Sunday 20 August 2017

Central Bank publishes list of bonds outstanding to banks

Laura Noonan

Laura Noonan

THE Central Bank yesterday attempted to clear up the discourse surrounding bank bondholders by publishing a full list of all bonds outstanding to Irish banks.

The release confirmed that Irish banks owe bondholders more than €63bn, but about two-thirds of the bonds are either guaranteed by the State or secured on specific assets.

In a statement, the Central Bank said it had issued the data on a "once-off basis" in "the interests of providing public information".

The level of bondholder debt has been a prominent talking point in the election and bailout negotiations, with various commentators and politicians espousing the benefits of inflicting losses on bond investors.

Yesterday's data from the Central Bank, which was accurate to February 18, show just €23.3bn of bondholder debt could potentially be targeted for "burden-sharing".

The pile includes some €6.94bn of so-called subordinate debt, the riskiest bank debt which institutions are already actively targeting for losses.

The most recent action on subordinate debt came on Tuesday, when Irish Nationwide gave investors a window of a week to accept an 80pc discount on a €175m debt pile or face a 99.99pc write-off.

The other bank debt that could be targeted for burden-sharing is the €16.4bn of senior bonds that aren't covered by the guarantee and aren't secured on any assets.

Any burden sharing on these bonds would have to be agreed at international level, since Ireland's bailout deal rules out burning any senior lenders.

The European institutions have been opposed to any attempts to inflict pain on senior bondholders, fearing such an event could have massive ramifications across the eurozone.

Burden

Last month, however, stockbrokers Goodbody's said the new government was facing the choice of restructuring senior bank debt now or restructuring Ireland's sovereign debt later, since the banking burden was too high to bear.

Goodbody's suggested discounts of as much as 50pc on these instruments, implying a gain of about €8bn across the largely state-owned banking sector.

Other debt outstanding to Irish banks includes €20.9bn of senior bonds which are covered by a government guarantee, and €19bn of senior bonds which are secured on bank assets.

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