumped billions into this guy’s bank account by dumping billions into The Anglo Irish Bank black hole so he could go out and buy the largest yacht in the world.

I suppose Cowen and lenihan might get an invitation for the maiden voyage  and who knows we might get lucky ,it might an iceberg.  



This is all about Irish Banks Too

  except the poor that can’t pay their TV License

Sellers of Anglo defaults may pay 25.5c on euro

Sellers of default insurance on Anglo Irish Bank may have to pay as much as 25.5 cents on the euro to settle contracts linked to senior debt.

Credit-default swaps traders set final recovery values in auctions yesterday of 74.5 per cent and 76 per cent on the senior bonds, according to Markit Group and Creditex Group. Results varied because of the different maturities of notes being auctioned.

Final values for subordinated debt were set at 18 per cent and 18.5 per cent.

Anglo Irish changed terms on 2017 subordinated bonds, virtually wiping out investors who did not accept an 80 per cent discount on their notes.

Investors can choose not to settle contracts, betting they will get more if losses are imposed on remaining junior notes maturing in 2014 and 2016. – (Bloomberg)

85 Billion loan to cost 6.7% (Madness)

European Central Bank

Image via Wikipedia

The Story
 
How far we done fell
Posted: 26 Nov 2010 06:31 PM PST
It’s 2am. I just checked the news for the first time in 24 hours. Forgive the following poorly-written mind-dump. Comments and abuse though are of course still most welcome.
The figure won’t be 6.7%, but it will be too much.
6.7% is a senseless and idiotic figure. You’ve got to think the announced rate will be lower, perhaps so it can be claimed that the negotiations were ‘successful’.
If the figure does turn out to be 6%+ it will have been designed to scare other teetering PIIGS into line in the short term.
Clearly, Ireland cannot afford anything close to such a rate. If the rate turns out anything above about 4.5% it’ll be to make an example of Ireland to ensure Portugal, Spain, Belguim and others stay the course. It’ll be the ECB and Irish government kicking our default date two or three years down the line, while heaping an extra €xbn (who cares what X is anymore? Any number is too big) onto the bill, in a desperate and transparent attempt to stop further defaults in the eurozone. We’re the gangrenous arm and the high rate will be a tourniquet.
Our default is coming, the question is when it’ll arrive. Right now, the answer to that question lies in Irish hands. The question for them is what they’re more concerned about protecting; the Irish taxpayer or Ireland’s relationships with other Eurozone members. The Germans have big exposure to our debt… jus’ sayin’.
Admittedly these are not mutually exclusive options but with the euro looking decidedly shaky, well, it can’t be all fun-and-games in Brussels forever… big-decision time looms.
Slight aside; Read Paul Krugman today…
Before the bank bust, Ireland had little public debt. But with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nation’s creditworthiness was put in doubt. So Ireland tried to reassure the markets with a harsh program of spending cuts.
Step back for a minute and think about that. These debts were incurred, not to pay for public programs, but by private wheeler-dealers seeking nothing but their own profit. Yet ordinary Irish citizens are now bearing the burden of those debts.
Or to be more accurate, they’re bearing a burden much larger than the debt — because those spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment.
But there is no alternative, say the serious people: all of this is necessary to restore confidence.
And Simon Johnson…
So why not restructure some of this debt, particularly as much of what the government will owe is actually debt taken on by overgrown and careless Irish banks?
The government has indicated that it will force a restructuring of some subordinated, relatively junior debt. For at least for one prominent bank, Anglo Irish, this may amount to paying 20 cents in the euro. This debt by itself is too small to make a difference, but why not apply the same principle to other categories of borrowings?
The most obvious answer is: Ireland’s European partners do not want this to happen, because it would expose the really bad decisions made by pan-European banks and their regulators over the last decade and create potential fiscal risks in other euro-zone countries.

source http://thestory.ie/

Comment :

Its no longer a story about the Irish Banks its all about the Euro now

It might as well be 50% we cannot pay this ,we have no option but to Default

full stop

Machholz

Brian Lenihan about to take €1.8bn from pensioners

Why is Brian Lenihan about to take €1.8bn from pensioners to bail out AIB shareholders and junior bondholders?

namawinelake | October 31, 2010 at 11:01 am | Categories: Irish economy, NAMA | URL: http://wp.me/pNlCf-K7

The short answer is “I don’t know” but this is precisely what this modern day inverse of Robin Hood is about to do – take €5.4bn from our National Pension Reserve Fund (NPRF) to buy shares in Allied Irish Banks (AIB and for our international friends again has nothing whatsoever to do with Anglo Irish Bank which is known here domestically simply as “Anglo”), and he is making the NPRF buy the shares at €0.50 each when two days ago, on Friday last they closed at  €0.337 per share meaning that the NPRF will incur a loss of €1,760m from the start.

The NPRF was set up to fund future pensions of ordinary citizens from 2025. AIB meanwhile had a market value of €364.2m of which we, the State, own €66.7m (that shareholding is from the conversion of our 8% dividend due on the €3.5bn preference shareholding in May 2010 to ordinary shares). According to the latest AIB accounts (the Interim Report for the first six months of 2010) the bank appeared to have over €4bn of junior (or subordinated) bondholders (note 32 on page 87).

As we know, we can legally require these junior bondholders to accept a haircut on their debt. So, why is Brian Lenihan forcing our pensioners to pay €1.8bn to bail out the remaining €297m of private AIB shareholders and €4bn+ of subordinated debt holders? This entry examines the issue.

Full article at source http://namawinelake.wordpress.com/author/namawinelake/

Comment :

Nothing surprises me anymore only that the Irish Nation is as far as I am concerned in the grips of madmen and they are every bit as bad as the Nazis were in Germany

We don’t have to go to war to destroy our people; Cowen and Lenihan are doing a good job by making financial slaves out of us all, stealing from our future pensions and giving it to forging gamblers and silly investors.

I personally believe that this latest initiative is designed to bail out TD’s who would otherwise be declared bankrupt and would otherwise have to vaccinate their Dail seats.

How many are even now bankrupt.

This government have destroyed our country and have blatantly stole the nation’s wealth and handed it over to unscrupulous opportunists and cronies and are thus guilty of treason and do not deserve the thrust of the Irish nation any longer !  

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