State wants to know if Anglo Irish was worth anything in 2009

Assessor to find out if failed bank had any equity value when nationalised a decade ago

Taxpayers ultimately committed €29.3 billion to Anglo Irish Bank by the end of 2010. Photograph: Bryan O’Brien

Taxpayers ultimately committed €29.3 billion to Anglo Irish Bank by the end of 2010. Photograph: Bryan O’Brien

 

The Government is seeking to hire a firm to assess whether Anglo Irish Bank had any equity value at the time of its nationalisation almost a decade ago, which will determine who stands to benefit if there are funds left over after the failed bank’s creditors have been dealt with.

Laws enacted in January 2009, when Anglo Irish Bank was seized, specified that an assessor must be appointed to see if it had a real value at the time, and whether shareholders should receive compensation.

However, the Department of Finance has only initiated the process this week as it issued an invitation to firms to tender for the work, which may cost up to €750,000.

The move comes ahead of a critical court case involving the family of businessman Seán Quinn early next year which will largely decide the scale of recovery from the ruins of Anglo Irish Bank, which was renamed Irish Bank Resolution Corporation (IBRC) in 2011 and put into liquidation two years later.

The Quinns, in a case originally filed in 2011, claim the bank illegally lent them over €2 billion to shore up their investment in the bank in 2008 and that they have no liability for the amount.

Bad loans

It is widely expected that an assessor will conclude the bank had no real equity value when it was taken over by the State, as then finance minister Brian Lenihan had to move within months to pump capital into the company as its bad loans soared following the property crash. Taxpayers ultimately committed €29.3 billion to Anglo Irish Bank by the end of 2010.

However, the process may prove to be a necessary box-ticking exercise, if there are any surplus funds after the bank’s creditors are addressed.

IBRC’s liquidators have so far paid out “dividends” equivalent to 50 per cent of valid senior unsecured claims. The State, which is the main creditor, has received about €560 million.

The liquidators – Kieran Wallace and Eamonn Richardson of KPMG – have said that they expect senior unsecured creditors to ultimately receive between 75 per cent and 100 per cent of what they were owed. That’s after all liquidation costs, expected to top €300 million by the time most of the wind-up work is completed in 2022, are covered.

Unpalatable task

If there is money left over after the senior creditors have been repaid, the liquidators face the politically unpalatable task of repaying some or all of the €300 million owed to a group of junior Anglo Irish Bank bondholders who refused to share the burden of its losses during the crisis.

Next in line are holders of £300 million of preference shares, held through a special purpose vehicle called Lambay Capital Securities. While that vehicle was put into wind-up earlier this year as its directors all but gave up hope of recouping the investment, the liquidators, Neil Hughes and Dessie Morrow of Baker Tilly Hughes Blake, will keep the firm going until the end of the decade at least in the event there is any chance of a recovery.

Finally, the outcome of the assessor’s work will decide whether Anglo Irish shareholders on the date of the nationalisation should receive any compensation if there are available funds at the end of the liquidation, or whether they will be trumped by the State.