Key Post Summary of Anglo's liabilities and assets

Brendan Burgess

Brendan Burgess

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I have been unable to find a summary of Anglo's liabilities and in particular how much we can save by not renewing the guarantee and allowing the bank to go to the wall - thus screwing the bondholders.

So I have compiled it myself from the recently published [broken link removed]

Is there any other analysis of this online?

|31 12 2009|31 12 2008|
Subordinated debt|2.4|4.9|
Medium term notes |7.4|0|issued with guarantee
Other medium term notes|6.7|12.2|
Short term notes|1.5|5|presumably matures by Sept 10
Derivatives|2.7|1.5
Retail deposits|15|19
Non-retail deposits|12|32|2008 figure includes 7b from Irish Life
Central Banks|24|8
Deposits from other banks|9|12
Total|81|97
 
Re: Summary of Anglo's liabilities

If we don't renew the guarantee beyond the end of September, all deposits and short term notes and much of the medium term notes would be withdrawn.

Would anyone know the maturity dates of the €6.7 billion in medium term notes? I assume 50% of it will mature before the end of September 2010, and so is government guaranteed anyway.

The subordinated debt of €2.4 billion.

The medium term notes of c. €4 billion.

So we can trigger the liquidation of Anglo and save the taxpayer around €6.4 billion. If half of this is owed to Irish institutional investors, then we are saving around €3 billion.

We would have to find around €40billion to replace the funding which will be withdrawn if the guarantee is not extended.

We would have the stigma of a nationalised bank being allowed to collapse.

And of course, the assets of Anglo would be worth far less in a liquidation.

So screwing the bondholders is just not an option.

We had an interesting discussion of it in June 2009.
 
Re: Summary of Anglo's liabilities

Karl Whelan does a more detailed analysis on Irish Economy.ie

It appears that the subordinated bonds don't mature until between 2014 and 2016 so the government can defer a decision on these.
 
Summary of Anglo's assets post Nama

Here is my assessment of Anglo’s assets.

They come from PDF page 41 of Anglo's [broken link removed]


They don't add up exactly, because I have rounded figures


|As reported|Adjusted|
Customer loans | 40,016||
Less provision for impairment| 4,753||
Net customer loans |35,263 ||
Realistic value|| 20,000|assuming 50% provision
||
Going to NAMA| €35,602||
Less own provision|4,000||
Less NAMA haircut|€10,120||
Net NAMA loans| €21,828|
Realistic Value of NAMA bonds|| 18,000|assuming 50% haircut


Loans to banks |13|13|
Capital promised by Government| 8|8|not paid by 31 March
Sovereign bonds |3.2|3|
Bank bonds |4|4|
Investments| 3|3|seems to be subsidiaries
Derivatives |3|3|
||
Total |93|72
 
Summary of Anglo's assets post Nama

The estimated cost to the taxpayer

Share Capital already subscribed|€4 billion
Promissory note issued |€8.3 billion
Further deficit|€9 billion
Total| €23 billion

The deficit is the difference between my estimate of the assets, €72 billion and the liabilities, €81 billion.

These amounts would be sufficient only to plug the deficit. If the bank continues to trade, it may require further capital.

If the loans are being transferred to NAMA at less than fair value, there will be a further indirect cost here.
 
So does that make your assessment of the further hole as 9bn (81 - 72)?

I don't fully understand this nationalisation thing. Does Anglo have to maintain capital ratios? Or is it sufficient just to fill the A/L hole with promissory notes?

Another thing I don't understand is that it is stated that Anglo's 24Bn borrowings from the ECB/ICB are fully collateralised. According to Sunny that has to come from repo stuff like sovereign bonds, there doesn't seem to be enough repo stuff to do the job, that is until the NAMA bonds are delivered.
 
That was an excellent piece by Karl Whelan and provides a lot more detail as to why we cannot default on the Anglo debt (except maybe for the subordinated debt some time in the future.

David McWilliams gives his side of the argument in the link below supporting a repudiation of the debt but not providing any substantial detail in support of this.

[broken link removed]

When you actually break down the liabilities it becomes apparent that it's not as simple as saying we've closed shop and no one is getting paid.

Brendan said:
Karl Whelan does a more detailed analysis on Irish Economy.ie

It appears that the subordinated bonds don't mature until between 2014 and 2016 so the government can defer a decision on these.
Click to expand...
 
Brendan said:
If we don't renew the guarantee beyond the end of September, all deposits and short term notes and much of the medium term notes would be withdrawn.

Would anyone know the maturity dates of the €6.7 billion in medium term notes? I assume 50% of it will mature before the end of September 2010, and so is government guaranteed anyway.

The subordinated debt of €2.4 billion.

The medium term notes of c. €4 billion.

So we can trigger the liquidation of Anglo and save the taxpayer around €6.4 billion. If half of this is owed to Irish institutional investors, then we are saving around €3 billion.

We would have to find around €40billion to replace the funding which will be withdrawn if the guarantee is not extended.

We would have the stigma of a nationalised bank being allowed to collapse.

And of course, the assets of Anglo would be worth far less in a liquidation.

So screwing the bondholders is just not an option.

We had an interesting discussion of it in June 2009.
Click to expand...

What we need in Anglo is to NAMA off all remaining assets and use the proceeds to pay off as much of the liabilities as possible.

We will have to hit remaining large depositors as well as senior bondholders and wipe out subordinated bondholders. The depositor should at least share the hit with the taxpayer.

The loans owed to Anglo are not going to be worth more than they would be to NAMA, so why run it as a going concern?

I think the goalposts have shifted now that we have an idea how truly horrendous the loan book is.

Within reason the taxpayer should bail out the banking system, by whom I mean depositors, where there is a threat to the entire system - but Anglo can be quarantined.

If AIB, BOI & PTSB are clearly solvent then we need not fear a run on the banks.
 
DerKaiser said:
We will have to hit remaining large depositors as well as senior bondholders and wipe out subordinated bondholders. The depositor should at least share the hit with the taxpayer.
.
Click to expand...

Surely the pool of deposit holders has evolved hugely since September 2008. What about people who invested more recently on the basis that there is a guarantee in place; Anglo is not paying much (if at all) above competitors' deposit rates. Why should they take a hit (as opposed to those who were deposit holders in september 2008)?
 
Ok I've started trying to use these figures to see if my idea to fold Anglo sometime after next September would save the state any money.

But I am not sure I understand the NAMA bit. I am reading it that 35B worth (non-discounted) of loans will be transferred to NAMA in exchange for 18B - is that correct?

I also, like Duke, am puzzled by the missing repo collateral. Perhaps the loans from the ICB are not repo arrangements?
 
First Fine Gael now the Greens are calling for the wind down of Anglo. Clearly the denouement is at hand. But what exactly do they mean? The [broken link removed]is obviously the more relevant. If the following quote is accurate
John Gormley and Eamon Ryan will tell Government colleagues that their party no longer supports plans to split Anglo into a good and bad bank, or an orderly wind down.
Click to expand...
the mind boggles as to what a disorderly wind down would look like. My recollection is that Brendan has been on record calling for an orderly but speedy wind down of Anglo and most would now be at least that far down the road - but what have the Greens in mind?
 
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