Comments on: Anglo Irish bank: dealing with risk investors http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/ Mon, 13 Feb 2012 05:08:35 +0000 http://wordpress.org/?v=2.6.3 By: IMF/ECB response to Ireland's deficit? - Page 7 http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-70438 IMF/ECB response to Ireland's deficit? - Page 7 Sun, 05 Sep 2010 21:38:35 +0000 http://www.irisheconomy.ie/?p=2457#comment-70438 [...] more creditworthy than one which handed over money lightly to unguaranteed risk investors. The Irish Economy Blog Archive Anglo Irish bank: dealing with risk investors __________________ Despotism can only exist in darkness, and there are too many lights now in the [...] [...] more creditworthy than one which handed over money lightly to unguaranteed risk investors. The Irish Economy Blog Archive Anglo Irish bank: dealing with risk investors __________________ Despotism can only exist in darkness, and there are too many lights now in the [...]

]]> By: FT Alphaville » “Most of the damage in this crisis has been done by just one institution” http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-42937 FT Alphaville » “Most of the damage in this crisis has been done by just one institution” Thu, 01 Apr 2010 07:52:06 +0000 http://www.irisheconomy.ie/?p=2457#comment-42937 [...] that Honohan has not made his feelings known before, however that was before he was official appointed central bank governor in September [...] [...] that Honohan has not made his feelings known before, however that was before he was official appointed central bank governor in September [...]

]]> By: The Irish Economy » Blog Archive » Extreme Contagion http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-41376 The Irish Economy » Blog Archive » Extreme Contagion Fri, 26 Mar 2010 10:36:55 +0000 http://www.irisheconomy.ie/?p=2457#comment-41376 [...] do not think that independent analysts are that clueless.   Patrick Honohan’s post on this blog back in May is worth re-reading.   An extract: It might be argued that losses [...] [...] do not think that independent analysts are that clueless.   Patrick Honohan’s post on this blog back in May is worth re-reading.   An extract: It might be argued that losses [...]

]]> By: Jonathan http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-25655 Jonathan Thu, 26 Nov 2009 13:22:13 +0000 http://www.irisheconomy.ie/?p=2457#comment-25655 Unfortunately if 'wound up' nothing will realise it's nominal value. This simply isn't an option Unfortunately if ‘wound up’ nothing will realise it’s nominal value. This simply isn’t an option

]]> By: john o'callaghan http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8835 john o'callaghan Fri, 12 Jun 2009 15:47:33 +0000 http://www.irisheconomy.ie/?p=2457#comment-8835 Brian Cowen states that the cost of winding up Anglo immediately would be 60 billion euros. Karl Whelan points out that continuing the bank as a going concern is not necessarily much different from a winding up. Apart from profits (presumably small) that can be expected to accrue to the continuing bank and the avoidance of some administrative costs in relation to an immediate wind up I can't see why it won't cost the same amount to keep the bank going. The fact that the costs will be deferred into future periods won't have a significant impact on the NPV (or NPC?). The deposits are irrelevant; they are guaranteed and will only stay if the guarantee is extended. Either way (wind up or wind on) they have to be paid. The value of the loans advanced by the bank may fetch less if sold in a hurry today but they are not going to realise anything like their nominal value at any stage. If Cowen is right then how will we fund the 60 billion, either this year or any year? Brian Cowen states that the cost of winding up Anglo immediately would be 60 billion euros.
Karl Whelan points out that continuing the bank as a going concern is not necessarily much different from a winding up.
Apart from profits (presumably small) that can be expected to accrue to the continuing bank and the avoidance of some administrative costs in relation to an immediate wind up I can’t see why it won’t cost the same amount to keep the bank going. The fact that the costs will be deferred into future periods won’t have a significant impact on the NPV (or NPC?).
The deposits are irrelevant; they are guaranteed and will only stay if the guarantee is extended. Either way (wind up or wind on) they have to be paid. The value of the loans advanced by the bank may fetch less if sold in a hurry today but they are not going to realise anything like their nominal value at any stage.
If Cowen is right then how will we fund the 60 billion, either this year or any year?

]]> By: The Irish Economy » Blog Archive » Anglo Wind-Up Debate a Distraction http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8731 The Irish Economy » Blog Archive » Anglo Wind-Up Debate a Distraction Wed, 10 Jun 2009 13:43:04 +0000 http://www.irisheconomy.ie/?p=2457#comment-8731 [...] debt, all of which matures beyond September 2010.  However, to date, Patrick Honohan’s important contribution discussing this issue has received little attention from the [...] [...] debt, all of which matures beyond September 2010.  However, to date, Patrick Honohan’s important contribution discussing this issue has received little attention from the [...]

]]> By: Pat Donnelly http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8329 Pat Donnelly Sun, 31 May 2009 12:17:30 +0000 http://www.irisheconomy.ie/?p=2457#comment-8329 Given the clear and obvious force of Patrick's arguments, and the agreement of many if not most contributors, why does the FF gang insist on paying more than is good for the country? They are deliberately putting the interests of someone else ahead of the state. What is the quid pro quo? Who is benefitting at the expense not only of taxayers for a generation, but at the expense of those who should be paid out under the AIB and BOI bailouts, as we will not be able to pay all of those when the FG gang get in. Other creditors should be alarmed as they will not get this generous treatment. Given the clear and obvious force of Patrick’s arguments, and the agreement of many if not most contributors, why does the FF gang insist on paying more than is good for the country?

