IBRC staring at colossal loss as iconic Belfast property comes onto the market

[The BBC is now reporting this sale here]

It remains the position on here that IBRC – the “bank” which we 100%-own which was formed from the merger of Anglo Irish Bank and Irish Nationwide Building Society – is going to cost us a gross €52bn to bailout and not €35bn as commonly expected. The €17bn difference is the interest on the promissory notes which I believe Minister Noonan confirmed last week was to be paid in full, on schedule to IBRC. This view on here differs with other views, but the main reason for the disagreement appears to be over the forecast of IBRC’s losses between now and 2022. Some think that IBRC will break even in 2012-2022 but I think it faces additional losses, and the €742m loss in the first six months of 2012 was just a precursor to a decade long work-out of loans which will be costly and which will see additional major losses come out of the woodwork.

And in that vein, step forward today the Odyssey Pavillion complex in Belfast which comes onto the market via Savills with an asking price of GBP 10m (€12.58m). The developer of the property included prominent northern Ireland property man, Peter Curistan and the property had GBP 71m owing to Anglo when the developer was placed in administration.

So even if the asking price is realised, Anglo or IBRC as it is now, will face a loss of at least 85% on its loan, and given the foreclosure and recovery costs, the loss is likely to be more. Nearly 70% of IBRC’s loans are now impaired according to the H1,2012 accounts and the view on here is that IBRC still faces multi-billion euro losses as the legacy loans are worked out between now and 2020.

And remember that it costs us €300m-a-year to operate IBRC, a cost no doubt reflecting the €1m-CEO and the money-is-no-object approaches to the Quinns and David Drumm. And remember that IBRC has been paid €900m in NAMA subordinated bonds for its loans and these bonds will not be honoured if NAMA makes a loss, and the jury is still out on NAMA’s prospects. And remember IBRC lost a key case against bondholders in June 2012 in the UK which could expose it to massive losses if IBRC loses its appeal and other bondholders get antsy. And don’t even mention the disastrous INBS mortgage book absorbed into IBRC. Yes, the view on here is the literal interpretation of Minister Noonan’s response to a parliamentary question was correct – IBRC will cost us €52bn gross to bailout.

As for the Odyssey itself, according to Savills “The Odyssey Pavilion comprises a total of 15 leisure based units extending to a total gross internal area of over 242,000 sq ft and occupies a prominent quayside river position. It acts as a gateway to the ever expanding Titanic Quarter which now hosts the Titanic Belfast signature tourism attraction, the Paintworks Film Studio, BelfastMetropolitanCollege, Premier Inn, the Public Records Office (NI) and the Northern IrelandSciencePark.” The brochure for the property is here.

The Odyssey was developed in part by Peter Curistan who has been behind developments in Northern Ireland and mainland UK. He was also behind the Parnell centre on Parnell Street in Dublin city centre, where he was on the losing side in a battle to repay Anglo’s loans adjudicated in Dublin’s High Court earlier this year. In Northern Ireland, he was battling with Anglo in the courts claiming Anglo behaved improperly towards his company in favour of a company associated with one of the Maple 10, though it seems he lost his case there. All of this litigation is not cheap, and even if Anglo wins, it faces further a battle to recover its costs. I haven’t seen Peter Curistan associated with NAMA, and he appears to be a developer whose loans were left in IBRC by the Agency.

Yes, that €52bn bailout estimate for IBRC is looking correct even if the blogpost here last week caused consternation in some lofty parts of our Establishment.