Saturday 23 September 2017

Hundreds of wealthy Irish burnt in bond haircuts

Louise McBride

Louise McBride

Disgraced Irish banker Sean FitzPatrick -- who has lost millions after investing in an Anglo Irish Bank debt bond -- is not the only individual to have been burnt by Irish bank debt.

Hundreds of wealthy Irish individuals are nursing heavy losses after pouring millions into Irish bank bonds over the last two years. Some investors have lost millions of euro.

The bonds -- known as unguaranteed subordinated bonds -- were sold by some stockbrokers and the private banking arms of the main banks.

"Individual investors have lost hundreds of thousands -- and even into the millions after investing in these bonds," said Vincent Digby, founder of the financial advisers Impartial and a former head of funding with Bank of Ireland Global Markets.

"Some investors incorrectly believed they could not lose money because they thought the bonds were covered by the government guarantee."

Although some bank bonds were guaranteed by the Government, many of those which offered the prospect of higher returns were not guaranteed.

Gary Hanrahan, who heads up the financial advisers Capital Options, said he has come across clients who had invested in AIB subordinated bonds and had seen as much as half of their investment wiped out.

The minimum investment for these bonds was usually between €50,000 and €100,000 but many wealthy investors poured between €1m and €2m or more into them.

Haircuts of up to 90 per cent have been imposed on subordinated bond-holders.

One large wealth manager said it was "surprised" at the amount of money that individuals had invested in such bonds.

Some credit unions invested in subordinated bonds. A spokeswoman for the Irish League of Credit Unions (ILCU) said that credit unions were "disappointed they are to suffer losses on these bonds".

In 2008, Sean FitzPatrick invested €4.6m in a debt bond issued by Anglo, known as the €750m Floating Rate Subordinated Notes 2014. FitzPatrick is understood to have lost millions on that bond -- which no longer exists.

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