ANZ 0.35% $28.82 australia and new zealand banking group limited

mirant exposure tipped at us$30 million

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    Dow Jones Business News
    Australia's ANZ Bank Mirant Exposure Tipped At US$30 Million
    Wednesday July 16, 5:37 am ET

    MELBOURNE -(Dow Jones)- Australia and New Zealand Banking Group Ltd. has around US$30 million exposure to U.S. energy company Mirant Corp. (NYSE:MIR - News) , which filed for bankruptcy protection in Texas this week, according to a source close to the Australian bank.

    The Mirant loan, thought to be part of a EUR1.1 billion facility arranged by Commerzbank in 2001, has again highlighted ANZ's exposure to the distressed U.S. energy sector.

    ANZ has the largest exposure to the U.S. energy sector of Australia's four major banks with around A$1.1 billion in loans tied-up in as many as 15 non- investment grade firms, including El Paso Corp. (NYSE:EP - News) , Aquila Inc. (NYSE:ILA - News) and NRG (NRZ), a subsidiary of Xcel Energy Inc. (NYSE:XEL - News) , which filed for Chapter 11 in May.

    But analysts on Wednesday were downplaying the latest risk which is understood to be related to project finance and well secured.

    "U.S. energy exposures are unlikely to have a material impact on ANZ's profitability given large provisioning cover," said UBS banking analyst Jeff Emmanuel in a note to clients.

    Under a bearish scenario, Emmanuel estimates ANZ could potentially lose around A$360 million from its exposure to U.S. energy and telecommunication firms.

    Of this, he believes A$190 million has already been specifically provided for, while the bank has an additional A$200 million in excess general provisioning covering for further risk.

    Mirant Corp. filed for Chapter 11 on Monday after failing to come to terms with its creditors before a crucial debt-repayment deadline. The Atlanta-based company has US$20.6 billion in assets and US$11.4 billion in debt.

    It is the latest in a string of electricity companies to file for bankruptcy protection following a downturn in trading volumes and a tougher credit regime following the collapse of Enron Corp. in December 2001.

    A spokeswoman for ANZ declined to comment on Mirant, saying the bank doesn't discuss its relationship with clients.

    However, she pointed to comments made by ANZ Chief Executive John McFarlane in April who said while there were some issues with the bank's energy portfolio they were containable, and any significant developments would be disclosed to the Australian Stock Exchange.

    "That still stands," the spokeswoman said.

    ANZ shares closed up one cent at A$18.02.

    -By Eric Johnston; Dow Jones Newswires; 61-3-9614-2663; [email protected]

    -Edited by Graham Morgan

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