Monday 22 January 2018

INBS bond group 'has 75pc support'

Emmet Oliver and Donal O'Donovan

A GROUP representing subordinated bondholders in Irish Nationwide believe they can now call on the support of 75pc of the holders of the bonds, and that way can put pressure on the Government not to force a severe haircut on investors.

INBS bondholders held a telephone conference yesterday to discuss the Government's plan to hit subordinated bondholders, rather than senior bondholders. The holders, who've spoken to the Irish Independent, claim to be still interested in a deal with the Government, but legal options are being studied.

Some of the bondholders picked up the bonds on the basis that Irish Nationwide would be forced into an alliance with EBS, creating a so-called 'third force' in Irish banking.

The 75pc support could mean any deal with the Government could be forced upon other holders, known as hold-outs, who do not want to settle for anything less than par value.

Law firm Bingham McCutcheon hosted the call. James Roome, a London-based partner with the law firm, said his firm was asked to arrange the call by an informal group of senior and subordinated Irish Nationwide bondholders.

But one bondholder said it was clear from the call that senior and subordinated bondholders have different interests.

Senior bondholders are happy for nothing to happen. Subordinated bondholders would welcome a buyback being launched by the Government, the bondholder said.

INBS subordinated bondholders believe their case is different to that of Anglo Irish Bank and that burden sharing should not apply. They say the depositor/members of a building society are equity owners unlike bank depositors. They say that means deposits should rank below subordinated bonds in the case of INBS.

A source involved said that if a legal challenge is launched, it is likely to come before the Government introduces legislation designed to impose burden sharing.

A subordinated INBS bondholder told the Irish Independent that they have not been contacted by the government since Minister Brian Lenihan announced the plan to impose burden sharing. The source said there as been no move from the government on the bond buy back mooted by the Minister in a conference call on October 1.

"We talk to the company and they ask us how much paper we have but we have had no approach from the government," a bondholder said.

He said 75pc of subordinated bondholders attended Thursday's call. He said that suggests the government could negotiate a deal that could be imposed on all subordinated bondholders by a majority vote. That would reduce the threat of legal challenges from "hold-outs" who refuse to agree a consensual deal.

But he believes the government is focused on Anglo Irish Bank and INBS investors will have to wait for clarity.

In 2009 INBS did a deal with bondholders that allowed it to significantly reduce its debts. Bondholders swapped old INBS bonds for bonds covered by the government guarantee scheme. Bond holders swapped senior bonds for bonds worth 78pc of face value and subordinated bonds for bonds with 55pc of face value.

Irish Independent

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