IRISH NATIONWIDE fears its proposed merger with EBS building society could be delayed by up to nine months as it drafts a restructuring plan for the EU under state aid rules and awaits approval, according to sources with knowledge of the lender’s plans.
The building society had previously been told that it could submit a restructuring plan jointly with EBS but was informed over the past week that it must submit its own report for EU approval.
Merger talks with EBS have already been delayed by Irish Nationwide’s assessment of bad debts on its commercial loan book as it prepares for the first loan transfers to the National Asset Management Agency (Nama) and the publication of its 2009 results.
Irish Nationwide will require up to €2 billion in capital after incurring heavy losses on the transfer of €8.5 billion in loans or 80 per cent of its loan book to the Nama.
The proposed merger between Irish Nationwide and EBS could be delayed by six to nine months, according to sources familiar with Irish Nationwide’s workload, given that the society has just started working on the restructuring plan.
The sources referred to the anticipated delay in EU approval for Anglo Irish Bank’s restructuring plan, which was submitted last November and is not expected to be sanctioned until June.
The drafting of the EBS restructuring plan is well advanced, according to the building society.
Banks must file restructuring plans under EU state aid rules showing they can repay government funds and remain viable.
EBS has said it will need up to €400 million to replenish capital after incurring losses on the sale of €800 million in loans to Nama.
Irish Nationwide is expected to report losses of more than €2 billion for 2009 when it releases its annual results.
Both building societies will need Government capital injections as they start transferring loans into Nama at the end of this month.
Nama is expected to issue acquisition schedules to Bank of Ireland, Nationwide and EBS later this week, showing the first loans it will buy linked to the top 10 borrowers. The schedules will outline the discount to be applied to the loans. However, the Nama legislation allows the lenders five days to negotiate with the agency on the price and the loan valuations.
The first loans are expected to transfer around the last weekend of this month with Nama’s only two publicly quoted participants, AIB and Bank of Ireland, making stock market announcements to coincide with the loan transfers.
Nama will buy all development loans from EBS and Irish Nationwide but only loans above €5 million from AIB, Bank of Ireland and Anglo. However, it has said that it reserves the right to buy loans below this threshold if the borrower is of “systemic importance”.
