The regular audience on here will be aware of the prediction that Permanent TSB, the 99.5% state-owned bank, will run out of cash by April 2013 when it needs redeem significant bonds UNLESS the bank can dispose of assets beforehand or it gets an additional bailout. Yesterday, PTSB issued a statement to the stock exchange confirming that it has sold €351m of loans (net of provisions and write-offs at February 2012) for a total of €287m. This means that PTSB will need book a further loss in its books of €64m, and may arouse suspicion that the price is a fire sale price forced on PTSB by its imminent obligations to redeem significant bonds in January and April 2013.
The buyers of the loans are identified in the PTSB release as a SPV called “Consumer Auto Receivables Finance Limited” and a “global bank”. It is understood that Deutsche Bank is behind both, and industry insiders have raised eyebrows at the involvement of Deutsche Bank is these loans, the majority of which are understood to be car finance loans, because car finance is not an area in which Deutsche Bank specializes.
In addition, there has been a management buy-out of a PTSB unit, Permanent TSB Finance Limited. The management set up a new company called “First Citizen Finance Limited” and all staff in the PTSB unit are expected to transfer to the new company. The new company is contracted by the buyer of the loans to service the loans. “Management buy-out” might be a grandiose term for this transaction as PTSB has said the sale was for “a nominal consideration”.The unit which was bought out by management made a €16m loss in 2011, according to the statement, but it is unclear if that includes loan impairments and the operating profit of the businesses was not disclosed.
So, did a bank into which we have to date shoveled €4bn and which we own 99.5% execute a financially stupid transaction? Was the sale price for the loans of €287m a “fire sale price” forced on the company by the need to repay bonds in January and April 2013. And was selling a unit to management for “a nominal sum” a good deal for PTSB? Davy Corporate Finance again advised PTSB and how much did they get paid on the transaction? How were the portfolios marketed so as to maximize value? Can we expect Deutsche Bank, which doesn’t specialize in car finance, to flip the assets and make a quick windfall profit?
Given that Minister Noonan keeps on telling us the details of these transactions in banks which we practically own are commercially sensitive, who knows, who can tell.