# Recapitalization of other irish Banks/Mutuals



## Madangan (12 Jan 2009)

Is anything happening vis a viz Perm TSB or EBS or INBS being recapitalized or is it only B of I, AIB and Anglo?

If not why not? Do they not need additional funds or are they deemed to be higher risk(than Anglo???) or  in the case of the 2 Building societies  has it to do with their status?


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## Brendan Burgess (12 Jan 2009)

I gather that they are not of systemic importance to the Irish economy. 

Brendan


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## Bandit (13 Jan 2009)

I am beginning to wonder if any of them are of "systemic importance" and, if they are , we´re all doomed. Don´t know if it´s just me but it seems that every penny that´s been poured into the banks has been used for the sole purpose of revitalising their balance sheets i.e. strenghtening themselves as businesses - and with little or no contribution from them towards relieving the credit squeeze.


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## Madangan (13 Jan 2009)

I would have thought that PTSB is of greater importance to the economy as a whole than Anglo??


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## Brendan Burgess (13 Jan 2009)

I don't think that in the normal understanding of the word "systemic", either are important.

If PTSB disappeared, its loans and deposits could be taken up by others. 

If Anglo disappeared, the same could happen. 

The difference with Anglo is that if it fails, it could have very serious consequences. First of all the government guarantee would be called in and this would apply to around €17 billion of bonds. It's not clear, but I think that this guarantee expires in October 2010. So Anglo could be allowed go then.

If Anglo goes now, the liquidator would probably be more aggressive in recovering the loans which are in default. This would further damage the construction sector.

Brendan


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## darag (13 Jan 2009)

Brendan,  you've suggested that Anglo could be let "go" once the guarantee expires a couple of times.  I would be interested in hearing how you think Anglo will survive until then as I don't believe it will be possible as I've stated in another thread.

For example, there is no way that Anglo have 17 billion worth of bonds which mature after September 2010.  The vast majority of their wholesale debt will come due before then as will significant chunks of subordinated debt (also covered by the government guarantee).  I am guessing but I imagine that conservatively at least 15 billion worth of bonds are going to mature in the next 20 months.  I've asked this question in another thread and nobody has responded but I simply do not see where this 15 billion is going to come from.  And this is ignoring the likely flight of commercial and retail deposit money as the expiry of the guarantee approaches.


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## Brendan Burgess (13 Jan 2009)

Hi Darag

I looked at the accounts and I understood that they were long term debt. I thought that the maturity dates were provided in a schedule. I provided this information in the first post of this thread. 

Have you read the Anglo accounts?  Am I reading them incorrectly? 



Brendan


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## darag (14 Jan 2009)

Hi Brendan, yes I had looked at the consolidated balance sheet but it didn't detail the maturity of the debt, hence my qualifications.

However I've just spend a bit of time searching for more detailed information and finally came across some useful information [broken link removed].

I wasn't too far off with my guess - less than 5 billion of Anglo's issued debt is long term.  The other 17 billion will need to be paid off over the next year or so (typically one year is the shortest corporate debt maturity to be considered "long term").

And, as I said, this is ignoring the complication caused by the likelyhood of a deposit run coming up to the guarantee expiry - certainly for the large retail, commercial and other bank's deposits.  Dealing with such a run would make paying back this 17 billion look easy given we're talking about 71 billion in deposits.

These figures suggest an inevitable outcome.  I carefully read Lenihan's interviews in the Sunday papers to see if there was the slightest hint that he has some plan to deal with of the reality of this situation and alarmingly I could not detect any awareness.  Admittedly such interviews are often as much a PR exercise as they are informational but it was disconcerting that some of his statements made no sense when viewed against the reality Anglo's balance sheet.

This impending 17 billion debt cannot be repaid using equity since this would reduce their tier 1 capital ratio which is already low by international standards and anyway there isn't enough of it (equity) to even cover half of this sum.  It will either require further tax-payers injections to cover or else, I'm guessing, they will be allowed to issue further (guaranteed) bonds to repay the existing ones.  It   The problem is they will only be able to sell bonds which mature before the expiry which means they are only deferring things - not actually reducing the 17 billion due.


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## Brendan Burgess (14 Jan 2009)

Thanks Darag

I had looked at Notes 17 and 19 [broken link removed]and concluded incorrectly, that the Medium Term debt was more than 5 years. 

So only €5 billion is not guaranteed long term.


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## Sunny (14 Jan 2009)

I ahd a quick look at bloomberg so don't depend on for complete accuracy but it looks like Anglo have €11 billion maturing before the guarantee ends and the rest (approx another €11 billion) maturing after the guarantee. (Think that is 2007 figures)


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## Alex (14 Jan 2009)

Madangan said:


> I would have thought that PTSB is of greater importance to the economy as a whole than Anglo??


 
me too!


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## The_Banker (14 Jan 2009)

Madangan said:


> I would have thought that PTSB is of greater importance to the economy as a whole than Anglo??


 

Surely you cannot take PTSB in isolation as it is part of the Irish Life & Permanent group?
Therefore, if PTSB go to the wall, IL&P goes also? With the amount of pensions, investments etc under management with IL&P would this organisation not be considered "systemic" using the current understanding of the word?


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## nadnerB (15 Jan 2009)

The_Banker said:


> Surely you cannot take PTSB in isolation as it is part of the Irish Life & Permanent group?
> Therefore, if PTSB go to the wall, IL&P goes also? With the amount of pensions, investments etc under management with IL&P would this organisation not be considered "systemic" using the current understanding of the word?


 
Of course it is, saying that IL&P is not of sistemic importance is utter nonsense. Saying that IL&P mortgage loan book can be bought by another Irish bank is nonsesne too. Saying all of the above without using any figures is FUD

Cheers

nadnerB


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## dafmurray (18 Jan 2009)

Hi, can anyone advise whether it would be advisable to sell Allied Irish Bank, Bank of Ireland and Irish Life & Permanent shares now, rather than wait for the proposed recapitalisation of A.I.B. and B.O.I. in Spring.  

Surely we are likely to discover scandals similar to Anlgo Irish Bank with both A.I.B. & B.O.I. in due course.

Should I cut my losses now, rather than take the risk that recapitalisation will dilute the share price so much it may never really recover much in the long term?

Any advice appreciated, as I just took a loss on Anlgo Irish Bank shares.


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