Can we refloat Anglo Irish now?

Laminations

Before it was nationalised Anglo was valued at a couple hundred million.

If it was to be refloated what determines the price that would be paid?
Its gross assets?
Its loan book?

Now without caring about what madmen would buy it, can it be refloated and if it was bought who is responsible for its debts? Are individual shareholders liable for a banks debts?

Are there laws preventing a company (or country in this case) selling on what is essentially a lot of liability?

jhegarty

It wasn't worth anything when it was nationalised, it was hours away from bankruptcy.

It will take many years , and may billions , before it's worth €1

Laminations

My point is if shareholders bought the bank would they be responsible for the debt? Or is it a debt-to-equity thing where the price of Anglo would be so high as to cover the debts minus the price of assets?

I'm trying to think of a way to get the bank back to the bondholders.
My idea (fanciful as it is and probably illegal) would be to sell Anglo to the people of Ireland. They would be shareholders and after the banking guarantee expires we'd let the bank fail. We as shareholders would lose our investment (couple hundred million) and the bondholders would be responsible for debt collection. The government would no longer be liable.

Yes its basically a ruse or a trick but in banking circles tricks are not necessarily illegal, ask Seanie Fitz that.


Morgan Kelly said the following in the IT in December

All that needs to be done is for ownership of Irish banks to be transferred to their bondholders. This process of converting debt into equity occurs sufficiently often in banking to have a name: resolution. Resolution offers a way for Irish banks to be adequately recapitalised at no cost to the taxpayer, and able to manage their business without political interference.


Under existing Irish corporate law, this transfer would be a recipe for centuries of litigation. That is why most other industrialised economies have, or are introducing, special legislation to resolve failing banks with limited judicial review. Particularly impressive is the UK’s Special Resolution Regime introduced last February, which could easily serve as a template for similar legistlation here.

Sir Oxman

Laminations wrote: »

My point is if shareholders bought the bank would they be responsible for the debt? Or is it a debt-to-equity thing where the price of Anglo would be so high as to cover the debts minus the price of assets?

I'm trying to think of a way to get the bank back to the bondholders.
My idea (fanciful as it is and probably illegal) would be to sell Anglo to the people of Ireland. They would be shareholders and after the banking guarantee expires we'd let the bank fail. We as shareholders would lose our investment (couple hundred million) and the bondholders would be responsible for debt collection. The government would no longer be liable.

Yes its basically a ruse or a trick but in banking circles tricks are not necessarily illegal, ask Seanie Fitz that.


Morgan Kelly said the following in the IT in December

I've been following your posts about this since yesterday but unfortunately I don't have much knowledge about how these things work - I'm reading a few Irish and Financial blogs/opinions to try and get a feel for the different scenarios/solutions to try and edumacate myself.

Hopefully a few knowledgable financial & legal people will post their opinions.

oppenheimer1

The bank is essentially worthless, its liabilities far outweigh its assets. Though if the government could offload it on someone with very deep pockets who would be able to absorb the losses, it probably would.

The problem is there are no buyers.

Laminations

Hopefully so. It would seem counter productive to float a loss maker as whoever bought it would lose their money. But if 4million shares were issued we would all lose a bit but far less than what the government is currently liable for or likely to pump in. Obviously the bondholders would be mad but was some big wig in europe not complaining recently that we were letting the creditors off too lightly?
It depends on how the bank would be priced- as in does the price have to cover the current debts and also if the shareholders would be liable for more than their investment.

Laminations

oppenheimer1 wrote: »

The bank is essentially worthless, its liabilities far outweigh its assets. Though if the government could offload it on someone with very deep pockets who would be able to absorb the losses, it probably would.

The problem is there are no buyers.

Ok so do shareholders absorb the losses as in incur liability for the banks debts? Do they not just lose their investment? As in if Anglo was allowed fail wouldn't the shareholders just have lost the value of their shares? I'm suggesting the irish people buy anglo, knowing they'll lose out but this loss will be better than the current government liability.

Laminations

I can see two issues and my knowledge on the subject is not good enough to answer these.
1. If the government float the bank is the value guided by assets=debts + equity, therefore equity would have to equal all debts minus assets? Which is far too much for us to pay.
2. Once shareholders buy up the bank can they lose more than their shares? If the bank fails can they not just step back and the bondholders are left to manage the debts?

oppenheimer1

Laminations wrote: »

Ok so do shareholders absorb the losses as in incur liability for the banks debts? Do they not just lose their investment? As in if Anglo was allowed fail wouldn't the shareholders just have lost the value of their shares? I'm suggesting the irish people buy anglo, knowing they'll lose out but this loss will be better than the current government liability.

