What the Anglo Ten Owe the Bank…And we are Writing off…

Simon Carswell has a great piece on the front of the Irish Times today detailing just how much the Anglo 10 owed the bank at nationalisation. This was the group of 10 people that were loaned money by Anglo Irish Bank to buy 10% of its stock with the money lent by the bank. They cannot be chased for 75% of the value of their loan for which Anglo took the stock as collateral. Meaning that roughly €300m is now written off by the newly nationalised bank.

This newspaper has confirmed the customers and loan amounts at the start of this year were:

Jerry Conlan, property investor and owner of a hospital chain, €56.5 million; Patrick Kearney, a Northern Irish developer, €46.6 million; Seamus Ross, a developer and hotel owner, €46.4 million; Gerry Gannon, a Dublin-based developer, €46.4 million; Joe O’Reilly, the developer behind the Dundrum Town Centre in Dublin, €43.4 million; Brian O’Farrell, a north Dublin auctioneer and property developer, €41 million; Paddy McKillen, a Dublin-based developer, €38.9 million; Gerry Maguire, the owner of shopping centres in Drogheda and Dundalk, €31.7 million; John McCabe, a Meath-based builder, €31.6 million; and Sean Reilly, a Meath-based developer, €9.7 million.

The identities of the 10 caused enormous rumour and speculation when it was revealed they got involved in efforts to keep Anglo private.

The loans to the 10 long-standing customers totalled €392 million as of last January, the records show, and are listed by the bank as “personal” borrowings. The bank also noted there had been a decline in the value of the security backing the loans.

This refers to the fact three-quarters of the money borrowed by each individual was on a “non-recourse” basis, backed only by the shares they bought in Anglo Irish Bank with the money, meaning they could not be pursued for this part of the loans.

The bank’s shares are all but worthless following its nationalisation in January. Anglo Irish – now owned by the taxpayer – expects to write off about €300 million in respect of these loans.

Senior executives at Anglo organised the purchase of the 10 per cent shareholding – from businessman Sean Quinn – in a private transaction during the summer of 2008 to avoid the shares being disposed of on the open stock market, as this would have affected the share price at a time of severe volatility.

Quinn was told that he had to dispose of shares bought via derivatives becuase of corporate governance failures. You can get an excellent background on just how vital Quinn was to ramping up and then subsequently exposing the Anglo share price to huge pressure. The use of Quinn company money to build up the share resutled in him being forced to take a loss by converting derivatives into stock.