They are deliberately putting the interests of someone else ahead of the state.

What is the quid pro quo? Who is benefitting at the expense not only of taxayers for a generation, but at the expense of those who should be paid out under the AIB and BOI bailouts, as we will not be able to pay all of those when the FG gang get in. Other creditors should be alarmed as they will not get this generous treatment.

]]> By: Dreaded_Estate http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8325 Dreaded_Estate Sun, 31 May 2009 10:26:45 +0000 http://www.irisheconomy.ie/?p=2457#comment-8325 What is the total amount of guaranteed Anglo debt? What is the total amount of guaranteed Anglo debt?

]]> By: Sean Lyons http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8284 Sean Lyons Fri, 29 May 2009 15:42:22 +0000 http://www.irisheconomy.ie/?p=2457#comment-8284 @ Patrick In addition to urgently modernising bank insolvency procedures as you suggest, the government should also take the opportunity to enact special administration procedures for non-bank network utilities. These would help ensure continuity of service in the event of a default (or impending default) affecting key infrastructure (e.g. the power grid, fixed line telecoms network, gas network etc.). For a discussion of the UK arrangement in this regard, see http://www.dieterhelm.co.uk/publications/Commentary_Oct08.pdf @ Patrick

In addition to urgently modernising bank insolvency procedures as you suggest, the government should also take the opportunity to enact special administration procedures for non-bank network utilities. These would help ensure continuity of service in the event of a default (or impending default) affecting key infrastructure (e.g. the power grid, fixed line telecoms network, gas network etc.). For a discussion of the UK arrangement in this regard, see http://www.dieterhelm.co.uk/publications/Commentary_Oct08.pdf

]]> By: Maurice O'Leary http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8280 Maurice O'Leary Fri, 29 May 2009 14:14:34 +0000 http://www.irisheconomy.ie/?p=2457#comment-8280 well made points especially on the radio at 1.00 where it is very hard to discuss this without listeners eyes glazing over - or shoud that be ears waxing over? well made points especially on the radio at 1.00 where it is very hard to discuss this without listeners eyes glazing over - or shoud that be ears waxing over?

]]> By: PJ Fitzpatrick http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8279 PJ Fitzpatrick Fri, 29 May 2009 13:59:34 +0000 http://www.irisheconomy.ie/?p=2457#comment-8279 @Patrick mature reflection by the financial markets would recognize that a country that, while honouring its debts and guarantees to the letter–and not beyond–was more creditworthy than one which handed over money lightly to unguaranteed risk investors. Very well articulated! @Patrick

mature reflection by the financial markets would recognize that a country that, while honouring its debts and guarantees to the letter–and not beyond–was more creditworthy than one which handed over money lightly to unguaranteed risk investors.

Very well articulated!

]]> By: Kevin O’Rourke http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8276 Kevin O’Rourke Fri, 29 May 2009 13:25:08 +0000 http://www.irisheconomy.ie/?p=2457#comment-8276 Well said Patrick (on the radio also). Well said Patrick (on the radio also).

]]> By: Eoin http://www.irisheconomy.ie/index.php/2009/05/29/anglo-irish-bank-dealing-with-risk-investors/#comment-8275 Eoin Fri, 29 May 2009 13:22:33 +0000 http://www.irisheconomy.ie/?p=2457#comment-8275 @ Patrick the comments from Lenihan today have definitely been considered 'bondholder friendly' in that there appears to be a decent chance that all the subordinated debt holders get taken out via a tender to buy back at levels somewhat above current pricing. Current pricing is (or rather was before the announcement) between 10-35 cents depending on the T&C's of each issue, so lets put an average of 23 cents. Buy them all back in at 35 cents. Current holders get a kick of 50% of current marked-to-market, sub-debt itself is wiped out by 65%, and profit in between gets booked as profit and so capital. This is an open and transperent market operation, avoids the liquidation route, and sees sub-debt take a fairly significant loss, but at the same time still gives the debt holders an exit route in terms of price and also liquidity. It seems the best and most market friendly route to take if thats one of the chief concerns of the govt. @ Patrick

the comments from Lenihan today have definitely been considered ‘bondholder friendly’ in that there appears to be a decent chance that all the subordinated debt holders get taken out via a tender to buy back at levels somewhat above current pricing.

Current pricing is (or rather was before the announcement) between 10-35 cents depending on the T&C’s of each issue, so lets put an average of 23 cents. Buy them all back in at 35 cents. Current holders get a kick of 50% of current marked-to-market, sub-debt itself is wiped out by 65%, and profit in between gets booked as profit and so capital.

This is an open and transperent market operation, avoids the liquidation route, and sees sub-debt take a fairly significant loss, but at the same time still gives the debt holders an exit route in terms of price and also liquidity. It seems the best and most market friendly route to take if thats one of the chief concerns of the govt.

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