Irish life

wicorthered

So the government have agreed to sell Irish Life for 1.3 billion today

http://www.rte.ie/news/business/2013/0219/368552-great-west-agrees-1-3-billion-irish-life-deal/

Can anyone tell me, what does this mean for the tax payer? Surely it must be good news?

AlmightyCushion

I assume it means we knock €1.3B off our national debt.

carpejugulum

The gvt borrowed to buy it in the first place so it will just cover that.

Cookie_Monster

They will trumpet it as an extra 1.3bn to spend and reduce this year's budget gap accordingly. I can't see it actually being used to pay down any of the national debt, just current spending.

AlmightyCushion

Cookie_Monster wrote: »

They will trumpet it as an extra 1.3bn to spend and reduce this year's budget gap accordingly. I can't see it actually being used to pay down any of the national debt, just current spending.

It still means less national debt though. If we were going to borrow €5B this year, then this will mean we only have to borrow €3.7B to cover the gap. The worst thing would be if they decide to use this to "ease austerity" and only make €2B worth of reduction as opposed to €3.5B.

Sponge Bob

I'm not sure that any of it can be spent...the NPRF probably has first dibs on the entire sum. It may well be presented as some class of a deficit narrowing exercise and then returned to the NPRF next January.

leeroybrown

For the tax payer it'll have very little direct impact this year. We receive €1.3bn and will probably use it to avoid borrowing €1.3bn of additional debt. Either that or it'll be returned to the balance sheet to reduce our defecit on paper. It won't change the current spending targets required to balance the Budget. The €40 million dividend being paid should be counted as income into the exchequer for the year.

It does however mean we've exited from one of our "bailouts" with no losses and will have reduced our deficit size by the end of the year. If the economy is kind to us elsewhere it might help push down our bond yields a bit and reduce our borrowing costs for next year too.

Cookie_Monster

AlmightyCushion wrote: »

It still means less national debt though. If we were going to borrow €5B this year, then this will mean we only have to borrow €3.7B to cover the gap. The worst thing would be if they decide to use this to "ease austerity" and only make €2B worth of reduction as opposed to €3.5B.

Apologies, that is what I meant. It'll be an extra spend of 1.X bn on top of the required borrowings for the year; not reducing the borrowings required.

RealExpert

wicorthered wrote: »

So the government have agreed to sell Irish Life for 1.3 billion today

http://www.rte.ie/news/business/2013/0219/368552-great-west-agrees-1-3-billion-irish-life-deal/

Can anyone tell me, what does this mean for the tax payer? Surely it must be good news?

Sadly the tax payer will not benefit from it but it wouldnt surprise me if the government give themselves a pay rise...(justifiably in their minds of course)

antoobrien

AlmightyCushion wrote: »

It still means less national debt though. If we were going to borrow €5B this year, then this will mean we only have to borrow €3.7B to cover the gap. The worst thing would be if they decide to use this to "ease austerity" and only make €2B worth of reduction as opposed to €3.5B.

That will depend on how they account for it and if they actually borrowed any money at all in the first place*. Since the original transaction was accounted for in the exchequer statement (unlike the original PNs), I'm going to guess that it will be accounted for as income.

I.M.O. this more than likely won't count to the Troika target, so while it will mean a lower overall deficit, it won't have a material effect on the budget.


* This could have been a second PN, where we said we put €32bn into anglo but didn't really and didn't account for it in the exchequer - despite putting 32bn onto the debt.

Chips Lovell

My understanding is that it was accounted for as an investment. The proceeds of the sale will be put against the deficit, which means that we've a one-off lowering of our borrowing requirement this year of €1.3 billion.

Rightwing

Vladimir Kurtains wrote: »

My understanding is that it was accounted for as an investment. The proceeds of the sale will be put against the deficit, which means that we've a one-off lowering of our borrowing requirement this year of €1.3 billion.

It will go towards the cost of bailing out IL&P. The real losers here were the shareholders imo.

BornToKill

Rightwing wrote: »

It will go towards the cost of bailing out IL&P. The real losers here were the shareholders imo.

Isn't that how shareholding works? If the business goes downhill, so does the value of one's investment.

Rightwing

BornToKill wrote: »

Isn't that how shareholding works? If the business goes downhill, so does the value of one's investment.

Yes, shame nobody told that to M Noonan and the others in dept of finance when they overpaid for AIB which had no assets. Seems the less you needed the harder the government comes down.

Scortho

Rightwing wrote: »

Yes, shame nobody told that to M Noonan and the others in dept of finance when they overpaid for AIB which had no assets. Seems the less you needed the harder the government comes down.

Was mr noonan not on the other side of the house when the decision was taken. As well as that the government in conjunction with fg and sf had previously agreed to guarantee all deposits and debts of the banks. So we were already on the hook for aib, so why not nationalise it.
Nationalising aib was something they didn't want to do. They'd rather have a set up similar to that of boi with the likes of willbur Ross having a large shareholding. Blaming mr noonan for actions taken when he was still serving time on the backbenches of fg is a bit of an extremity.

antoobrien

Rightwing wrote: »

Yes, shame nobody told that to M Noonan and the others in dept of finance when they overpaid for AIB which had no assets. Seems the less you needed the harder the government comes down.

