Monday 23 January 2017

Holders of Anglo bonds to get 'burned' by State

Published 28/09/2015 | 02:30

Out-going Central Bank Governor Patrick Honohan
Out-going Central Bank Governor Patrick Honohan

The Government looks set to achieve the "moral" victory sought by out-going Central Bank Governor Patrick Honohan by ensuring junior bondholders at the former Anglo Irish Bank get their hands on as little as possible of any of the surplus cash from its liquidation.

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Weekend reports had suggested that IBRC - formerly Anglo - was due to make a tax settlement of as much as €150m with the Revenue Commissioners, due to practices employed by Anglo Irish Bank when it was both a stockmarket-listed company and State-owned.

The payment means there will be even less money than anticipated left from the bank's liquidation. That in turn means the prospects of junior bondholders receiving any money are diminishing.

Bondholders owed €270m are almost last in line to be paid from the liquidation of more than €21bn worth of Anglo Irish Bank and Irish Nationwide Building Society assets, which have been sold off by the special liquidators of IBRC.

But bondholders would be in line for payment before the State can part-recover funds provided via the controversial promissory notes, which totalled around €30bn.

The 'Sunday Business Post' reported that IBRC is due to make the tax settlement with Revenue for between €100m and €150m - the largest ever made in Ireland.

Probe

It follows a probe by Revenue into certain tax practices used at the bank. The liquidators made a voluntary disclosure to the taxman in 2013. Making a voluntary disclosure typically results in a lesser penalty being imposed by Revenue.

Prof Honohan insisted in emails to the Department of Finance that payments to junior bondholders at the bank should be blocked. In emails with a top Department of Finance official, Ann Nolan, Prof Honohan said the "moral case" for ensuring that the surplus money from the liquidation of IBRC is returned to the taxpayer is "almost unassailable".

Prof Honohan said European rules put in place after the financial crisis could help Ireland's case.

"The more I think about it, the more I am convinced that the State should take further steps to ensure that unexpectedly strong asset disposals by the IBRC liquidator return to the State and not to subordinated debt holders," he said in an email to Ms Nolan, released to the Irish Independent under Freedom of Information.

Irish Independent

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