Has the EU a hand in Anglo’s second tranche transfer to NAMA?

Maeve Dineen at the Independent reports today that there has been a delay with transferring Anglo’s second tranche (previously reported to comprise €8bn of the €13bn being transferred) and the reason: “a delay in processing all the information required by NAMA for each loan being transferred”. Let’s look at Anglo’s books again, starting with the 2009 accounts. If the tranche 1 haircut of 55% is applied to €8bn of loans in tranche 2, then Anglo will be left with a residue after the tranche 2 transfer of over €18bn of loans and a provision of less than €3bn (14%). Of course if the reports that the Financial Regulator forcing banks to face up to losses in their non-NAMA loans are correct then Anglo may well have other substantial write-downs on the remaining €36bn of its loan book.

The EU approved a limited injection of €10.44bn of capital by the government into Anglo in March 2010. So far €10.3bn has been injected under this decision (which is completely separate to the €4bn injection last year). So if Anglo is forced to recognize another €4.4bn of losses when tranche 2 is transferred, that may well lead to a need for another immediate injection.

The EU Decision makes it clear that the EU was unhappy with Brian Lenihan’s unauthorized commitment to provide State-aid to Anglo in December 2009 and also that the approval contained in the Decision was in respect of €10.44bn only. Should any further injection be required there would need to be communication with the EU – whether that is merely notification or a more serious application for approval is unclear. The EU of course have had the revised Anglo restructuring plan since the end of May 2010 and it is likely that extra recapitalizations have already been flagged. And to recap, at this point the government has put €10.3bn of the €10.44bn limit into Anglo.

As discussed here last week, there is a tipping point for State-aid at which the EU will intervene. For NAMA’s operation that point may not have arrived yet but for interconnected Anglo, could the EU be considering an intervention now?

UPDATE: 19th July, 2010. With Moody’s downgrading Ireland’s sovereign debt (and consequently NAMA’s bonds) from Aa1/negative to Aa2/stable and stating ” Overall, the recapitalization measures announced to date could reach almost EUR25 billion (equivalent to15.3% of Ireland’s 2009 GDP) — and Moody’s expects that Anglo Irish Bank may need further support. “, that places Moody’s at odds with the Minister for Finance who was saying 3 days ago at the launch of the NTMA report that “I am confident that the cost of saving Anglo Irish and Irish Nationwide will be €23bn to €25bn and the taxpayer will not lose anything with AIB and Bank of Ireland.” Let us hope the EU is carefully considering that Anglo restructuring plan.

UPDATE: 20th July , 2010. Emmet Oliver at the Independent reports that NAMA said yesterday that the delay with Anglo’s second tranche was “due to the amount of paperwork involved in the process”, according to Emmet, and more importantly “a spokesman for NAMA said yesterday said there was no other reason for the delay” – so no issues with EU approval it would seem. Interestingly when Simon Carswell at the Irish Times contacted Anglo, their spokeswoman refused to comment on the reason for the delay.