IRISH NATIONWIDE and the Department of Finance will hold discussions early next week to finalise the building society’s restructuring plan before it is submitted for approval to the European Commission.
The building society will present the plan to the department by Tuesday’s deadline to secure approval from Brussels for the Government’s €2.7 billion capital bailout for the troubled lender.
The plan centres on the potential for a trade sale or merger of the society, which will be left with residential loans of €2 billion and deposits of €4 billion after the sale of €9 billion in commercial property loans to the National Asset Management Agency (Nama).
This is in line with the Government’s plan, outlined last March, when Minister for Finance Brian Lenihan said he wanted to secure a swift sale of Irish Nationwide, or its merger with another entity.
The society has had to assess and cost an immediate closure and a wind-down of the business over the medium and long term in the plan, under European Commission state-aid rules.
Financial institutions in receipt of state aid must prove they have a viable future, or else show how they plan an orderly wind-down.
The exercise must also assess how state aid can be minimised, possible exit options for the Government, and how risks across the banking system can be minimised.
Irish Nationwide’s management team has drawn on advice from accountants KPMG and London-based financial law firm Linklaters in drafting the viability plan.
The commission temporarily approved a €2.7 billion State bailout of Irish Nationwide in early April as the society took an initial injection of €100 million from the Government, giving the State effective control through a special investment share. The remaining capital will be made available through a promissory note from the Government, with which the society can draw down capital over a period of 10 to 15 years.
Irish Nationwide is not involved in merger talks with Irish Life Permanent (ILP) or EBS, which have re-engaged after discussions stalled between EBS and a private equity consortium led by Cardinal Asset Management and backed by US company JC Flowers.
Irish Nationwide and EBS held merger discussions earlier this year which came to nothing.
Management at Irish Nationwide later said they did not believe Brussels would approve a merger of two financial institutions in receipt of Government aid.
The building society has said it may need more capital on top of the €2.7 billion pledged by the Government if it incurs higher losses on the upcoming Nama transfers.