AIB shares (& shareholders) got wiped out.

Rightwing

antoobrien wrote: »

AIB shares (& shareholders) got wiped out.

They shouldn't even be trading on the exhange after the damage this bank did to the country. Noonan was more than weak in dealing with them.

Chips Lovell

Why shouldn't they be trading on the exchange? And Michael Noonan wasn't the one who nationalised AIB

Rightwing

Vladimir Kurtains wrote: »

Why shouldn't they be trading on the exchange? And Michael Noonan wasn't the one who nationalised AIB

Well if the taxpayer pumped in what €20bln, surely this bank should have been completely nationalised.

If it wasn't Noonan, then who was it?

Chips Lovell

You mean owning 99.8 per cent of the bank isn't enough nationalisation?

Brian Lenihan nationalised it.

Rightwing

Vladimir Kurtains wrote: »

You mean owning 99.8 per cent of the bank isn't enough nationalisation?

Brian Lenihan nationalised it.

Well Lenihan part nationalised it, then noonan did the majority of it, as it transpired it was in a worst situation than even the most pessimistic thought.

Not enough imo, and also paid a high price for the shares. Ever check out the market cap of the bank, and absolute joke.

As an aside issue, the bank guarantee ends next month, will save the banks a few hundred million each.

Cookie_Monster

Vladimir Kurtains wrote: »

Why shouldn't they be trading on the exchange?

From Wiki, a quick list:

3 Controversy

3.1 Insurance Corporation of Ireland
3.2 John Rusnak
3.3 Tax evasion
3.4 Excess FX charging issues
3.5 Other charging issues (9 items)
3.6 Deal allocation and associated issues
3.7 Charles Haughey and the Moriarty Tribunal
And then all the last 4 years of nonsense

They should have been allowed to die and be bought over by a bank that actually capable of running itself properly.

Chips Lovell

Actually Lenihan did all of the nationalising. The state's share was something like 92 per cent by the time of the election.

I'm still not sure quite what you're complaining about. The shareholders were effectively wiped out by it.

Scortho

Cookie_Monster wrote: »

From Wiki, a quick list:

3 Controversy

3.1 Insurance Corporation of Ireland
3.2 John Rusnak
3.3 Tax evasion
3.4 Excess FX charging issues
3.5 Other charging issues (9 items)
3.6 Deal allocation and associated issues
3.7 Charles Haughey and the Moriarty Tribunal
And then all the last 4 years of nonsense

They should have been allowed to die and be bought over by a bank that actually capable of running itself properly.

Will this not probably happen though? Government gets them stable and puts their stake up for sale?
Big international comes in (Santander) and buys them out.
Awful bank but I do my personal banking with them for some reason

Scortho

Vladimir Kurtains wrote: »

Actually Lenihan did all of the nationalising. The state's share was something like 92 per cent by the time of the election.

I'm still not sure quite what you're complaining about. The shareholders were effectively wiped out by it.

Would any of the shareholders have made gains? As in what was the price the gov pay them? Or was it debt for equity?

Rightwing

Scortho wrote: »

Would any of the shareholders have made gains? As in what was the price the gov pay them? Or was it debt for equity?

I think the Govt paid 9cents for them at the end :eek:, when they should have been completely worthless.

Chips Lovell

The government didn't buy shares from ordinary AIB shareholders. The bank issued new shares to the government.

Rightwing

Vladimir Kurtains wrote: »

The government didn't buy shares from ordinary AIB shareholders. The bank issued new shares to the government.

Yes, but it always seemed strange to me that they issued AIB shares at a higher price than IL&P ones, considering they had Irish Life, it seemed grossly inequitable.

Scortho

Vladimir Kurtains wrote: »

The government didn't buy shares from ordinary AIB shareholders. The bank issued new shares to the government.

So in basic terms debt for equity?

djpbarry

RealExpert wrote: »

Sadly the tax payer will not benefit from it but it wouldnt surprise me if the government give themselves a pay rise...(justifiably in their minds of course)

The government are going to give themselves a pay rise to the tune of 1.3 billion?

Cookie_Monster wrote: »

They should have been allowed to die and be bought over by a bank that actually capable of running itself properly.

Don't seem to be too many of them around.

Chips Lovell

RealExpert wrote: »

Sadly the tax payer will not benefit from it but it wouldnt surprise me if the government give themselves a pay rise...(justifiably in their minds of course)

Given that they've just given themselves a pay cut, I think we can rule that one out.

BornToKill

Rightwing wrote: »

Yes, but it always seemed strange to me that they issued AIB shares at a higher price than IL&P ones, considering they had Irish Life, it seemed grossly inequitable.

What seems grossly inequitable? Neither institution could have survived without State support. Both sets of shareholders took a loss, as one would expect in the circumstances. I don't understand the point you are trying to make about equity.

