Taxpayers recoup €1.26bn from Anglo lenders
Taxpayers have now recouped €1.26bn by forcing losses on junior lenders to Anglo Irish Bank.
Last night lenders wrote off another €676m they were owed by the bank by voting to accept losses on subordinated debt. Last month, holders of €750m of similar subordinated bonds agreed to the same terms.
The latest saving was made by buying back subordinated bonds due to be repaid in 2014 and 2016 issued by Anglo Irish at 20c in the euro. Holders of 90pc of the €825m of subordinated bonds affected voted to accept the deal.
The saving amounts to almost €676.5m with just €150m of new bonds replacing the previous €825m.
The buybacks allow the Government to impose losses on lenders to the failed bank without going through an insolvency procedure.
Subordinated lenders who abstained or voted against the deal will get just 1c per €1,000 of bonds held because those who accepted the deal also voted to change the terms of the bonds to punish holdouts.
Lenders that agreed to the deal will not receive cash but are being given new government-guaranteed bonds instead of their old Anglo Irish bonds. The new bonds are due to be repaid in cash next year.
The overwhelming vote means all threats of lenders resisting the deal have crumbled. Lenders voted to take cash now rather than wait for the new banking legislation to come into force.
The Credit Institutions (Stabilisation) Bill 2010, currently waiting to be signed off by the President, gives the State powers to change bondholders' rights, including interest and principal payments.
Lenders were balloted at two meetings in London. The bank had offered to buy back a total of €825m of bonds in exchange for the one-year government-guaranteed notes.
The 10pc of bonds that did not accept the terms are effectively wiped out, after the deal passed. That creates a saving of almost €82.5m. The rest of the saving is a result of the 80pc write off of the 90pc of bonds that did accept the deal.
Last month, holders of €750m of subordinated bonds due in 2017 agreed to the same terms -- giving a total saving of €1.26bn.
Anglo Irish has no plans for further buybacks however, and does not intent to extend the process to its more senior debt.