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Why are the bank of ireland / aib bonds so heavily discounted?

ofjames · 2009-05-19 22:48:58

with regard to the following plan: http://www.irishtimes.com/newspaper/breaking/2009/0519/breaking32.htm Can someone kindly explain why these bonds are trading so far below par? Especially in light of the govt guarantee.

19-05-2009 10:48pm

#1

ofjames

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with regard to the following plan: http://www.irishtimes.com/newspaper/breaking/2009/0519/breaking32.htm

Can someone kindly explain why these bonds are trading so far below par? Especially in light of the govt guarantee.

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Comments

#2 19-05-2009 11:15pm

Économiste Monétaire

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As far as I am aware, they're buying back hybrid bonds and other undated debt (only?). The government guaranteed a specific class of debt, undated subordinated debt not being in that. You don't have to make the coupon payments on hybrid bonds and, yet, it's not considered a default (like dividends on equity). They're pretty low on the totem poll of seniority and the prospect of nationalisation is probably why they're so heavily discounted.

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