I received a bunch of emails today from the Department of Finance in relation to communications with Anglo Irish Bank between September 2008 and February 2009. I will scan them all shortly and upload. One in particular though caught my eye. It’s an email exchange between Marie Mulvihill at the DoF and John Paul Coleman at Anglo Irish Bank. It’s dated February 2, 2009, just two weeks after nationalisation, subject line: “Query over Tier 2 capital”.
We have received a query regarding the tier 2 capital securities on Anglo Irish Bank’s balance sheet. I’ve had a quick look at the preliminary results as at 30th September 2008 but can’t locate a break down.
I would be grateful if you could outline what makes up the Tier 2 capital and whether it is covered by the Bank Guarantee Scheme.
About an hour later, John Paul emailed back, stating:
With Tier 2 capital the Bank has two forms of securities issued these are Lower Tier II (LT2) and Upper Tier II.
LT2 the Bank has issued all have a final maturity date and therefore fall into the dated subordinated category’ which is covered by the Bank guarantee scheme. The coupons on LT2 cannot be deferred and most be paid at each coupon date
The Bank has 5 LT2 deals outstanding these are
€750 million Floating Rate Subordinated Notes 2014
US$.165 million Subordinated Notes Series A 2015
US$ 35 million Subordinated Notes Series B 2017
€500 million Floating Rate Subordinated Notes 2016
€750 million Floating Rate Subordinated Notes 2017
In total the Bank has €2,112 million outstanding at 30t h September 2008 of LT2 Upper Tier II that the Bank has issued is perpetual bonds i.e. they do not have a final maturity date.
Unlike LT2 the coupons on Upper Tier II can be deferred but are cumulative i.e. if you miss one coupon payment at the next coupon payment date you most pay the two coupons. Upper Tier II is not covered under the Bank Guarantee Scheme as it is perpetual
The Bank has one Upper Tier 2 GBP300miilion with a value of €385milIion at the 30th September 2008.
If you need any additional information please let me know.
The question I am asking myself is why, two weeks after nationalisation, the Department of Finance was only then asking about Tier 2 Capital? Interestingly, Carl O’Brien at the Irish Times sought the briefing papers used by DoF officials at a recent Oireachtas committee. The DoF is keen to defend itself it would appear.
Original document here: