“Ms Margaret Hayes: The treasurer of the bank is working on a strategy to address the roll-over of funding for the elements that are due and maturing next spring. We have been advised that this is well advanced but, as the Deputy will appreciate, this is commercially sensitive and I cannot go into any more detail about it.
Deputy Pearse Doherty: I understand that. Does one of the options include the possibility of further recapitalisation by taxpayers of that bank if the strategy does not—–
Mr. Ray MacSharry: That does not arise. Our capital adequacy arrangement at the moment is 18%, which is very high. We are probably the best capitalised bank in the country. That is to take care of the problems of arrears.” Permanent TSB’s two public interest directors before the Oireachtas Finance and Public Expenditure and Reform Committee on 19th December 2012
Permanent TSB has two meaty bonds that it needs to imminently repay – one next Monday 14th January for €1.3bn and the same again in April 2013. The 99.2% state-owned bank says that it already has the funding in place for both redemptions, that is, the €1.3bn next week and the €1.3bn due in April 2013. The bank’s directors were also categorical at an appearance before an Oireachtas committee in December 2012 that no additional capitalization would be required from the taxpayer and that the bank was not in receipt of any Exceptional Liquidity Assistance from the Central Bank of Ireland. PTSB failed to sell the €8bn Capital Home Loans business in the UK last year when it didn’t attract deemed-adequate prices and only realized a relatively paltry €287m from the sale of its car loan business. It only had €58m of cash on hand at the end of June 2012 (see balance sheet below). So where has it gotten the money to now boldly assert it can pay the two maturing bonds?
Whilst it would generally have been open to PTSB to go cap-in-hand to the ECB for a loan secured on its assets – mostly loss-making impaired mortgages in Ireland with many in negative equity and loss-making mortgages in the UK – it is understood in the industry, that the collateral at PTSB would not have been such to provide it with sufficient funds to pay the two bonds.
However, it is understood from sources that PTSB has gone to “private banks” to access the funds on a repo basis, that is, secured on specific assets in the bank. But if Bank of Ireland has to pay 3.2% on 3-year debt secured on blue-chip mortgage assets, then how much did PTSB pay?
But why would private banks advance funds in the first place to a bank which seems to be drip-dripping bad news all the time – in August 2011, it told the European Commission it would be returning to profit in 2014, a year later in August 2012, it was reported to have said it would return to profit “at the end of 2014 or start of 2015” and yesterday, it said it would return to profit in 2016. It has a mortgage book which its directors say is 20% impaired, but in line with accounting practice, this ignores mortgages on homes in negative equity.
It emerged in 2011 that former finance minister Brian Lenihan has been issuing so-called “letters of comfort” to the Central Bank of Ireland as a condition of that bank advancing funds to Anglo. The letters of comfort acted as quasi-state guarantees to the Central Bank for its advances to Anglo; I say “quasi” as the whole legality of the Anglo promissory notes is set to be tested in the courts shortly with David Hall’s challenge in the High Court set to commence at the end of January 2013. Might there have been letters of comfort exchanged in PTSB’s case?
And if customized guarantees weren’t given, were the loans covered by the Eligible Liabilities Guarantee scheme. And does the repayment of these loans depend on a resolution of PTSB’s loss-making tracker mortgage book and its Asset Management Unit?
We had a splash announcement yesterday from PTSB on its €450m of lending into the Irish economy in 2013. It would be nice to see an announcement on how it is financing €2.6bn of bonds that fall due imminently.
NAMA Wine Lake 