IBRC's Subordinated Bondholders

conorh91

I think this belongs in legal discussion and not politics, but feel free to move.

I can't make any sense of the assurances which have been given by the Government regarding the future non-payment of IBRC's subordinated bondholders. Maybe someone else can.

First, Government ministers asserted that there would likely be no money left over after secured and unsecured creditors, including the Irish State, were paid. It is unclear how they could claim to know this before the liquidator does, and they have been contradicted by financial experts over the weekend.

Second, Government have implied that they will legislate so as to deny subordinated bondholders their legal entitlement. Again, this is troublesome. Any such legislation would be an arbitrary and capricious get-around designed to deny one small class of individuals from exercising their contractual rights. As such, such legislation would be unconstitutional on its face, and indeed be offensive to the doctrine of the rule of law.

Third, and for what it's worth, the notes held by the subordinated bondholders in IBRC are, according to the trust deeds, to be governed by English law in the English courts. We know this because of the judgment delivered by the English courts a couple of years ago in the case of Assénagon v IBRC.

These three observations appear to me to indicate to me the Government's assurances are worthless. There is no legal basis for such promises. Are they bluffing the public and the bondholders or what?

FreudianSlippers

I agree with all 3 of your points. I think the government are merely attempting to plaster over this hole, hoping it'll hold until the next GE. Any legislation such as the mooted legislation is going to be severely tested in terms of constitutionality I would imagine.

GerardKeating

FreudianSlippers wrote: »

I agree with all 3 of your points. I think the government are merely attempting to plaster over this hole, hoping it'll hold until the next GE. Any legislation such as the mooted legislation is going to be severely tested in terms of constitutionality I would imagine.

Would it not be reasonable (even for a Govt Minister) to assume that (given the scale of the Anglo debts) that the liquidation would never raise enough money to cover the debts, unless they were doing "something naughty" and hiding the money.

FreudianSlippers

GerardKeating wrote: »

Would it not be reasonable (even for a Govt Minister) to assume that (given the scale of the Anglo debts) that the liquidation would never raise enough money to cover the debts, unless they were doing "something naughty" and hiding the money.

In fairness, yes. They have stated that this is the worst portfolio of loans, but unless they have a crystal ball, there is no way of telling how much they may sell for. I still feel they are kicking this can as far down the road as possible.

Carawaystick

isn't this a special liquidation, though where Noonan has a bit more of an oar in than normal shareholders might?

hfallada

The Government should have brought all the bonds for next to nothing. But have been paying back bonds at higher levels than they could have. Even NTMA which manage the national debt acknowledged they should have brought bonds when they were going for single cents in the Euro, instead of buying the bonds a lot higher a few months later/

conorh91

GeraldKeating wrote:

Would it not be reasonable (even for a Govt Minister) to assume that (given the scale of the Anglo debts) that the liquidation would never raise enough money to cover the debts

My point would be that the Government has not simply been making public assumptions. The Government has been actively indicating to the media that certain payments will not be made.

Some financial experts have already indicated that, barring any significant and successful litigation against IBRC, it is reasonable to anticipate some return for subordinated bondholders.

Carawaystick wrote:

isn't this a special liquidation, though where Noonan has a bit more of an oar in than normal shareholders might?

If we look at the iBRC Act 2013 in isolation, it appears that you are correct. Taking that Act alone, it would appear that the Minister can simply direct the Liquidator not to pay the subordinated bondholders.

But we have to read the IBRC Act in light of the constitutional ban on capricious or invidious discrimination. A Ministerial order for the liquidator to arbitrarily refuse to pay one class of unpopular creditor would appear to me to meet that threshold, without fulfilling any legitimate social objective.

Then again, I am no expert on the equality jurisprudence of the constitution, so I'd be interested to hear more knowledgable views!