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.
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.