Government to proceed with plans to nationalise IL&P

FINANCE Minister Michael Noonan has stressed that the Government will proceed with its plans to nationalise Irish Life & Permanent (IL&P), in order for it to meet its recapitalisation needs, by the end of this month, despite the group’s shareholders voting against the plan.

IL&P’s senior management are due to meet the minister to discuss the plan and communicate shareholder sentiment, in the light of a lively extraordinary general meeting yesterday.

At that meeting, IL&P’s shareholders rejected a resolution allowing the Government to put state funds into the institution and voted in favour of extending the July 31 recapitalisation deadline and the appointment of additional advisers to review alternative investment options. They also voted leading rebel shareholder — Piotr Skoczylas of Maltese-based investment fund, Scotchstone Capital — onto the board, pending full regulatory approval.

Despite the shareholder opposition, Mr Noonan said yesterday that IL&P’s recapitalisation programme would progress. He is expected to seek High Court clearance to pump fresh funds into the group, but said it would be premature to announce the Government’s next move.

“I can appreciate and understand the feelings of shareholders, because they invested thinking they were in a sound investment, and then they’ve almost been wiped out. But it all arises from the instructions that we have got to recapitalise the banking system. And the stress tests in March showed IL&P in a more stressed way than we thought it was. So it needed extra capital. So, under the programme with Europe and under the instructions of the ECB, we had no choice but to recapitalise immediately,” he added.

At the group’s annual general meeting in May, IL&P chairman, Alan Cook said up to €2.5bn of the group’s €4bn post-stress test capital requirements would have to come from Government. That forecast is widely understood to have risen to as much as €3.8bn of the total, which would give the state a 99% stake in IL&P.

Mr Cook said, yesterday, that he would communicate investor concerns to Mr Noonan, but didn’t want to raise false expectations amongst shareholders for any change in outcome. He added that IL&P is legally bound to the €4bn July 31 deal, unless the Government agrees to change terms. Mr Cook also expressed his disappointment — but said he wasn’t surprised — at the outcome of yesterday’s shareholders meeting.

One shareholder questioned the difference in recapitalisation requirements for IL&P arising from the Central Bank’s March stress tests and those carried out last week by the European Banking Authority (EBA), which found that the group only required €1.5bn in extra funding. Mr Cook noted that the two tests used different methodology and that the EBA’s judgement didn’t take into account IL&P’s 2013 loan loss forecast.