Anglo Subordinated Bondholders

Scarab80

At the time that the "final" Anglo recapitalisation cost was announced, Lenihan also announced that they were....

....working on resolution and reorganisation legislation, which will enable the implementation of reorganisation measures specific to Anglo Irish Bank and INBS which will address the issue of burden-sharing by subordinated bondholders

The idea being that subordinated bondholders would not be entitled to anything in the case of a forced liquidation of Anglo so legislation enforcing losses on this class of debt holder may be constitutional.

In a move to use this stick to try to buyback subordinated debt at a discount Anglo announced on 21 Oct, two offers, a 20% payout on dated debt and a 5% payout on perpetual debt, with holders voting against the buyback getting a 0.00001% payout.

The holders were required to vote 75% in favour of the deal with a 2/3 turnout for the resolution to be passed. It now appears that a group of investors with a sufficiently large voting block are going to vote down the resolution.

http://www.ft.com/cms/s/0/4154fa42-e21e-11df-9233-00144feabdc0.html

The bondholders described the move as an “astonishing” attempt to strong-arm noteholders to vote in favour of the exchange offer by threatening to eliminate minority dissenting noteholders’ rights to repay monies loaned to Anglo Irish.

The group said Anglo Irish’s proposal is inconsistent with principles of fair and equal treatment of creditors.


“This is unprecedented and provides for unequal treatment of the minority. We sincerely wish to meet with Anglo Irish to discuss a fair and consensual resolution”, said Louise Verrill, partner at Brown Rudnick, in the statement.

Is this posturing by the bondholders or will this be fought through the courts?

It puts pay to the idea that imposing losses on bondholders is easy, especially with seniors who would be ranked the same as depositers and would be entitled to a payout in the event of liquidation, likely making enforced losses unconstitutional.

Fat_Fingers

i love the way its unconstitutional for gamblers ( sorry investors) to take the hit, it’s unconstitutional to reduce the wage of judges and barristers but there is nothing unconstitutional about robbing ordinary taxpayer.

Scarab80

Fat_Fingers wrote: »

i love the way its unconstitutional for gamblers ( sorry investors) to take the hit, it’s unconstitutional to reduce the wage of judges and barristers but there is nothing unconstitutional about robbing ordinary taxpayer.

It's unconstitutional for the government to abrogate private property rights - surely this is a good thing. When you leave money in a bank you are taking the same gamble as senior bondholders. The problem with our banking system is that this risk is not spelled out nor accounted for by ordinary depositers and there is an inherent expectation that the money your account is safe and available to withdraw at any time.

It's unconstitutional to reduce the salary of a judge to protect the judiciary from political interference - sensible no? Barristers wages are not constitutionally protected.

I find it amazing with all the calls for bondholders to share losses and with 2bn on the line in this transaction that this topic generates so little comment, it was probably a big factor in pushing our bond rates to 7% today.

del_c

Scarab80 wrote: »

I find it amazing with all the calls for bondholders to share losses and with 2bn on the line in this transaction that this topic generates so little comment, it was probably a big factor in pushing our bond rates to 7% today.

I fnd it surprising too; not much comment either in the meeja.

Fantastic to see the poster boy of billionaire greed and escess moaning about this in the Irish Times.
http://www.independent.ie/business/irish/bondholders-finally-faced-down-by-lenihan-just-ask-abramovich-2397807.html

....could hardly have asked for better PR

Good timing on this thoug I think. The state does not need additional financing for a couple of months, and Bond Yields are going to be upset anyway at the moment due to general uncertainty re the rest of the PIIGS.


Wouldn't be the biggest fan of Lenihan....more a best of a bad lot type of feeling toward him, but maybe he has worked this one out quite well. Hopefully some additional stings over the next couple of months to save the taxpayer money.


I think there is stll a lot of misunderstanding out there about Anglo Liabilites, everyone talking about defaulting on 40bn of debt. I really don't think there is much appetite for defaulting on deposits at the moment, though it would be interesting to see a detailed breakdown of outstanding liabilites, to see who in fact would be hurt, and if there is a case for further taxpayer protection.