Anglo €15m loan signed off after bank rescue

ANGLO IRISH Bank approved a loan of €15 million to Belfast property developer Patrick Kearney, one of the Maple 10 investors, …

ANGLO IRISH Bank approved a loan of €15 million to Belfast property developer Patrick Kearney, one of the Maple 10 investors, to buy subordinated bonds in the bank a month after the nationalisation of the lender in January 2009.

The bank signed off on the loan to Mr Kearney, described in an internal application as a top five client of the bank’s Belfast office, to buy a subordinated bond in Anglo which traded in the markets at the time at 62 cent in the euro.

Anglo estimated in the loan proposal that it would be “self-financing” as Mr Kearney would pay interest of €675,000 on the loan which would be covered by interest of €708,000 paid by the bank on the subordinated bond.

It was estimated by the bank in the loan proposal that Mr Kearney would make a profit of €9 million on the bond if it was repaid on “a call date” in June 2009 or June 2014 when it eventually matured.

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A spokesman for Mr Kearney said that he declined to comment.

Irish Bank Resolution Corporation, the new name for Anglo, also had no comment to make.

“IBRC has a strict legal obligation not to disclose details of individual customer dealings with the bank in the public domain. The bank cannot therefore comment on any specific details in this matter,” said a bank spokesman.

In the loan application, Anglo said the difference in price on the bond and opportunity to make a gain existed due to the “significant turmoil in the financial markets”.

“The client will not necessarily buy Anglo bonds but will research the market and revert to the bank for approval before purchasing same,” said the loan application.

Mr Kearney is understood to have to drawn some of the approved funds to buy bonds in Anglo, though it’s not clear how his investment or loan was affected by losses later imposed on junior bondholders by the lender.

The bank set two preconditions on the loan – the purchase of the bonds had to be approved by the bank’s credit committee and by the lender’s compliance unit if Anglo bonds were to be bought.

Mr Kearney was described on the application as one of the Belfast office’s “most capable and long-standing clients.” The bank estimated in the proposal his net worth was more than £125 million which included Anglo shares worth £38 million and cash of £10 million.

He was one of 10 clients approached by the bank in 2008 to buy a 10 per cent stake as part of the unwinding of a major contracts for difference (CFD) position in Anglo held by Sean Quinn.

The PBN group of property companies and Mr Kearney had loan limits totalling £184 million (€206 million) with Anglo, including £3 million personally, at the time of the application in February 2009 to borrow to buy the bonds.

The bank said in the loan application that PBN Property Limited was jointly owned by Mr Kearney and Neil Adair, who was “well known to the bank as an ex-associate director who established the Belfast office back in 1997”.

Former Anglo chairman Sean FitzPatrick invested money in an Anglo subordinated bond with a maturity in 2014. The bank, which is costing the State €29.3 billion, has imposed heavy losses on subordinated bondholders since 2009.

Simon Carswell

Simon Carswell

Simon Carswell is The Irish Times’s Public Affairs Editor and former Washington correspondent