Department seeks EU approval for Anglo-Nationwide merger plan

A JOINT restructuring plan for Anglo Irish Bank and Irish Nationwide Building Society was being prepared for submission to the European Commission yesterday, according to a spokesman for the Department of Finance.

The plan had to be submitted to the commission by yesterday’s deadline under the agreement reached by the Government with the European Union and the International Monetary Fund on the €85 billion aid package.

The spokesman for the department said yesterday evening that it was working toward the submission of the plan to Brussels before the deadline and that he expected the deadline to be met.

Anglo and Irish Nationwide have been in discussions since last month about merging following the transfer of a combined €43 billion loans to the National Asset Management Agency (Nama).

The deposits of both – less than €14 billion at Anglo and about €4 billion at Irish Nationwide – will be transferred to other lenders, the governor of the Central Bank Patrick Honohan said last month.

The backing of the rump of Irish Nationwide – about €2.5 billion in loans, mostly residential mortgages – into Anglo, which has about €37 billion in loans after its own transfers to Nama, will result in job losses across both institutions.

There is expected to be between 100 and 200 job losses in the initial months after the proposed merger – if it is approved by Brussels – with the workforce at the combined asset recovery bank estimated to fall to about 1,000 staff within about a year of merging.

Anglo has a staff of about 1,300, while Irish Nationwide employs 450, of whom about 200 work in the building society’s 50 branches.

The Government has pledged €29.3 billion in capital into Anglo-Irish and €5.4 billion into Irish Nationwide. The two lenders suffered the heavy losses on property lending.

Anglo’s senior bonds, which amount to about €5.4 billion following a repayment to bondholders yesterday, are expected to remain with the merged entity under the proposal submitted to Brussels.

The bank repaid some €750 million of unsecured debt to senior bondholders who were no longer guaranteed by the Government after the expiry of the two-year blanket guarantee last September.

Anglo paid back €7.9 billion of debt to senior bondholders last September before the expiry of the two-year blanket guarantee.

The Government has said that senior bondholders will not be asked to share the losses of the banks, but that it expects subordinated bondholders to make a significant contribution to the costs.

Anglo has raised more than €1 billion from offering subordinated bondholders 20 cents in the euro for their debt.

Their investment was effectively wiped out if they did not accept and the majority of the bondholders voted in favour.