Rightwing

BornToKill wrote: »

What seems grossly inequitable? Neither institution could have survived without State support. Both sets of shareholders took a loss, as one would expect in the circumstances. I don't understand the point you are trying to make about equity.

Well Noonan paid 9 cents for AIB which cost the taxpayer what €20bln? And 6 cents for IL&P which cost about €3bln.

I'd have him up explaining that act of lunacy.

I also think the state put far too much cash in BOI for such a small stake.

ronjo

Rightwing wrote: »

Well Noonan paid 9 cents for AIB which cost the taxpayer what €20bln? And 6 cents for IL&P which cost about €3bln.

I'd have him up explaining that act of lunacy.

I also think the state put far too much cash in BOI for such a small stake.

Are you saying there was over 200,000,000,000 shares in AIB??
Thats not true surely

Rightwing

ronjo wrote: »

Are you saying there was over 200,000,000,000 shares in AIB??
Thats not true surely

I'm talking about how much money the taxpayer had to pump into AIB. It was around €20bln. Not sure how many shares are in issue, but they really should have been 100% nationalised or else let go bust altogether.

How Noonan could decide to pay AIB shareholders more than IL&P needs an explanation imo.

ronjo

Rightwing wrote: »

I'm talking about how much money the taxpayer had to pump into AIB. It was around €20bln. Not sure how many shares are in issue, but they really should have been 100% nationalised or else let go bust altogether.

How Noonan could decide to pay AIB shareholders more than IL&P needs an explanation imo.

So why did you say buying shares at 9cents cost 20billion?

Rightwing

ronjo wrote: »

So why did you say buying shares at 9cents cost 20billion?

Noonan paid 9c for the shares :mad:, what I said was AIB cost the taxpayer around €20bln

ronjo

Ok I am a little confused. What is the correlation between 9c and 20billion?
If he had paid 6c then what difference would it have made?

Chips Lovell

Rightwing wrote: »

I'm talking about how much money the taxpayer had to pump into AIB. It was around €20bln. Not sure how many shares are in issue, but they really should have been 100% nationalised or else let go bust altogether.

How Noonan could decide to pay AIB shareholders more than IL&P needs an explanation imo.

What money was paid to AIB shareholders?

Rightwing

ronjo wrote: »

Ok I am a little confused. What is the correlation between 9c and 20billion?
If he had paid 6c then what difference would it have made?

Minimal, but these shares were completely worthless so they should have been fully nationalised.

Rightwing

Vladimir Kurtains wrote: »

What money was paid to AIB shareholders?

A small read up on it here:

http://www.rte.ie/news/business/2011/0701/303133-aib/

Chips Lovell

Rightwing wrote: »

A small read up on it here:

http://www.rte.ie/news/business/2011/0701/303133-aib/

That doesn't mention about giving shareholders any money. It's been explained to you already that the government didn't buy shares off the shareholders.

And if you want the bank to have been 100 per cent nationalised rather than 99.8 per cent nationalised (although I'm mystified as to why you think this is some sort of issue), it would have required acquiring the pre-existing shares. Which would have meant paying money to shareholders.

Rightwing

Vladimir Kurtains wrote: »

That doesn't mention about giving shareholders any money. It's been explained to you already that the government didn't buy shares off the shareholders.

They issued new shares at 9 cents. Why ? When this bank was completely worthless.

Chips Lovell

Rightwing wrote: »

They issued new shares at 9 cents. Why ? When this bank was completely worthless.

Hang on, do you think the government paid 9c a share to people who had shares in AIB?

Rightwing

Vladimir Kurtains wrote: »

Hang on, do you think the government paid 9c a share to people who had shares in AIB?

They didn't buy the shares off shareholders, they just issued new ones at 9 cents.
They issued new ones in IL&P at 6cent, IL&P cost the taxpayer a lot less, and had a big asset in Irish Life. That was my point. Seemed unfair to me.

Also they paid far too much for such a small stake in BOI.

Chips Lovell

Rightwing wrote: »

They didn't buy the shares off shareholders, they just issued new ones at 9 cents.

OK, but if you understand that, then why were you asserting that Noonan paid AIB shareholders?

Rightwing

Vladimir Kurtains wrote: »

OK, but if you understand that, then why were you asserting that Noonan paid AIB shareholders?

I see what you mean now. It basically meant AIB shareholders like E Sheehy were able to sell their shares at a far higher price than they ever should have been able to.

By issuing new shares at such a high price, the government were in effect paying over the odds for this useless, bust bank.

Chips Lovell

BTW, where are you getting this 9c a share price from? The stock exchange filing put it at 1c per share.

Rightwing

Vladimir Kurtains wrote: »

BTW, where are you getting this 9c a share price from? The stock exchange filing put it at 1c per share.

I'll try and find the link for you. I believe they issued more shares later at the 1cent.

Chips Lovell

No, check the date. July 1 2011. This is the deal you've been complaining about.

Rightwing

Vladimir Kurtains wrote: »

No, check the date. July 1 2011. This is the deal you've been complaining about.

That's a good link. It must have been earlier then that they paid over the odds for those shares. I've no complaint issuing all those shares at 1cent, that's all they were worth.