This page has been archived and commenting is disabled.
Anglo Irish Tier 2 Debt Downgraded By S&P To CCC On Restructuring Concerns, As Bank Prepares To Receive Bail Out
The EURUSD was last seen well north of 1.36. The reason for this strength certainly was not based on news flow out of Ireland, where Anglo Irish just saw its Tier 2 debt downgraded to CCC, on what the rater called a "clear and present risk" of a restructuring of this debt. Yet this is likely irrelevant in the grand scheme of moral hazard things: after all, as the FT reports, Ireland is about to unveil an "additional capital injection expected to be about €5bn (£4.3bn). That would bring the bail-out costs for Anglo Irish to €30bn, shy of the €35bn forecast by credit rating agency Standard & Poor’s." Nonetheless, Ireland’s cost of borrowing on Tuesday hit record levels with yields on 10-year government bonds jumping 25 basis points to 6.72 per cent. And to make things delightfully surreal, the Irish unemployment rate was reported to jump from 13.0% to 13.7% in one month.
From S&P
- It has been reported that Anglo Irish Bank Corp. Ltd. would like to carry out a liability management exercise in respect of its lower tier 2 regulatory capital instruments, subject to regulatory and European Commission approval.
- As a result, we are lowering our rating on Anglo's lower Tier 2 instruments to 'CCC' from 'B' to reflect our view that there is a "clear and present risk" of a restructuring of this debt.
- Our 'BBB/A-2' counterparty ratings on Anglo remain on CreditWatch negative pending our assessment of the further planned capital injection into the bank, the restructuring plan approved by the European Commission, and our view of the bank's medium-term importance to its owner, the Irish government, once Anglo has been restructured.
- Upon resolution of the CreditWatch, the counterparty ratings may be affirmed, or lowered by one or more notches.
Rating Action
On Sept. 28, 2010, Standard & Poor's Ratings Services lowered its rating on Anglo Irish Bank Corp. Ltd.'s nondeferrable dated subordinated debt (lower Tier 2) securities to 'CCC' from 'B'. The 'BBB/A-2' counterparty credit ratings on Anglo Irish Bank Corp. Ltd. (Anglo) remain on CreditWatch with negative implications, where they were placed on Jan. 26, 2010. Issuance guaranteed by the Republic of Ireland (AA-/Negative/A-1+) is not affected by today's rating action.
Rationale
The downgrade reflects our opinion that the likelihood of a liability management exercise in respect of Anglo's lower tier 2 instruments has increased.
It has been reported that Anglo would like to carry out a liability management exercise, subject to regulatory and European Commission (EC) approval, in respect of its lower tier 2 instruments, which totaled €1.72 billion on June 30, 2010. We also note that while Ireland's minister of finance has made a number of forthright public statements strongly supporting Anglo's senior obligations, he has not done so in respect of these subordinated obligations.
In our view, there is a "clear and present risk" of a restructuring and we have therefore lowered this issue rating to 'CCC' from 'B', in accordance with our criteria (see "Methodology For Rating Bank Nondeferrable Subordinated Debt (Lower Tier 2 Regulatory Capital), published on Aug. 4, 2009). If the bank announces an exchange offer, we would expect to characterize it as a "distressed exchange" and lower the rating to 'D', in accordance with our criteria. This action would have no impact on the counterparty credit ratings unless there was a default on nonregulatory capital issues.
Our 'BBB/A-2' counterparty credit ratings on Anglo reflect our expectations of ongoing support from the Irish government, which includes the minister of finance's public statements on the senior obligations. Anglo was nationalized in January 2009 by the government of Ireland and the bank has received very substantial capital injections and funding support since then. Further, Anglo is participating in the arrangements made available by Ireland's National Asset Management Agency (NAMA) into which participating Irish banks are transferring property development lending and associated assets at a significant discount to help cleanse their balance sheets.
The government has announced that it wishes the bank to be split into two and wound down over time, and that it will not be allowed to engage in any new lending. Anglo's customer deposit franchise, which we consider to be weak and in decline, will be separated from Anglo as part of the split.
The government has stated that it wishes, subject to EC approval, to split Anglo into an asset recovery bank (ARB) and a funding bank (FB). We expect that the ARB will be the renamed existing Anglo legal entity.
The government has announced that it intends the split to be effective early 2011. Both the ARB and the FB will be regulated banks but neither will engage in any lending. We understand that the ARB will focus on working out Anglo's non-NAMA loans over a period of time. These loans (net of provisions) totaled about €29 billion on June 30, 2010.
