Inside the world of business
Investigation into AIB's sale of Zachodni more a formality
ONE OF THE two underbidders for Allied Irish Bank’s 70 per cent stake in Bank Zachodni WBK, Poland’s third largest bank, is obviously smarting after being beaten in the auction by Spanish banking giant Santander.
Much was made in the Polish press about the country’s financial regulator looking into potential irregularities in the transaction – namely, whether confidential information was passed to Santander that the others did not get to see.
Poland’s PKO Bank Polski, which is 51 per cent state-owned, must feel hurt it has missed out on the chance to buy the country’s third largest lender and take back domestic control of another Polish lender at a time when, like in Ireland, credit is in shortage supply in a country with plenty of foreign banks.
The investigation by regulator KNF appears more a formality rather than hindrance to AIB taking the first step on the road to raising the €7.4 billion it needs by the end of the year. AIB has secured a decent price in an auction run in tight time constraints and with the added difficulty of selling an asset above a government-backed bid from Poland’s largest bank.
AIB’s managing director Colm Doherty has suggested that other deals were on the horizon while weekend press reports suggested AIB could generate up to €600 million from below- the-radar deals. Analysts expected the bank to raise up to an additional €2 billion from the sale of AIB’s 22.5 per cent stake US regional bank MT and its UK banking division.
This, with the €2.5 billion capital gain on Poland and other bits and bobs of businesses, would leave a shortfall of €2.3 billion to reach the final €7.4 billion and this bridge must be crossed with shareholders’ cash. Bank of Ireland got a €1.7 billion rights issue away – with a €1.5 billion placing from institutions and the State – but had the good fortune of tapping investors first and at a time more favourable to an equity raising.
The key question is whether the bank can complete the asset disposals at the right prices and convince investors to cover the difference. While the Polish result is encouraging, it must be borne in mind that this was AIB’s “jewel in the crown”. It was also the asset that attracted the most international interest and was the easiest to sell. The coming weeks should be interesting and will help clarify just how big a stake the Government will be left with in the bank and whether it is a majority, controlling share.
Pensions fail to deliver
IRISH PENSION providers continue to bleat from the sidelines as evidence of their inability to deliver for customers mounts.
Friends First yesterday published the results of a survey pointing to a continuing gap in private pension provision between men and women. It uses all the emotive terms, talking of “pension timebombs and of women “not providing adequately for their retirement”, and bemoans current incentives that are a “barrier to increasing coverage”.
Ironically, the story appears on the same day as news that Topaz, Ireland’s largest fuel provider, is shutting down its defined benefit pension scheme – burdened with a €26.9 million deficit. Pensioners face a shortfall and now rely on the goodwill of the company to make it up.
The Irish pensions industry has performed woefully over the past decade. On the one hand, it has berated government for not making pension saving sufficiently attractive to people to allow pension firms to sell them over-priced products; on the other, it has singularly failed even to match the pace of inflation over the past decade. In the 10 years to August, the money invested in private pensions in Ireland has lost an average of 0.1 per cent every year.
The industry continued to over-invest in Ireland – particularly Irish equities (for which you can read listed banks) – in defiance of best practice. At this rate, far from the promise of a comfortable retirement, many Irish people can look forward only to disillusionment as the pensions industry continues to reward itself with their commissions. No wonder hard-pressed consumers are reluctant to trust it with their funds.
Nama’s role in McInerney
NAMA TOLD the High Court last week it was “neutral” on whether or not McInerney Holdings’ Irish businesses were placed in examinership, but whatever the outcome of the process, the State agency is going to play a role in its immediate future.
McInerney Homes and its associated companies owe €111 million to a syndicate of three banks, State-owned Anglo Irish, Bank of Ireland and Belgian-controlled KBC. About €70 million of the total is due to Anglo and Bank of Ireland. Those debts are scheduled to be transferred to Nama towards the end of the year.
This means that the agency has the right to approve any changes to the loan agreements involved, even if those changes are agreed before Nama takes charge of the debts.
Billy O’Riordain of PricewaterhouseCoopers has been appointed examiner to the companies. O’Riordain has to report to Mr Justice Frank Clarke by October 1st on the companies’ prospects of survival in three scenarios, including if a new lender were to replace the existing syndicate. Mr Justice Clarke didn’t say one way or the other if he was thinking of Nama when he referred to the possibility of a new lender on the scene, but once the loans are transferred to the agency that is, in effect, what will happen.
So, even assuming that O’Riordain can get a deal that works for McInerney, Oaktree and the banks, it will also ultimately have to work for Nama. That’s a very Irish form of neutrality.
TODAY
The Revenue Commissioners will publish their quarterly list of tax defaulters.
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