Well up until recently a lot of irish people owned a large part of anglo. Through poor managment it ran its business into the ground incurring massive losses. It was unable to fulfil its obligations as they fell due and hence it was nationalised. Unless a flotation raised enough capital, somewhere in the region of €12bn it would again pose a systemic risk to the irish banking sector. The government would have to step in again.

The amount of shares that would have to be purchased by each individual would be about €2700 to achieve this. Some people feel the hole in the banks balance sheet could be twice that.

Laminations

My idea is that we float the bank and it is privatised and undercapitalised- back in a position like before it was nationalised, except this time round the government do not step in and move to insulate and prop up the other, actually systemic banks. The public wouldn't panic and the bondholders sort out their own mess.

oppenheimer1

Laminations wrote: »

My idea is that we float the bank and it is privatised and undercapitalised- back in a position like before it was nationalised, except this time round the government do not step in and move to insulate and prop up the other, actually systemic banks. The public wouldn't panic and the bondholders sort out their own mess.

The problem with that is that the Irish government would be demonstrating that it isn't willing to support the banking sector here. Interbank lending rates for irish institutions would rocket to unaffordable levels or wouldn't be available at all. One by one the Irish instutions wouldn't be able to refinance their debt and would go out of business.....

....Handing all €440bn of liabilities onto the state...

Laminations

oppenheimer1 wrote: »

The problem with that is that the Irish government would be demonstrating that it isn't willing to support the banking sector here. Interbank lending rates for irish institutions would rocket to unaffordable levels or wouldn't be available at all. One by one the Irish instutions wouldn't be able to refinance their debt and would go out of business.....

....Handing all €440bn of liabilities onto the state...

I dent think it would show that we dont support the banking sector. It would show that we dont support wreckless lending. I'd wait for the bank guarantee to expire and not renew it for anglo, then i'd drop anglo like a sh!t brick. Interbank lending would improve knowing anglos debts are not around the heads of the state or the other banks?

baalthor

As I understand it, there are three arguments against letting Anglo go bankrupt:

Effects on sovereign debt: Anglo's debt is now part of Ireland's debt. Anglo collapsing would be seen by the bond holders as equivalent to Ireland defaulting on it's sovereign debt. This would make it very difficult or expensive for the government to borrow money and the government really needs to borrow money at the moment.:D
Even had Anglo not been nationalised, the outcome might be no different as the same institutions hold Anglo debt and Irish debt.

Systemic Risk: Anglo isn't standalone but is linked to the other banks and large companies through a web of borrowings and transactions that we don't understand and may never be fully made public. Anglo's collapse might have a dramatic and unknowable impact on the other banks and institutions.

Ultimate Outcome: If all goes well we might make some money on Anglo:pac:

Anyway, it's all being explained on Primetime now!
Primetime just mentioned the depositors, who with Anglo are not Joe and Josephine Public ...

ifconfig

Can someone shed light on this ....
Someone else brought this up on Joe Duffy the other day and it is such an obvious question to ask ....

How can Anglo Irish Bank be offering one of the most competitive deposit
rates (3.5% fix term AER) at the moment?
Halifax and Postbank are pulling out of the Irish market because the deposit rates they were offering were unsustainable in the current environment.
How can a nationalised , zombie bank doing no lending offer what is probably the most competitive deposit rate in the state ?

ei.sdraob

ifconfig wrote: »

Can someone shed light on this ....
Someone else brought this up on Joe Duffy the other day and it is such an obvious question to ask ....

How can Anglo Irish Bank be offering one of the most competitive deposit
rates (3.5% fix term AER) at the moment?
Halifax and Postbank are pulling out of the Irish market because the deposit rates they were offering were unsustainable in the current environment.
How can a nationalised , zombie bank doing no lending offer what is probably the most competitive deposit rate in the state ?

thats because you are being scammed
that's your own money (every single taxpayer) there being used to offer a measly 3.5%
money that had to be borrowed at 6% by ntma


money that will be taken off you and your children via much higher taxes for a very long time

but look here dont mind all of that you!
look at this shiny non-distracting 3.5% "interest" coin

ifconfig

ei.sdraob wrote: »

thats because you are being scammed

that's your own money (every single taxpayer) there being used to offer a measly 3.5%

money that had to be borrowed at 6% by ntma

That was exactly my suspicion.
Would these be deposits underwritten by the recapitalization money or separate sovereign bond purchased made by Anglo on the open market ?

Is there a reason why Anglo could afford to provide a tighter margin compared to the other guaranteed banks ?