Tuesday 23 January 2018

Legal fallout from IBRC liquidation intensifies

Anglo directors will be asked back to assist in bank solvency enquiry

RONALD QUINLAN Special Correspondent

THE State's exposure to a potential multi-billion euro lawsuit arising from the decision to liquidate the IBRC has increased significantly this week.

Having terminated the contracts of the bank's directors and dismissed them with just statutory redundancy terms, the IBRC's special liquidator Kieran Wallace will now have to recall them to help prepare its statement of affairs.

While it is understood that the IBRC's former chief executive Mike Aynsley and his fellow directors will comply with their obligations under company law and assist the special liquidator with this process, sources familiar with the matter have told this newspaper that the information the statement of affairs will present could have serious legal and financial consequences for the taxpayer.

"Under company law, the IBRC's directors are legally obliged to prepare a statement of affairs that shows the bank's true financial position. The numbers will show that IBRC had a five per cent Core Tier 1 ratio when it was liquidated. It was solvent, and the statement of affairs will show that.

"That's a real problem for the Government. It's a bigger problem for the taxpayer who will have to foot the bills that might arise from legal actions by bondholders and other creditors, though," one well- placed source said.

Asked if contact had been made with the former directors of the IBRC yet to seek their assistance with the preparation of the bank's statement of affairs, a spokesman for the special liquidator declined to comment.

News of the latest difficulty arising from the IBRC liquidation comes just a week after the respected International Financing Review (IFR) reported that several major international hedge funds were gearing up to sue the State over allegations that the Government "unlawfully wiped out" in the region of €1.8bn of IBRC bonds when it closed the bank down.

Citing several sources familiar with the matter, the IFR said a decision by the IBRC's special liquidator not to appeal a judgement granted to European hedge fund Assenagon Asset Investment, which sued the bank after it tried to burn its €170m junior bondholding, "could now open the floodgates for litigation".

One London-based lawyer who spoke to the IFR said: "I have been approached by creditors looking at what legal avenues are available for them in the IBRC case. We will likely see bondholders looking to challenge the exit consent and the legality of the liquidation."

Commenting further on the potential illegality of the Government's decision to liquidate the IBRC, a source at a hedge fund with an interest in the now defunct bank said: "There was no external trigger to cause the liquidation, there was no liquidity problem."

Already it is understood that Assenagon Asset Investment, which is now known as Xaia Investment, is taking legal advice to reignite its claim against the State, in which it would try to prove that the liquidation of the IBRC was illegal under ECB rules or simply a "contrived" insolvency designed to wipe out its creditors.

Irish Independent

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