IRISH NATIONWIDE gave tens of millions worth of sterling and dollar loans to former Anglo Irish Bank chairman Seán FitzPatrick as part of his loan transfers between the two institutions to conceal up to €122 million in borrowings from Anglo Irish.
The Irish Times understands the building society provided Mr FitzPatrick with loans of $56 million and £14 million on September 26th, 2007.
Irish Nationwide also lent the then Anglo Irish chairman $26 million on September 27th, 2006. This loan was secured with an undertaking from Anglo Irish, meaning that the bank would repay the loan if he could not. The £14 million personal loan was secured on properties and 4.5 million Anglo Irish shares, worth €55 million at the time.
It is understood that Mr FitzPatrick drew loans in different currencies as he held investments in sterling and dollars.
These borrowings form only part of Mr FitzPatrick’s loans from Irish Nationwide in 2007 as Anglo Irish said last month that Mr FitzPatrick had repaid €122 million on the bank’s books in September.
Mr FitzPatrick borrowed from Irish Nationwide over eight years, drawing loans before Anglo Irish’s accounting year-end on September 30th and repaying them within days with fresh loans from Anglo. By transferring the loans, Mr FitzPatrick hid them from the bank’s auditors and shareholders. The Financial Regulator and the Office of the Director of Corporate Enforcement are investigating Mr FitzPatrick’s loans.
Irish Nationwide chief executive Michael Fingleton directed queries to his spokesman who declined to comment. Mr FitzPatrick had no comment, saying he had been advised legally not to make any comment in relation to his loans.
An Anglo Irish spokeswoman said the bank could not comment on the undertaking provided as security against a loan in 2006.
Alongside its investigation into multibillion-euro lodgements in Anglo Irish by Irish Life Permanent (ILP), dislcosed last week, the regulator is investigating whether there was a reciprocal relationship between the two institutions.
At issue is whether there were flows of money into ILP from Anglo at the end of the first half of ILP’s financial year in June and the second half in December.
ILP said last Friday that Anglo accounted for €3.33 billion in short-term cash deposits from other banks held last June. These deposits ranked among €7.73 billion in short-term inter-bank deposits, which were pledged against mortgage assets.
ILP said the transactions were “correctly accounted” for in its half-year accounts, adding that there were no material collateralised transactions with Anglo Irish at the end of its financial year.
The company’s spokesman said it will co-operate fully with the regulator. “We are absolutely confident that we can deal with any questions they might have,” he said.
The new details about Mr FitzPatrick’s loans emerged as Irish Nationwide had its debt rating – an indication of its ability to repay its borrowings – downgraded by two notches to one level above speculative or “junk” status yesterday. A drop to “junk” status would stop many large companies investing in the building society’s bonds.
International credit rating agency Moody’s also reduced Irish Nationwide’s rating to a level representing “modest” financial strength, “potentially requiring some outside support at times”. The agency said the outlook for the building society was “negative”, meaning it may downgrade the lender’s ratings again soon.
The lower ratings will force the lender to pay higher interest rates at a time when it is preparing to raise €1.5 billion in the markets this year to cover debt payments.
Mr FitzPatrick has declined to appear before the Oireachtas committee on economic regulatory affairs meeting today to explain why Anglo Irish needed to be nationalised, citing legal reasons.
Committee chairman Michael Moynihan said: “We need and deserve a full explanation as to what went on at the bank which led to the necessity of it being nationalised.”
The committee has written to the Government asking that a motion be put before the Dáil that would compel witnesses to attend hearings.