It has been reported that the FB will contain Anglo's declining customer deposit book. It will be a stand-alone bank, completely separate from Anglo's loan assets. Anglo receives significant levels of special funding lines from the Central Bank of Ireland, and participates in open-market operations with the European Central Bank. We regard Anglo's funding and liquidity position as highly stressed.
»
- 6396 reads
- Printer-friendly version
- Send to friend
- advertisements -
ahh the sweet smell of a recovery in progress ...............
those "green shoots" really grown into strong oak trees he :)
Damn, I jumped the ship at the exact right moment, screw Ireland
The Irish woman club already made T-shirts to counter your quote:
http://2.bp.blogspot.com/_TQmtZsLrDI8/Sjv4gPe0OcI/AAAAAAAAAeQ/1U2NkkHWjHw/s400/111007_ugly_woman_shirt.jpg
This is exactly how i see Ireland
+1 HAHAHAAAAAAA!
I just woke up. Let me guess.. Futures are in the green. Actually i just checked. S&P futes only down .50. Its over Johnny.
Did you press F5 already?
If the glitch isn't fixed by then, I propose you reboot your computer or call the Fed helpdesk.
Maybe there is a shortage of Euros for this bailout.
Anyone checking out the Dodd-Frank legislation going into effect 10/18?
Talk about Nanny State.
Banks win again, the world loses.
Show me bonuses for the filthy and deplorable.
Chart: SPX
Buckle up, folks.
http://99ercharts.blogspot.com/2010/09/spx_29.html
I looked at the chart that you posted and have "buckled up."
Now please, if you will, tell me why I'm strapped in. Are we going up or down in your view?
99er, I have a similar chart on my PC, except that I'm looking at the channel on the 15 min. It's going to converge with that huge monthly trend line going back to Oct 2006 and Apr 2009. They converge today or tomorrow. Check it out.
I believe technicals are probably the best way to guage the markets, however, I haven't an ioda of skill interpreting them.
What see yee in the charts?
(I won't hold you accountable...............)
Do you think Prechter is correct for example?
I think that lately technicals have been used to set up shorts for the slaughter. Often futures drift up through resistance after hours and then the market takes off. Unless real selling (heavy volume) return, I don't see them being very helpful.
However, we don't seem to be able to get through 1150 for some reason.
I've sure noticed that 1150 ceiling!!!
Thanks for responding.
Until I became a cynic, I knew nothing about TA; I now find it indispensible to cut through all the crap one hears from Bulls and Bears alike. A good book is John J. Murphy's TA of the Financial Markets and a good site to follow if you're interested in daily action is evilspeculator.com. This place is great if you believe (as some don't) that the news is important to price action. Best of luck to you.
Hey,play that Notre Dame University victory march theme will ya:
http://www.youtube.com/watch?v=7csGhMQoQms
"Rah,Rah....."marching onward to history"
Where the h-ll is my f-ing bailout!
If you're middle income forget about it.
Just keep working and pay your taxes.
Bailouts are for the rich and the poor.
EUR about to get monkeyhammered.
It should. Who knows. Everyone is focusing on the USD "death cross".
As the Chinaman said - "I be bank."
http://news.yahoo.com/s/ap/20100929/ap_on_bi_ge/eu_europe_austerity_protests
Americans lack the sack to do anything about it.
so we get a good bank - bad bank
we get some begging for some more sugar
lets just sweep the shit under the carpet.
for your listening pleasure - for all the talking heads of all content and no fucking action.
Spain to follow shortly
http://www.dailymotion.com/video/x12spb_talking-heads-once-in-a-lifetime_music
To CCC good god, no wonder much of our media don't report this as dire. They don't want to panic the markets. Irelands on it's way to be like Greece, Greece is just a matter of time before it defaults. The rest of the PIIGS are playing pretend and extend in order to hope someone will pull a rabbit out of their hat.
Just when you thought it couldn't get any worse - it has...........
http://www.bloomberg.com/news/2010-09-30/anglo-irish-allied-irish-may-need-as-much-as-19-6-billion.html
i love zerohedge policy cheap hosting
Current difficulties seem to be caused by real estate bubble which is so well known in the world. I wonder how governments keep ignoring this threat for decades. Or, could it be that in euro zone governments can do nothing to prevent this as it is huge, even unlimited, free money that floats around the Europe looking for next real estate bubble to pop up.
http://www.prime-targeting.com/irish-economy-downgraded/