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$200 million dollars to bondholders government claimed to have burned – Adams

8 March, 2012 - by Gerry Adams TD


Sinn Féin President Gerry Adams has described as an absolute scandal the revelation that subordinated bondholders in Anglo Irish Bank are to be repaid in full after refusing to accept an 80% haircut which was accepted by other bondholders.

The information was revealed in a reply to a Parliamentary question from Deputy Adams by the Minister for Finance.

Speaking following receipt of the reply Teachta Adams said:

“One year after this Government took office no losses have been imposed on senior bondholders in Anglo/IBRC.

“It is nothing short of a scandal that this zombie bank is continuing to pay huge amounts of money in interest to junior bondholders and intends to pay these gamblers back in full to the tune of $200 million with the taxpayers’ money at a time when health, education and other services are being cut.

“The fact that IBRC has so far paid over €3 million in interest to these junior bondholders just adds insult to injury.”

Note to editor:
Fir Tree Capital Funds are a New York hedge fund and are receiving interest and will get their full principal repaid on their $200 million worth of subordinated bonds in Anglo, now IBRC. Other subordinated debt holders in Anglo took 80% haircuts on their holding of subordinated debt. In Anglo and Irish Nationwide investors were led to believe they would get virtually nothing if they did not accept 80 per cent discounts on their bonds so the debt buybacks were still regarded as voluntary.

However in this case Fir Tree Capital has faced the government down and the government has folded. They are now being paid interest and due to be repaid in full.

Similarly the Bank of Ireland subordinated bond holders gambled by not participating in debt for equity swap are also due to be repaid in full.

DÁIL QUESTION
NO 132

To ask the Minister for Finance if he will detail the nominal interest payments or other forms of payment that have been given to any of the Fir Tree Capital Funds from Anglo Irish Bank, now IBRC, for their €200 million of subordinated notes in Anglo Irish Bank which were the subject of a legal challenge by Fir Tree Capital Funds in the US that was recently dismissed; if he will outline the maturity dates of these subordinated bond notes; the action he intends to take concerning these outstanding subordinated notes; if any portion of the outstanding subordinated notes shall be honoured by the now IBRC; and if he will make a statement on the matter.

- Gerry Adams.

* For WRITTEN answer on Tuesday, 6th March, 2012.
Ref No: 12665/12

REPLY

Minister for Finance ( Mr Noonan) : The Deputy is aware that under the Relationship Framework the Board of the bank is responsible for the day to day operations of the bank including the funding of the bank. I have been informed by the bank that there are two subordinated private placement bonds that were issued in 2005 and documented under US law, that are now held by Fir Tree. The bank became aware that Fir Tree was the new holder in December 2010 and March 2011 respectively.

For clarity it should be noted that IBRC’s liability is US$200 million not €200 million.

The first bond is for $165,000,000 and has a maturity date of 29.9.2015. Interest is paid quarterly and the interest basis is 3 month US$ Libor +92basis points. Interest payments made to Fir Tree are as follows:

$504,411.60 29-Dec-10
$504,409.95 29-Mar-11
$517,595.10 29-Jun-11
$491,557.92 29-Sep-11
$536,043.85 29-Dec-11

The second subordinated private placement bond was issued for $35,000,000 and has a maturity date of 29.9.2017. It currently pays a fixed rate of 4.8%. Interest payments are semi-annual and Fir Tree has received two interest payments as follows:

$840,000.00 29-Mar-11
$840,000.00 29-Sep-11

As things stand IBRC has a contractual obligation to pay interest and principal on the notes.

DÁIL QUESTION
NO 133

To ask the Minister for Finance the total amount in euros of the outstanding un-guaranteed Bank of Ireland subordinated debt not repurchased by Bank of Ireland; if he will detail subsequent to his statement on 2 December 2011, the reason he was no longer considering the use of the powers available under CISA for making savings for the taxpayer through writing down this outstanding subordinated debt; his views that those Bank of Ireland note holders who did not participate in the Bank of Ireland debt for equity swap earlier in 2011 made the correct investment decision as their holdings of subordinated debt shall now be honoured in full; if the reason he no longer, as quoted in the aftermath of the March 2011 stress tests, is fulfilling his promise that he would take all actions necessary to achieve burden sharing for subordinated debt in all of the banks including Bank of Ireland; and if he will make a statement on the matter.

- Gerry Adams.

* For WRITTEN answer on Tuesday, 6th March, 2012.
Ref No: 12666/12

REPLY

Minister for Finance ( Mr Noonan) : As set out in Bank of Ireland’s (the “Bank”) preliminary statement of its financial results for the year ended 31 December 2011, released on 17 February 2012, the Bank’s outstanding unguaranteed subordinated debt at 31 December 2011 was €370m. This excludes the €1bn contingent capital instrument investment subscribed by the State.

As the deputy is aware, I noted on 23 November 2011 that the Bank had to raise €350m of core tier 1 capital by 31 December 2011 to satisfy the requirement of the 2011 Prudential Capital Assessment Review (“PCAR 2011”). In that context I considered using the powers available under the Credit Institutions (Stabilisation) Act 2010 as amended (“CISA”) to apply for a Subordinated Liabilities Order (“SLO”) to generate, from subordinated liabilities, the residual capital required by the Bank by 31 December 2011.

On 2nd December 2011, the Bank announced that it had raised approximately €350m of core tier 1 capital, through its tender offer and purchase of capital securities. As a result of the Bank’s announcement and the fact that the totality of the outstanding PCAR 2011 capital required by 31 December 2011 had been raised, the grounds for use of the powers under CISA to raise that capital through burden-sharing no longer arose.

It is not for the Minister to comment on the investment decisions made by the holders of subordinated debt in the Bank. The powers granted pursuant to CISA continue to be in effect and will be used in the future if necessary.

With regard to achieving burden sharing with subordinated bondholders in all of the banks including the Bank, I draw the deputy’s attention to the fact that total capital generated from burden sharing with bond holders since 2008 is in excess of €15bn.

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