Just some thoughts on the Anglo Irish Bank “Golden Circle” deal

It’s a little removed from the normal content of the site, but I was thinking yesterday evening on the implications of the deal allegedly entered into between the so-called “Golden Circle” and Anglo Irish Bank. Given the newspaper coverage, here’s how things are supposed to look at the moment for each of the chosen 10:

  • Borrow €30m from Anglo Irish Bank
  • Buy Anglo Irish Bank shares off the stock exchange – probably at a preferential price (i.e. cheaper)
  • Anglo Irish Bank goes tits up with the the implications that the shares are worth nothing after Government nationalisation
  • Because of the loan conditions, Anglo Irish Bank can’t go after the €75m collateral that the “Golden Circle” had previously offered – so they get to keep their houses
  • It’s now expected that that the €300m in loans will also be written off by Anglo – and now they’ve no debts and get to keep their houses

All very nice and cosy – these 10 unnamed people came to the rescue when asked (by whom we don’t know as of yet – Anglo Irish Bank, or the Financial Regulator, or the Government?). But I think it could get better for the “Golden Circle”:

  • There is a commission working at the moment on assigning an valuation to the shares of Anglo Irish Bank at the time of nationalisation.
  • If that commission comes back and says that Anglo Irish Bank was worth, lets say, 25c per share, at the time of nationalisation, then each of the 10 lucky punters will get a good proportion of their money back (proportion depends on the preferential share price mentioned above)
  • So now, the “Golden Circle” have received cash from the government for the shares that they had originally borrowed money from Anglo to buy in the first place – but because the loans are written off, they don’t have to repay the money, so that money is essentially pure profit.
  • But, it’s profit that they won’t be paying tax on probably. Because they’ll technically have made a loss on the purchase price of the shares compared to the money they’re getting back from the Government, they’ll have a capital loss that they can use to offset against any other profits made elsewhere in their dealings.
  • So, at the end of it all, it’ll really be free money for the “Golden Circle”.

Nice work if you can get it. But this is just my personal speculation on what could happen. There’s a big IF in there – that the independent commission will actually assign a value to the Anglo Irish Bank shares at the time of nationalisation.

A similar situation arose in the UK with the nationalisation of Northern Rock and the decision by the government there was not to pay anything to the shareholders – despite a High Court case. They decided that Northern Rock was worthless at the time of nationalisation – and all shareholders lost out completely.

Here’s where I think we’ll see actually how “chosen” the “Golden Circle” actually will be – at the end of the day, it will be decided (quite wrongly in my opinion) that Anglo was actually worth something on the day of nationalisation.

That will allow my speculation actually come true, and the “Golden Circle” will clean up at the expense of the taxpayer in more ways than one.

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6 Responses to Just some thoughts on the Anglo Irish Bank “Golden Circle” deal

  1. Maebh February 19, 2009 at 09:01 #

    I will be on the march this saturday with a banner ‘jail the golden circle’. I agree your analysis and the siuation is UNACCEPTABLE.

    Thinking of taking my dog whose banner will say ‘tax the fat cats!’

  2. DeclanH February 19, 2009 at 09:22 #

    By jove, I think I’ve found the solution.
    Anyone know how we can import a few of these vans and park them up at Stephens
    Green, Ballsbridge and Baggott Street?

  3. Paul February 20, 2009 at 02:10 #

    I don’t feel the blame lays fully on the “golden circle”. At the time of they were offered a deal which was very attractive not knowing the bank would ever have been nationalized. At the end of the day they were approached by anglo not the other way around! Its the board of directors i.e. Sean Fitzpatrick who are responsible for this. Don’t forget he was hiding loans of €113m from everyone even the golden circle themselves. What Fitzpatrick has done is far more incriminating than the GC, and is far more hurtful to the credibility of the bank itself. This is why the bank was nationalized in the first place. I think its right to name the GC but NOT blame them for being offered a deal by stupid anglo directors! Get this over with and get on with bringing Fitzpatrick to court! If this were America he would have been in jail 4 months ago

  4. Lorna Lancaster March 17, 2009 at 10:51 #

    Just read your linked article maryf. Unbelievable! I am an English senior citizen and last year had over £80k in Anglo Irish shares, now worth nothing. I had held these shares, for very many years, in an ISA so won’t be able to offset them against future capital gains supposing I managed to make any. Even if I had held them directly, losses cannot now be indexed in the UK so would not have been able to index the true loss, whereas your lucky ten can presumably offset the whole loss, and to think I have lent them the money to acquire them and they will never pay it back.

    I also read the other article on here about buying local. Well, I can assure you I won’t be investing in Ireland again and will avoid buying anything that emanates from there like the plague. Looks like I have scrimped and saved for my old age just to line the pockets of Irish crooks. And I’ll bet they’re still paying generous bonuses to Anglo staff. Wonder what sort of package FitzP. rec’d when he quit; anybody know if it was of the Fred Goodwin variety? Just hope the Irish economy holds up long enough for me to get back my one year deposit in a few months’ time.

  5. No good at Math April 8, 2009 at 21:48 #

    Nothing more being heard about this – has it been nicely submerged and lost in the nation’s pissing off over the Mini Budget? Out of Sight, now? and maybe Out of Mind?

  6. paddy June 8, 2009 at 16:16 #

    i worked in a 5star golf club were fitzpatick was a member and and money was no object to him the way he entertain his guests private banking dinners,shot gun golf outings for his guests the food was free the drink was free to hundreds of his guests he was treated like a god by his guests and alot of them were ff politions and builders i really did see it all there in that place i worked in were the super rich conmen hung out.
    even a ex chairman of a local county council had free membership along with his son in law,thats why the posh apartments on the course went up so fast.

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