Inside the world of business
Wagons circle Anglo's loan book
THE SALE of Anglo’s $10 billion (€7 billion) US loan book has generated huge interest in real estate and financial circles on the east coast of the US. There is an estimated $340 billion of liquidity in the US property market earmarked for deals after a resurgence in the commercial mortgage-backed securities market.
Banks, investment firms, private equity companies, sovereign wealth funds and family companies are said to be circling the book with a view to making bids.
The portfolio has been divided up into nine pools of loans by Eastdil Secured, the property broker hired by Anglo to flog the loans. Prospective buyers can buy either the entire portfolio or one or more individual pools.
The majority of the loan book is in the northeastern US – about 40 per cent of the loans are in either New England or New York near the bank’s main offices in the US in Boston and Manhattan. About 14 per cent of the loans are in the mid-Atlantic states, 12 per cent in the midwest, 12 per cent in the south and 7 per cent in the western US. There are about 250 loans in total and 600 properties, including the Mandarin Oriental hotel in Boston which is wholly owned by the bank.
The book has also been divided into performing and non-performing or sub-performing, as among the interested parties are distressed funds which might be looking to take on higher risk loans to foreclose on the borrower in so-called “loan-to-own” deals.
Details of the sale are expected to be announced shortly to prospective buyers. Minister for Finance Michael Noonan has made it clear the process will be “open and transparent”. Noonan is meeting investors who may have links to prospective buyers for the loans during his four-day US trip this week, but it would make no sense for him to get involved in the sale process.
There is enough interest in the transaction to secure a good return for Anglo and the State.
Why bondholders look good for burning now
THE GOVERNMENT’S about face on burden sharing with Anglo Irish Bank’s senior unsecured bond holders is as welcome as it is surprising. The policy outlined by Michael Noonan in Washington departs significantly from that current position which is that Anglo Irish bondholders will only be burned if the bank requires more capital than the €29.3 billion already committed. The issue seemed moot following the disclosure earlier this month by the Central Bank that €29.3 billion should be adequate.
It raises the question as to what has emboldened the Government to press ahead with the haircuts.
One obvious reason is the need to be seen to deliver on some of the election rhetoric, particularly on the part of the Labour party. Some €750 million of Anglo Senior Bond fall due in November and both parties would dearly love to be in a position where they don’t have to sign that cheque.
Its also possible that the lack of any serious consequences flowing from the defaults by Anglo and AIB on their unsecured junior bondholders may have encouraged the Government to test the market for a senior bond default at Anglo Irish.
Clearing its lines with the International Monetary Fund was a wise precaution, but the fund’s response was always likely to be positive.
The European Central Bank declined to comment yesterday and its support for such a move would represent a very significant concession given its terror of the systemic consequences of senior bond defaults. Such support seems unlikely, but at least the Government has found another bargaining chip in the bigger game of trying to get better terms on the bailout.
Few lessons learned in technology market
The dot-com bust may be fresh in some minds, but not fresh enough, it seems. Despite fears of a new bubble, investors appear willing to back the sector.
The latest internet hot property is online radio firm Pandora, which floated this week with shares priced higher than expected – and rising sharply on their debut. It follows companies such as LinkedIn and Russian search engine Yandex in a blaze of optimism.
You’d be forgiven for eyeing developments with suspicion. It’s not yet clear how some of these firms intend to make money. Pandora, for example, has lost $92 million since 2000, although losses are shrinking.
That hasn’t deterred investors. LinkedIn’s shares doubled on their debut in New York. And other opportunities are coming down the line. Groupon, which is said to be readying itself for market, recorded a net loss of almost $114 million in the first quarter. Social gaming firm Zyngais is also weighing the prospect and there is speculation that social networking sites such as Twitter – valued at $10 billion, despite not making any significant profit – and Facebook could soon test the market.
Potential investors are eager to identify the next big thing online. Bearing in mind the mistakes of the past, they would be wise to proceed with caution.
TODAY
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