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HSBC claims next year 'risky' for Anglo senior debt

Emmet Oliver, Deputy Business Editor

Published 29/06/2011 | 05:00

NEXT year is going to be "particularly risky'' for senior bondholders in Anglo Irish Bank, HSBC has warned its clients in a note. The bank is an Anglo bondholder itself.

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While Minister for Finance Michael Noonan has vowed to return to the issue of senior bondholders in the autumn, HSBC, one of the world's largest banks, believes there is less urgency about the issue until next year, when €5.6bn of senior debt is due to be redeemed.

The bank points out that only €1bn of senior bonds are due to be repaid this year by the nationalised bank, with the vast weight of redemptions falling next year, and with €2.4bn due to mature in 2013.

Reviewing the figures, HSBC said this meant 2012 would be "particularly risky for senior bond holders''.

Mr Noonan made comments on June 15 during a visit to Washington that alarmed the markets and the European Central Bank (ECB).

Mr Noonan said the Irish State was not prepared to pay back "speculative'' senior bonds at par when many of them were trading at a 30pc discount.

However, the markets still believe those maturing in the second half of this year are reasonably safe, with a move to complete a liability management exercise falling upon the huge wave of bonds maturing in 2012.

HSBC's views are influential because the bank holds bonds in Anglo Irish as well as Bank of Ireland. The issue of junior debt at Anglo is now a very minor one, with its last balance sheet showing the bank owing just €500m of subordinated debt, and with this amount to be lowered by liability management exercises where the bank declined to pay par and instead offered holders a lesser amount.

These so-called 'bail-ins' of junior bondholders have so far only applied to this class of creditor, but the Government's position on senior debt has fluctuated.

Back in March, the Government said it would only apply losses in senior debt in the event that Anglo Irish Bank needed additional capital.

When the financial regulator declared that the bank did not need additional capital, most market observers believed the issue of senior debt was off the agenda.

But Mr Noonan's recent remarks in Washington sparked fresh fears of losses being imposed on this group.

Irish Independent

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