Saturday 22 July 2017

Bailed-out banks still have to pay out €10bn to investors

Laura Noonan

Laura Noonan

THE controversial $1bn (€730m) bond repayment by Anglo Irish Bank will be played out again and again over the coming years -- as bailed-out banks hand over €10bn to the same type of bondholders.

Figures compiled by the Irish Independent show that AIB, Bank of Ireland and Irish Life & Permanent all have bonds similar to the type repaid by Anglo Irish Bank yesterday.

Anglo has another €2.7bn of the "unguaranteed" debt to hand over to bondholders, including those who bought the debt at a steep discount when the bank was already bust.

AIB, which is now 99pc owned by the taxpayer, has the biggest chunk of the controversial debt outstanding. The rescued bank owes some €4.209bn to investors whose loans are ranked as 'senior' but don't have the protection of a security against bank assets or a government guarantee.

AIB yesterday said it was "legally obliged to pay all senior bonds in full at maturity".

Obligation

Anglo will have another €2.7bn to repay in the coming years, and both its chairman and chief executive have insisted the bank has a legal obligation to repay all senior debt.

Irish Life & Permanent, which counts the State as a 99pc shareholder, has just €337m worth of the debt, reflecting its smaller size.

The remaining €2.5bn of the bonds are owed by Bank of Ireland, which is 16pc state- owned, but is still covered by the government guarantee.

The bank yesterday confirmed that it intends to honour all its senior bonds.

Investors appear to believe that the remaining senior bonds will be honoured.

An AIB bond that falls due in April was trading at about 93pc of its redemption value yesterday, while an Anglo bond due in April was trading at 94pc of its redemption value.

The pricing indicates a near-certainty of repayment -- when investors feared they were about to be 'burned' at Anglo, the bonds were changing hands for as little as 55pc of their redemption value.

Market sources say Anglo's unguaranteed bonds are overwhelmingly owned by foreign hedge funds.

But these types of bonds in other bailed-out banks are likely to be owned by more 'mainstream' investors.

This is because the bonds themselves have a higher credit rating than Anglo.

Irish Independent

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