irish life and permant legal chalange

mike tv

any shareholders of IL&P we are being sold down the river this bank is not bust we must stand together before it to late

SGKM

Technically it is "bust" along with all the other banks. It's insolvent as it is unable to meet it's liabilities as they fall due - it has to increase its capital buffer by €4bn by a certain date.

It has a staggering loan to deposit ratio, I think I read its something like 249% (could be wrong on that) and massive losses are forecast on its mortgage book.

Assuming it can sell / float some assets the options are state support or say a private equity investment (unlikely) wiping shareholders or a €2.5 - €4bn rights issue on a €40m market cap... would you be willing to invest, say 100 times the current value of your equity stake to stop a dilution?!

liammur

SGKM wrote: »

Technically it is "bust" along with all the other banks. It's insolvent as it is unable to meet it's liabilities as they fall due - it has to increase its capital buffer by €4bn by a certain date.

It has a staggering loan to deposit ratio, I think I read its something like 249% (could be wrong on that) and massive losses are forecast on its mortgage book.

Assuming it can sell / float some assets the options are state support or say a private equity investment (unlikely) wiping shareholders or a €2.5 - €4bn rights issue on a €40m market cap... would you be willing to invest, say 100 times the current value of your equity stake to stop a dilution?!

The bank isn't bust. Far from it in fact.
The reason it has to increase it's capital buffer by €4bn is to please the market, this will take it's capital reserves to 33%, the highest in the world. All are agreed it's an artificial level. Most European banks are 12%.
The bond yields continue to rise anyway, but the government will make a few nice € by hammering shareholders. Long term though, it doesn't give confidence to invest in Ireland.

Taken from yesterday's FT:

http://www.scribd.com/doc/56477497/260511-Financial-Times-Irish-Life-and-Permanent-Shareholders-Are-Right
FT LEX on Irish Life & Permanent

Irish taxpayers have borne the brunt of the country’s banking collapse – a €70bn hit. So have shareholders. They have been wiped out at Anglo IrishBank, and diluted to the point of emaciation at Allied Irish Banks and Bank of Ireland. Now the death cart has been summoned for shareholders in Irish Life& Permanent, which is facing a mandatory €4bn recapitalisation of its bankingdivision. Some ILP investors have started a fightback. That’s good.The Irish bank stress tests in March had ultra-pessimistic assumptions aboutmortgage defaults and loan losses. The authorities wanted to draw a lineunder the banking crisis. The long term outcome, unless Armageddon arrives,is that the banks will be significantly overcapitalised. ILP’s Permanent TSBbank reported a robust-looking core tier one capital ratio of 10.6 per cent atthe end of 2010. The group reckons the forced recapitalisation will lift the ratioto 33 per cent by 2013, leaving PTSB with excess capital of €1.5bn.
The recapitalisation will be funded by selling ILP’s life insurance division –which could be worth €2bn – and by the state. And there’s the rub: thegovernment is demanding almost full ownership of the rump of ILP in return.Angry investors say that is tantamount to expropriation: the life businessbelongs to shareholders, and the state’s ILP stake should be no more than 56per cent, to reflect its maximum contribution to the recapitalisation. Oneshareholder, Malta-based Scotchstone Capital, insists PTSB does not needsuch a big recapitalisation. The dissidents are pressing for a better solution,such as giving private investors a call option on the state’s stake.The investors have a case: the ILP recapitalisation looks arbitrary and shouldbe re-examined. Ireland’s banking collapse was an exercise in wanton valuedestruction. Fixing it must not do likewise.
Copyright The Financial Times Ltd ©

ROK ON

FWIW, the mooted sale price of the Irish Life part of the business is way too low IMHO, even factoring in the depressed nature of valuations within the broaded financial sector at present.

IIRC, media reports have speculated that the sale price could fetch in the reason of €2bn. The book value of the insurance business is above €5bn. As a pure play life business with well in excess of 30% mkt share in Life, Pensions & AM if this business is sold for anything less than €5bn - then once again the taxpayer is being taken for a ride.

Interestingly I was lead to believe that if some sort of funding arrangement could be put in place (by the ECB) on the mortgage portfolio to maturity, then the bank part of ILP would have been willing to recapitalise to take the credit risk of that portfolio.

ILP (unlike the other banks) is an easy solution to fix, it is pretty scanadlous that successive Governments have dragged feet for so long on this that no reasonable solution (from a taxpayer point of view) was found.

All moot now however.

knockbran

Anybody know what became of the challenge to the recapitalization by certain shareholders. It was going through the courts in the spring 2012, and nothing since about the time of the referendum