Bondholders to offer BoI a deal

Scofflaw

Interesting:

A group of international investors will this week offer to underwrite a 2bn euro plus rights issue at Bank of Ireland if the government pulls back from plans to impose losses of up to 80pc on its bonds. Tom Lauria of a NY law firm representing almost half of the bondholders, said the proposal would mean there was no need for any more taxpayer euros to be pumped into Bank of Ireland. He says the bondholders want to convert their debt into equity at par, with no haircut, and also to underwrite the 2bn euro rights issue. He said the bondholders were made up of "about 15" banks, hedge funds and investment funds. They viewed the bank as a good investment and were not seeking board control.

BoI still regarded as a good bet - interesting to see whether the deal goes ahead. The bondholders are betting fairly heavily on BoI needing no more taxpayer money there, since if more taxpayer money does have to be put in, their equity holding would likely be wiped out entirely.

cordially,
Scofflaw

dan_d

Interesting.

It further underlines my belief that where there's a will there's a way. If people REALLY want something to happen (preferably to their benefit if there's money involved) they will find a way to make it happen.I think this is something that people have consistently under-estimated since this whole crisis began. Never say never.

Raskolnikov

Scofflaw wrote: »

BoI still regarded as a good bet

It is?

If the government agree to this, it will see a sizable portion of their existing equity position being massively diluted. Existing shareholders wouldn't be pleased either, although they should have been wiped out a long time ago.

Scofflaw

Raskolnikov wrote: »

It is?

If the government agree to this, it will see a sizable portion of their existing equity position being massively diluted. Existing shareholders wouldn't be pleased either, although they should have been wiped out a long time ago.

Sure - but the government isn't supposed to want to be a shareholder. The reason I say that this marks BoI as a good bet is because what the bondholders are looking for here is an equity position. If anything happens to BoI that equity position will be amongst the first things wiped out. In their case, that's a tradeoff against getting only 20% of their current bond holdings, but they're still valuing an equity stake with a risk of 100% wipeout as more valuable than a definite 20% of their bonds' face values.

cordially,
Scofflaw

dan_d

In short, it seems to be a case of taking the better of 2 bad choices.

Dannyboy83

Somewhat related:

AIB has defaulted: the official verdict of a global banking group
http://businessetc.thejournal.ie/aib-has-defaulted-the-official-verdict-of-a-global-banking-group-154911-Jun2011/

ONE OF THE WORLD’S most authoritative banking associations has ruled that AIB is officially in default, as a result of its moves to enforce burden-sharing on some of its junior bondholders.

Scofflaw

dan_d wrote: »

In short, it seems to be a case of taking the better of 2 bad choices.

From the bondholders' perspective, absolutely. It may or may not be the better choice for the taxpayer.

cordially,
Scofflaw

later12

Dannyboy83 wrote: »

Somewhat related:

This was somewhat expected, though.

Background to this story:

1. Minister puts forward SLO on AIB. This amends some debt coupon terms, see this doc: http://www.merrionstreet.ie/index.php/2011/04/minister-noonan-welcomes-high-court-decision-on-aib/
2. maturities were extended to the year 2035

This caused the following request at ISDA
http://www.isda.org/dc/committees.html#EMEA


The request was initially withdrawn - legal issues - and then re posed. ISDA came out today and answered in the affirmative.

And the rest is history!

Maybe this should have been posted in a new thread, sorry OP.

dan_d

Scofflaw wrote: »

From the bondholders' perspective, absolutely. It may or may not be the better choice for the taxpayer.

cordially,
Scofflaw

Sorry, yes, I meant from the bondholder's perspective.

It's not like the taxpayer gets any choice in these decisions anyway.

lmimmfn

OP you forgot to add the link, no offense

Scofflaw

lmimmfn wrote: »

OP you forgot to add the link, no offense

True - this is it: http://www.businessworld.ie/livenews.htm?a=2794509

The reason I didn't add it is because there isn't anything more to it than I've quoted!

cordially,
Scofflaw