Anglo chiefs rush home to stop rot

Emmet Oliver and Jon Ihle

Anglo Irish Bank executives rushed back to Ireland last week as the company's share price spiraled towards virtual collapse and its credit profile plunged as speculators increasingly bet it could not meet its bond debts.

The Government and Anglo Irish representatives remained in touch throughout last week to discuss a plan to capitalise the bank through the issuing of preference shares.

Private equity group Mallabraca has made it clear it's not interested in buying Anglo Irish and only has an interest in Bank of Ireland.

Senior management cut short their investor roadshow last Wednesday as shareholders rejected their pitch and fled from the stock in an extended sell-off following the bank's disappointing full-year results earlier in the month.

The cost of insuring Anglo Irish in the event of a bond default soared to 575 basis points, almost 80% higher than the rating of AIB, the country's largest bank and one potential buyer of Anglo Irish.

This means it cost €575,000 to insure €10m of Anglo Irish subordinated bonds.

Anglo Irish now has the highest credit risk of any Irish bank, when measured using credit default swaps (CDSs), bond insurance instruments studied closely by the international markets.

Anglo dipped as low as €0.28 on Thursday before recovering slightly to end the week at just €0.38 - a 60% fall from the month's high - marking the latest of several collapses in the bank's share price since a brief high this time last year. Markets responded badly to a 37% drop in pre-tax profits as well as a bad debt provision of nearly €750m.

Finance director Willie McAteer was scheduled for a two-week, 14-city tour of the US and Canada to present results and strategy to some of the bank's largest and most committed institutional shareholders, including Denver fund giant Janus Capital.

But McAteer was back in Dublin by Thursday, cutting the roadshow in half, to have meetings in the Department of Finance alongside chief executive David Drumm.

Reports last week stated McAteer returned for a scheduled board meeting, but he told reporters after the bank's results presentation on 3 December that he would be out of the country for two weeks.

December 14, 2008

Comments

#1 James Dundrum commented, on December 14, 2008 at 6:02 p.m.:

"Anglo dipped as low as €0.28 on Thursday before recovering slightly to end the week at just €0.38..."
Anglo is certainly beaten down but sorry...a rise of 35.71% (from .28 to .38) can hardly be termed 'recovering slightly'.

#2 Jack commented, on December 14, 2008 at 8:32 p.m.:

The issue is the private equity companies. Why should the Irish government allow private equity companies to win Bank of Ireland? Given by the recent injections of capital by private equity companies in troubled banks, the PE crowd will want to invest in Bank of Ireland through preferred stock and, most likely, have the Irish government take on the risk of the further losses in the loan book. All this sounds like the PE guys get all the upside, meanwhile tax payers get the downside. Why can't the Irish wake up and realize the situation is beyond the point of not acting? It should take a stake in the banks similar to the US TARP. Allow the tax payers invest and reap the rewards on the upside; this requires the government invest and appoint some credible management teams. Tough choices, but time to action. Otherwise, it's back to farce times similar to 1922.

#3 Shark Trager commented, on December 15, 2008 at 5:54 p.m.:

Sorry James but you are clutching at straws there. I laughed this morning at the news Irish shares had "surged" ahead on foot of the 10bil bail out. If surged now means increased by a few cent then dictionaries will need to be revised.

#4 antony commented, on December 15, 2008 at 8:58 p.m.:

Shark I think you misunderstood what James said. He also laughed as we all did.