Tuesday 17 September 2019

Kenny denies that Anglo junior bondholders will get payments

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Transport Minister Paschal Donohoe

Donal O'Donovan and Niall O'Connor

Taoiseach Enda Kenny has said he does not see "any circumstances" in which junior bondholders will be paid following the liquidation of the former Anglo Irish Bank.

Last night, the Government insisted that bondholders owed €280m by the bust bank rank behind the State and other unsecured creditors in the so-called 'waterfall' that determines who gets paid, and when, as loans and mortgages are sold off by the liquidator of Irish Bank Resolution Corporation (IBRC).

Paying bondholders would be politically toxic for the Fine Gael/Labour coalition. It came to power in 2011 on a promise of ending the bailouts of banks and bondholders.

The insistence that junior bondholders rank subordinate to all other Anglo creditors means none of the €280m can be paid until every other bill owed by the bank has been paid in full first.

That includes €1.1bn owed to taxpayers. This was money paid over by the State to savers and secured investors in the bank who lost out when it went into liquidation last year.

However, the bulk of the total €30bn cost of bailing out Anglo is not strictly speaking a debt, so ranks behind even the bondholders.

Yesterday, the Taoiseach was among a raft of Government figures who moved to play down the prospect of a payout for junior bondholders. That followed a public outcry after the Finance Minister Michael Noonan last week sparked speculation such a payment was on the cards.

Mr Kenny poured cold water on the prospect of cash for Anglo bondholders.

"I do not see any circumstances - any circumstances - in which junior bondholders would be paid in the liquidation of IBRC," he told reporters at a Fine Gael event in Dublin.

Health Minister Leo Varadkar and junior finance minister Simon Harris also moved to rule out paying junior bondholders.

Mr Harris said that if the liquidation of IBRC yielded a surplus, there would be a hierarchy of payments made.

"The unsecured creditors - 70pc of which is the Irish government, others include our credit unions, local authorities which held bonds - they will all be paid first. Only if, and it's highly unlikely, there's still a surplus, does the issues of the junior bondholders arise," Mr Harris said. "The issue of junior bondholders will only arise if that €1.1bn is paid in full, along with other unsecured creditors," he said.

"So they are very much at the bottom of the pile. It is a highly unlikely situation, and it's one that is highly unlikely to be resolved for a long number of years due to various issues."

Transport Minister Paschal Donohoe said junior bondholders were "at the very bottom of the pile" of creditors seeking money. He said it was very unlikely they would be paid.

That position - where bondholders rank below unsecured creditors - was confirmed to the Irish Independent by sources directly involved in the liquidation process.

Unsecured creditors have been told to lodge claims with liquidators if they want to be paid.

A complicating factor in assessing how far the liquidation payments will stretch are 120 legal cases the IBRC was involved in when it was shut down, including those involving members of the family of former tycoon Sean Quinn. The final dispersal of cash will happen after the last cases ends.

Irish Independent

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