Between the frothing-at-the-mouth Fionnan Sheahan and the dessicated Terry Prone, the Independent is leaving no stone unturned in its personal and professional excoriation of Deputy Luke “Ming” Flanagan who has this week admitted to benefitting from the quashing of not one, but two sets of penalty points. Deputy Flanagan had a little dig of his own back at the publishers of the Indo, Independent News and Media, when, after his withering interrogation by Vincent Browne on Tuesday, Ming pointed out that although debt forgiveness was still a taboo subject for mortgage borrowers, that there was seemingly no problem in IN&M getting a debt write-down of €100m in its €400m+ debt pile, with the €100m being spread across eight banks including AIB which we 99.8% own.
IN&M’s full year results for 2012 are expected imminently, but they are unlikely to show a much improved state from that recorded for H1,2012 when the group was balance sheet insolvent to the tune of €200m, with bank debt of over €400m, and after it turned in a fully recognized loss of €177m for the first six months of 2012. The €400m is owed to eight banks, and it is understood from reporting in the Sunday Business Post that Bank of Ireland is owed around €80m and AIB around €70m. We own 15% of Bank of Ireland and 99.8% of AIB.
With IN&M shares languishing at just over 3.5c a share, giving the group a stock market valuation of €19.3m, you might have thought that the shareholders including Denis O’Brien (29.9%), Tony O’Reilly (13.3%) and Dermot Desmond (6.4%) would be wiped out before the banks were called on for any debt write-down.
Seems not.
In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael if AIB would allow a debt writedown on a commercial loan whilst leaving the shareholders untouched. Minister Noonan said there was no “blanket policy applied in respect of capital hierarchy” so we may now see a situation at IN&M where AIB does agree a €20m debt write-down whilst leaving the €19.3m of shareholders intact. A year ago, the Government managed to get away with Anglo writing off €100m in Siteserv as part of a deal which allowed the shareholders in that company to walk away with €5m.
No doubt it will be a transaction that will be keenly watched. And not just by Deputy Flanagan.
The full parliamentary question and response are here.
Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the policy of Allied Irish Banks in which he is the shareholder of 99.8% of the shares in writing down debt owed on commercial loans and if ordinary shareholders in companies where debt write-offs will be agreed by AIB, will be 100% wiped out before any debt write-off is agreed by AIB..
Minister for Finance, Michael Noonan: I have been informed by AIB that the bank is committed to operating its business activities on a commercial basis as it seeks to return to profitability. The bank assesses each customer in detail on a case by case basis to ensure the appropriate commercial outcome for the bank is achieved. As each case is dealt with on an individual basis, there is no blanket policy applied in respect of capital hierarchy.
http://www.rte.ie/news/2013/0315/376861-property-developers-outstanding-levies/
Maybe of Interest
The amount outstanding equates to about 1.5 years’ yield from the property tax or could finance the construction of almost two National Childrens Hospitals.
So, some of the wealthiest people in this country, some not even tax resident are going to get debt write-off. Their losses, just like those of the bank bondholders will passed on to the Irish taxpayer.
The State need to draw a large red and if needs be bloody line through this right now.
Agreed. If I were a mortage holder in negative equity, struggling to pay bills while in mortgage arrears, I’d be livid with rage if INM secures a debt write down from banks that have been bailed out by taxpayers while INM’s immensely wealty, significant shareholders effectively engage in “won’t pay” strategic defaulting. If this happens, the shareholders would appear to prefer that taxpayers (who are also the INM’s main customers) take a hit rather than have the balls to add to their holdings in INM.
Any chance of a breakdown on how the debts of €400m have been amassed?
Could you just explain, for those with less experience, why it might be thought that the shareholders would be wiped out first? What is the general/expected procedure for creditors recuperating debts from shareholders? I take it that with limited liability, they can’t simply go around asking shareholder for money.
In the event of no debt write down, what should we expect to see happening?
Reblogged this on Machholz's Blog and commented:
Looking after the faceless moneymen and the power behind the puppets in Lenster House!
Has this bank heist actually taken place or are the INM chancers just trying it on?
If it happens we have it in our power to close the papers.Just stop buying them. I have already stopped Mondays edition of the Indo. because it is just a re-hash of Sunday Independent
DOB’s buddies have publically said that IN&M is “too small” to be a publically listed company. I think the existing equity owners will be wiped out by the looming IN&M prepack in order to take the firm private. However, DOB and maybe DD will get an equity stake in the new venture, leading to a de-facto debt write off.
When Luke Ming Flanagan flagged this on Vincent Browne a few nights ago, I was astounded at how quickly Joe O’Reilly FG TD for Cavan/Monaghan cut in, dismissing it as “populist nonsense”. If it is just nonsense, why has INM not denied it?