IL&P Shareholders - Unite!

Dear Fellow Shareholder in Irish Life & Permanent,

We are a shareholder in Irish Life & Permanent Group Holdings plc (IL&P) and are reaching out to you as a fellow shareholder.

As you know, the situation of the IL&P shareholders has deteriorated markedly following the recent stress tests on the PTSB Bank – the Prudential Capital Assessment Review (PCAR) and the Prudential Liquidity Assessment Review (PLAR), which were completed by the Central Bank of Ireland (CBI) in March 2011. The PCAR/PLAR capital requirements for IL&P exceeded by far the most pessimistic analyst forecasts. The IL&P Management appeared shocked at the outcome of the stress tests. So what happened? Well, let me put it in the context of the following FACTS:

1. Fact: PTSB Bank is NOT insolvent. PTSB Bank is currently entirely solvent and adequately capitalised to deal with the most likely macroeconomic scenario, as well as a realistic worst case scenario.
2. Fact: PTSB Bank does NOT NEED anywhere close to €4bn extra capital (even though it is REQUIRED to raise the €4bn forcefully imposed as a result of the stress tests).
3. Fact: The Irish State will NOT single-handedly save IL&P by bailing it out: Firstly, IL&P does NOT need bailing out. Secondly, IL&P is not being saved -- this entirely viable two-pillar business is being unduly dismantled just in case an entirely unrealistic, made up scenario materialises. And thirdly, the Irish State will merely cover 56% of the unneeded €4bn capital requirement that the Irish Authorities have themselves made up -- the remaining 44% (more than €1.7bn) will be covered collectively by the IL&P shareholders.

In this context, we believe the present IL&P share price collapse has effectively resulted from fears that the Irish Authorities may want to improperly disenfranchise current shareholders and grossly violate shareholder ownership rights via an interlinked and carefully crafted string of inequitable government measures. 

Let me illustrate this very briefly on the following simple example:

Imagine that, while you are fully solvent, the Irish Authorities forced you personally into an ARTIFICIAL bankruptcy-like position by imposing on you an unrealistic requirement to hold at all times 16-times the amount of money that you really NEED to support yourself in a realistic worst-case scenario.

But that would not be the end of it ...

Then, the Irish Authorities would force you to sell your house, your car and all your valuables in order to cover a large 44%-part of this artificial and unneeded financial requirement that the Authorities have MADE UP for you in the first place.

But that would still not be the end of it ...

Then, the Irish Authorities would say: "You cannot just be in the artificial bankruptcy-like state that the Authorities have created for you -- the Government will provide the remaining 56% of the unneeded capital requirement that the Authorities have MADE UP for you (and that you have not yet covered yourself by having sold your house, your car and all your valuables) -- but "in return", the Government will become the exclusive owner of almost all the assets that you still have left in your ownership. It does not matter that you have covered 44% of the artificial financial requirement -- we, the Government, disregard this contribution of yours (the contribution that the Government has forced you to make) and the Government will now be the owner of more than 90% of all your assets left (after the sale of your house, your car and all your valuables)".

And, by the way, to make you feel better, the Irish Authorities would also say "the Government are doing all this in the best interest of the country and its financial system, as well as to satisfy a prudent image of the Irish State".

How would you call such a behaviour by the Irish Authorities?

Well, that absurd scenario illustrates pretty much EXACTLY what may be happening to the IL&P shareholders!

However, we believe that, together, the shareholders can influence the difficult situation for the better. On the website www.ilpshareholders.com, we delineate how we see the situation and what we believe we can do together to improve it. Please go this website.

If you would like to reach out to other IL&P shareholders and make public comments, please post your views on this blog for IL&P shareholders.

Thank you for your consideration and feedback.

Sincerely,

Piotr Skoczylas

Managing Director and Fund Manager
Scotchstone Capital Fund Ltd

Email:  enquiries@scotchstone-capital.com
Phone: + 356 2788 8840